On the heels of last week’s Hearing on the Merits, the proposed transition of Lubbock Power & Light (“LP&L”) from the Southwest Power Pool (“SPP”) to the Electric Reliability Council of Texas (“ERCOT”) was back on the agenda at this week’s Public Utility Commission of Texas (“PUCT” or the “Commission”) open meeting.

During last week’s hearing Chairman DeAnn Walker instructed representatives of LP&L and ERCOT to finalize an agreement in which LP&L pays to help counterbalance some of the transmission infrastructure costs that may be incurred by ERCOT customers as a result of the transition. Walker also advised LP&L and SPP to try to reach a similar agreement for the benefit of the ratepayers in that region.

In response to that directive, LP&L, the Commission Staff, the Office of Public Utility Counsel (“OPUC”), and the Texas Industrial Energy Consumers (“TIEC”) have reached an agreement in principle that would, if approved by the Commission, resolve the outstanding ERCOT issues. A letter summarizing the terms of the agreement in principle filed in PUCT Docket No. 47576 last week states that LP&L will pay $22 million each year for five years to ERCOT wholesale transmission customers through the tariff proposed by Commission Staff to shield ERCOT ratepayers against the expected financial impacts of LP&L’s requested transition, and that LP&L will pay SPP’s study costs of approximately $172,000.

Discussions with ERCOT continued this week regarding what terms the final transition agreement will need to contain to satisfy ERCOT’s concerns. LP&L has completed a draft settlement agreement with ERCOT’s guidance in mind and circulated it to all parties the day before the open meeting. LP&L’s attorney conducted preliminary conversations with the parties regarding the draft and the settlement discussion is ongoing; LP&L expects to gain more guidance from the parties over the course of the next several days.

LP&L’s attorney noted that an agreement in principle has also been reached for SPP. This agreement involves an upfront payment from LP&L as well as ancillary terms. LP&L’s understanding is that the remaining parties including TIEC, Commission Staff, and OPUC are supportive of this agreement in principle. The parties met prior to this week’s open meeting to discuss how payment from LP&L would be reflected in rates and flow back to customers, and there are more details to hammer out relating to who will build out the transmission system improvements defined in option 4oW related to the McKenzie-North 115 kV & COOP- McKenzie 69 kV transmission line. The settlement draft that LP&L circulated addresses this point.

In the spirit of moving forward, Commissioner D’Andrea suggested that the option 4oW issue could be carved out of the agreement and decided by the Commissioners. Chairman Walker stated that in her opinion, the Commission can “do whatever we want” with regard to the carve-out, and noted that the carve-out should not hold LP&L up from getting the rest of the settlement finalized and submitted to the Commission. She also reiterated the sense of urgency in this decision based on the timing of the potential switch in 2021.

LP&L asked for time to work on the 4oW carve-out issue and all other issues and report back to the Commission at the February 15th open meeting. Watch for an update here after that meeting.