Former Director weighs in, plan to force LP&L to pay street lights - KCBD NewsChannel 11 Lubbock


Former Director weighs in on plan to force LP&L to pay for street lights

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By James Clark | email

LUBBOCK, TX (KCBD) – A plan to force Lubbock Power and Light to fund the city's street light cost is raising questions about whether or not the move is legal.  The City Council takes up such a proposal Thursday behind closed doors. 

Sources close to the situation do not wish to be named at this time but the consensus seems to be that one way or another city council can carry out the plan.  There is some question as to whether or not the council would have to call a public hearing and change LP&L's governing ordinance in order to go forward.

He Rescued It; What Does He Think?

No longer close to the situation is the man largely credited with saving LP&L from financial collapse, Carroll McDonald. 

McDonald says under the right circumstances it would be okay for the City to take more money from Lubbock Power & Light.   "I'm just a citizen now," says McDonald who was twice the LP&L Director. 

"I don't think it would hurt a thing if they would transfer it.  But they're not going to do that.  They're going to put it in the budget," says McDonald.  In other words, he says forcing LP&L to take on unfunded mandates is different than obligating LP&L to publicly transfer money.

McDonald left LP&L the first time in 1994 with $36 million in the bank.  He came in the second time in 2003 in the midst of a projected $24 million shortfall.  At the time of his second retirement in 2005 LP&L was back in the black and well on its way to recovery.

"I never objected to them taking money if they did it above the table," McDonald says about City Council.  However, "They're not listening to the people on that [LP&L] board."

LP&L Board members have not yet commented on the record but it's pretty well known that the board is not in favor of the street light idea.

What About The LP&L And Xcel Sale?

But McDonald raises another interesting question.   "They're about to borrow $87 million," McDonald says in reference to the pending sale of certain Xcel assets to LP&L. 

"They need to leave that alone until that's done and then they'll know more about their new customers and revenue."

The sale is expected to be complete later this year.  "They need to wait and see what's going to happen."

McDonald does not think street lights will be a one-time issue but rather, "It's gonna be something they're going to have to pay every year."

Customers, Not City Hall, Entitled To Profits And Other Background

The LP&L board, by law must fund its reserves first, then make a payment to the city in lieu of taxes not to exceed 5% of gross revenue, and then refund all other profits back to the electric customers.

However, City council sets the rates that customers pay and approves the budget for expenses.  So, city council has the authority to add expenses including street lights even if that means there will be less money left over for rebates. 

Public records show that LP&L net revenues began to decline in 1995.  By the end of 96 LP&L was breaking even and from then until 2003 it was suffering losses, sometimes in excess of $6 million per year.  City Hall took $41 million from LP&L during the period from 1997 to 2003, of which nearly $22 million was more than LP&L made.

In 2003, the city had to announce the layoffs of 126 employees, mostly from LP&L.  By the end of the fiscal year many of the 126 employees escaped the budget axe by retraining and taking different positions in the city.

In addition to LP&L's official transfers during the time in question, it was overcharged $3 million per year by the city's I.T. or "information technology" department.   It was made to pay the salaries of secretaries for the City Manager and the director of Market Lubbock Inc.; the one time purchase of a fleet of trucks for the city; travel expenses of at least one council member; free utility hookups for developers of new subdivisions; and street lights. 

While recent media reports have said that the price of natural gas, used to fuel LP&L's generating stations, was the cause of LP&L's demise, public records show otherwise with prices rising in 2000 and a sudden spike in January of 2001.  

The Pros and Cons

Detractors of the idea including one who does not wish to go on the record at least until after Thursday's meeting says the downside of the proposal to make LP&L pay for street lights is that it decreases the amount of money LP&L can refund to its customers each year.

Supporters say it can help the city with a much needed pay raise.  Also we've heard that it was part of LP&L's early mission to provide both power and street lights.  KCBD NewsChannel 11 did some digging, and we found that historic accounts do seem to confirm that the city would provide electricity for street lighting if the County and/or private individuals would provide the lights and poles.  

Although the city council can hash out a proposal behind closed doors, at some point to become official, it would have to be voted upon publicly.

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