City Council rejects motion to push back rate increase - KCBD NewsChannel 11 Lubbock

City Council rejects motion to push back rate increase

LUBBOCK, TX (KCBD) -

The Lubbock City Council spent over two hours discussing the LP&L rate increase Tuesday night, but ultimately voted to keep the rates in place.

Council members seemed to struggle with the issue, torn between their desire to respond to citizen concerns and their need to keep LP&L solvent.

Councilman Jim Gerlt summed up the dilemma, saying that they were "trying to operate a business and keep it solvent, while at the same time having some heart."

"I'd like to see us get some heart in LP&L," Gerlt said.

The bulk of the council's time was taken by Joe Mancinelli of J Stow & Co. Mancinelli's firm made the original recommendation to change the rate structure back in May, and he spent more than an hour explaining and defending that recommendation on Tuesday night.

Mancinelli made the case that the primary reason for the increase in June bills was not the rate increase passed by the council, but the wholesale cost of power passed on from Xcel.

After years of essentially ignoring this "Purchased Power Cost Recovery Factor," LP&L suddenly started passing on 100 percent of it to customers, and when it finally showed up on bills, the price of power from Xcel was double what the consultant models had predicted.

Mancinelli said the recent high bills were caused by an unexpected spike in wholesale power prices, combined with a 54 percent increase in power consumption from May to June.

Councilman Gerlt said that by refusing to pass on these wholesale costs, LP&L had basically been subsidizing the cost of electricity for years.

Councilman Floyd Price said, "My bill went from $118 to $329. It hits me in the pocket, too."

District 5 Council Member Karen Gibson said if she had known how the numbers would add up, it would have changed her vote.

Councilman Victor Hernandez said the May 9th vote came less than a month after two negative reports from ratings agencies that threatened to lower LP&L's bond rating if they didn't change direction.

Hernandez asked the council to remember three previous instances where the senior management of LP&L had asked for "small, routine and uneventful rate changes" and been denied.

Hernandez said these rejections ultimately led to the vote on May 9th, when they were "forced to have a rate increase."

Council members were obviously worried about the fate of ordinary customers, but they were also worried about the long-term fate of LP&L.

Councilman Floyd Price asked the council to remember 2003, when LP&L was, "on the brink of bankruptcy."

"I don't want to see us make a knee-jerk decision and put LP&L in jeopardy, because that puts the City of Lubbock in jeopardy," Price said.

Council members Price and Klein expressed concern about the volatility of monthly wholesale charges from Xcel, suggesting that the utility board find a way to "flatten" rates and avoid the kind of rate shock that hit consumers in July.

The council seemed like it was going to delay action until the Electric Utility Board could make their recommendations on Wednesday, but Councilman Hernandez called for a vote.

Hernandez asked for a vote to rescind the rates until October, so citizens could, "See where each one of us stands on that issue."

The vote failed 5-2.

Copyright 2013 KCBD. All rights reserved.

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