Lubbock Power & Light presents budget; ERCOT TCOS revenue and 'hold harmless' credit shape reserves

Harvey Hall, chief financial officer for Lubbock Power & Light, gave the utility's budget presentation, focusing on revenues, reserves and capital priorities. Hall said LP&L expects total expenses to fall modestly from about $185 million in the prior year to roughly $179 million in the proposed budget.

The nut graf: LP&L’s revenue and reserve picture is heavily affected by transmission-related fees and a multi-year ERCOT-related ‘‘hold harmless’’ arrangement; a favorable Public Utility Commission decision increased the utility’s allowed TCOS revenue and the scheduled end of the hold-harmless credit in February 2027 will free about $22 million per year for local ratepayer benefit.

Hall told council a key one-time driver in the prior year was cost recovery for crews sent to Florida after Hurricane Milton; that work and FEMA reimbursements reduced this year’s nonrecurring revenue. On distribution revenue, staff is modeling a small rate decrease (about one to one-and-a-half percent) in the distribution charge, subject to final filings and Council action.

A large and recurring revenue line is TCOS — the transmission cost of service the utility charges for transmission assets outside city limits. Hall said the utility budgeted TCOS revenue at about $44.4 million for the coming year after a favorable ruling by the Public Utility Commission that awarded LP&L the increase it sought. Hall said this TCOS structure means costs for transmission assets outside the city are borne by customers using the transmission rather than by Lubbock property taxpayers.

Hall described reserves and borrowing: LP&L used about $19.1 million of reserves in the current year for projects and expects to use roughly $6.4 million next year; the scheduled end of the ERCOT hold-harmless credit in February 2027 will allow about $22 million annually to be retained for ratepayer benefit thereafter. He also said the utility paid down a 2015 revenue bond early, reducing debt service and improving credit metrics; the utility recently received rating upgrades from Fitch, S&P and Moody’s to the 'AA' category.

On capital, Hall noted a pending proposal to participate in a West-side transmission loop in partnership with another utility. That borrowing (estimated in staff remarks at about $120 million) would be financed through TCOS and would not be included in retail distribution rates. Hall emphasized operational items including vegetation management and required NERC/FERC testing and described planned capital funds for equipment replacement and a continued emphasis on cash funding projects when possible.

Council members asked about tree-trimming responsibilities, the timing of TCOS filings and the impact of the hold-harmless credit expiration; Hall and staff answered that the vegetation work is targeted to power infrastructure and that the transmission borrowing, if pursued, would be presented with full PUC filings and cost-recovery plans.