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OPUC: Texas PUC Should Require Lubbock Power & Light To Fund Study Of Costs/Benefits Of Adopting Retail Choice

ARM: Adopting NOIE Load Zone For LP&L Would Create Barrier To Any Future Move To Retail Choice

November 29, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

In testimony concerning Lubbock Power & Light's proposed transition from SPP to ERCOT, the Texas Office of Public Utility Counsel said that approval of such move should be conditioned on, among other things, LP&L funding an independent study of the costs and benefits of adopting retail choice in LP&L's service area

A witness for OPUC testified, "I recommend that the Commission require as a condition of approval that LP&L fund an independent study under the direction of the Commission or a party of the Commission's choosing to determine the costs and benefits both to LP&L customers and existing ERCOT customers of LP&L opting-in to retail competition. The study should be completed and filed with the Commission three years after LP&L is granted and has operated under Non-Opt In Entity (NOIE) status."

Elsewhere in OPUC's witness testimony, the witness testifies, "The study should be initiated three years after LP&L has operated within ERCOT under NOIE status and be filed with the Commission."

In separately filed testimony, the Alliance for Retail Markets also called for an independent study on moving LP&L to retail choice, funded by LP&L, but ARM's witness said that the benefits of choice, "should be thoroughly evaluated by LP&L prior to LP&L service area's integration with the ERCOT region since a decision to opt into competition would impact if and how LP&L would contract for wholesale supply as of the requested June 1, 2021 transition date."

ARM also opposed the creation of barriers to any future move to retail choice at LP&L -- namely, the creation of a Non-Opt In Entity (NOIE) Load Zone. ARM's witness also said that completing a study and a decision on a transition to retail choice prior to the execution of PPAs to serve LP&L upon its entry into ERCOT would also avoid hurdles associated with any transition to competition if competition were not adopted immediately and long-term PPAs were instead put in place

"The proposal to establish a new NOIE Load Zone would inhibit any transition to competition as part of this application," ARM's witness said

"If its application is approved by the Commission, LP&L should join the existing West Load Zone for a number of reasons. First, there is no specific ERCOT Nodal Protocol requiring LP&L to establish a NOIE Load Zone for itself. Once a Load Zone is established under ERCOT Nodal Protocol Section 3.4.2, however, its boundaries may not be changed for 48 months. To avoid this 48-month restriction, LP&L could join the existing West Load Zone and still integrate its service area as part of the ERCOT region either as a NOIE not participating in the competitive retail electric market or as an opt-in entity whose service territory is open to retail competition," ARM's witness said

"If a NOIE Load Zone is established prior to the introduction of retail competition in the transitioned LP&L service area, additional costs will be incurred and delay will be experienced in moving the Affected Load from the NOIE Load Zone to the appropriate Competitive Load Zone (i.e, the West Load Zone) in order to facilitate retail competition," ARM's witness said

"[E]stablishing a NOIE Load Zone for LP&L pre-supposes that LP&L would join ERCOT as a NOIE. If LP&L were to opt into competition, Protocol Section 3.4.3(1)(f) would require it to join the appropriate Competitive Load Zone four years after customer choice is offered," ARM's witness said

A witness for ERCOT, who said that the Commission is the appropriate entity to decide if a new load zone should be created for LP&L, testified that, "Creating a new NOIE Load Zone for the proposed transition of LP&L's Load into the ERCOT System would have less of an impact on Market Participants than would incorporating LP&L's Load into an existing Load Zone. For example, existing long-term contracts would not likely contemplate a significant change to Load in a particular Load Zone (i.e., the addition of LP&L's proposed Load into a new Load Zone), which could impact prices with respect to that Load Zone. Prices could be impacted because projected Load and congestion forecasts, as contemplated when such long-term contracts were executed, would likely change if LP&L's Load was incorporated into an existing Load Zone. Such a scenario would not occur if a new NOIE Load Zone were created for LP&L's Load."

However, ARM's witness said that ERCOT's Competitive Load Zones have absorbed block loads larger than the 470 MW of load LP&L proposes to add to the ERCOT region without significant impact to the wholesale or congestion revenue right markets.

In discussing the benefits of retail choice, ARM noted that, currently, the LP&L standard rate is priced at an average rate of 11.6 cents/kWh at 1,000 kWh per month, which is 40 percent higher than the average of one-year fixed price offers available from REPs in Dallas

The Texas Energy Association for Marketers filed this Statement of Position stating, "TEAM is concerned with the shifting of costs for this transaction to other load serving entities in ERCOT without a corresponding benefit ... In addition, should the Commission ultimately approve the movement of the end-use customers of Lubbock Power & Light into ERCOT, those customers should be given the option of participating in the competitive retail market in ERCOT."

Docket 47576

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