Xcel Energy to sell distribution system in Lubbock, Texas, to city

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Source URL http://lpandl.ci.lubbock.tx.us...

Related Companies Lubbock City of Southwestern Public Service Co Xcel Energy Inc. (XEL)

Related Documents Merger Press Release (MR) Xcel Energy Inc. 11/4/2009, filed on 11/4/2009

Xcel Energy Inc. said Nov. 4 that it has reached an agreement to sell its electric distribution system in the city of Lubbock, Texas, to the city-owned electric utility, Lubbock Power & Light.

In a statement, Xcel Energy said the sale would allow for more efficient operation of the distribution system within the city, which since 1942 has been served by both LP&L and Xcel Energy, a situation resulting in the duplication of electric power services, lines, poles and substations. "Both companies have determined this to be an inefficient and intrusive way to provide electricity to the community," the company said.

David Eves, president and CEO of Southwestern Public Service Co., the Xcel Energy utility that operates in the Texas Panhandle, said Xcel Energy customers will now be served by LP&L, though Xcel Energy will continue to supply wholesale power and transmission services.

"It's natural for LP&L to pick-up the Xcel retail electric service, since the City of Lubbock already provides utility service to all the properties in Lubbock," Lubbock Mayor Tom Martin said in a news release issued on behalf of both the city and Xcel Energy. LP&L provides power to more than 77% of the households in Lubbock.

Electric rates will remain the same under the terms of the agreement, the statement said.

Xcel Energy spokesman Wes Reeves said LP&L is purchasing the distribution system, which consists of about 685 miles of lines, for approximately $87 million, and new customers will be served under LP&L's existing contract when the transfer is finalized.

"Basically, they get the same power," Reeves said, noting that LP&L's contract with Xcel Energy goes through 2019.

Xcel Energy added in the statement that it will "remain a significant part of the Lubbock community" and will "continue its civic involvement in Lubbock as a regional hub of operations and as a wholesale electricity provider for LP&L and retail provider in other areas of the South Plains."

Xcel Energy said its board of directors has already approved the sale of the assets, and the company expects to receive regulatory approval within the next nine months. LP&L must still seek approval from its Electric Utility Board and the Lubbock City Council.

LP&L and the city were advised by RBC Capital Markets with respect to financial matters, R.W. Beck with respect to operational matters and Vinson & Elkins with respect to legal matters.

In a related action, Lubbock voters voted Nov. 3 to put control of LP&L under a nine-member Electric Utility Board to be appointed by the City Council, according to report by the Lubbock Avalanche Journal posted on LP&L's Web site.

The move, supporters said, creates a buffer between the utility's finances and other city accounts. City officials had, in recent years, used money generated by the utility to fund other departments.