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4-Traders Homepage  >  Equities  >  Nyse  >  Xcel Energy Inc    XEL

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Xcel Energy : LP&L electric rates to increase $5 for average customer next month

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01/18/2017 | 12:01pm CET

Jan. 18--After seeing a rise of an average $10 a month in October 2016, electric users in Lubbock will notice their electric bills go up an average of about $5 more per month beginning in February.

The $10 increase back in October wasn't so much an increase as it was a return to normal, since Lubbock Power &Light lowered its rates earlier that year. The $5 more per month beginning next month is because of higher costs the municipal utility pays its electric provider, Xcel Energy, officials said Tuesday.

Lubbock's Electric Utility Board reluctantly approved the rate increase at its board meeting Tuesday afternoon.

LP&L's rates are made up of two parts -- the base rate and the purchase power recovery. The purchase power recovery is for the cost of the electricity -- what LP&L pays Xcel Energy for power -- and is largely driven by fluctuations in the energy market. As part of its rate stabilization model, LP&L spokesman Matt Rose said the municipal utility reviews and implements new rates typically twice a year, in June and then October, to prevent fluctuations from month to month. Because of increasing costs, Rose said, the utility was forced to make a midseason adjustment to the rates for purchase power recovery.

"Our models are working perfectly. These are unanticipated costs that have been passed on to us. I get it -- it's very frustrating to us," LP&L Chief Financial Officer Andy Burcham told the board before the vote. "I completely get your frustration, but it's been unexpected. We were hoping it would resolve itself."

In February, the purchasing rate was lowered from 6.85 cents to 5.68 cents per kilowatt hour, and then went back up to 6.82 cents per kwh starting in October. Now, starting in February, it will be increased to 7.3 cents per kwh, or $73 a month for a customer using 1,000 kWh per month.

Chad Sales, LP&L's financial planning and analysis manager, said the increase in pass-through costs is being led by three separate components LP&L is paying. As part of its wholesale contract, Sales said LP&L pays an annual true-up fee to Xcel that is designated to allow LP&L to recover costs, and last year it was a much higher cost of $4 million. LP&L also now pays a newly implemented charge for transmission line owners to recover investment costs in the market, which is $1.1 million.

But the continuous cost, however, is the rising price of fuel, curtailment and congestion that LP&L says has increased $2.7 million.

"The problem is that all three of these costs got heaped on us," said Rose. "Any one of those individually would have been fine -- we probably would have been able to stay in our (stabilization model). All three of them together, they total up about $7 million, and it would be ongoing."

Rose says he expects this rate to stay through the summer, although he didn't know what the fuel and congestion cost will be going forward.

LP&L this year increased its base rate as well, which makes up about 30 percent of a customer's electric rate and covers the cost of operations, such as salaries, maintenance and capital improvement projects. This was the third of five annual 5.75 percent base-rate increases for the projected $333 million worth of capital improvements LP&L plans in the next six years, largely in preparation for the switch to the Electric Reliability Council of Texas grid in 2019 when the city's wholesale contract with Xcel Energy expires.

___

(c)2017 the Lubbock Avalanche-Journal (Lubbock, Texas)

Visit the Lubbock Avalanche-Journal (Lubbock, Texas) at www.lubbockonline.com

Distributed by Tribune Content Agency, LLC.

© Tribune Content Agency, source Regional News

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Financials ($)
Sales 2016 11 549 M
EBIT 2016 2 243 M
Net income 2016 1 118 M
Debt 2016 14 612 M
Yield 2016 3,30%
P/E ratio 2016 18,72
P/E ratio 2017 17,80
EV / Sales 2016 3,08x
EV / Sales 2017 3,06x
Capitalization 20 928 M
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Mean consensus HOLD
Number of Analysts 15
Average target price 42,6 $
Spread / Average Target 3,5%
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Benjamin G. S. Fowke Chairman, President & Chief Executive Officer
Kent T. Larson President-Group Operations & Executive VP
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