Less than ten years ago, Lubbock voters approved a charter amendment to ‘fix’ LP&L which transferred the day to day management of LP&L away from the city manager to an executive director who reports to a board of private citizens. The City’s experiment in allowing a public utility owned by tax payers to operate as a private business with minimal city oversight has been a failure.
Three years ago we saw the secret agreement by the LP&L board to issue 87 million in LP&L revenue bonds to buy out Xcel. None of the new debt was submitted to a vote of the taxpayers, but will be paid for by them over the next ten years. No public input as to whether or not the purchase was in the best interest of the residents of the City of Lubbock was sought or even considered. Instead, a small group of insiders, working with a unanimous city council, voted to eliminate all electrical competition within the city. We are now seeing the results of the new monopoly. This summer Lubbock has been hit with blackouts, rolling blackouts, boil water notices, business closings due to the blackouts and a public dispute between the Mayor and the board over LP&L accounting methods. Most disturbing of all is the fact that there is no board plan that has been made public for how LP&L intends to obtain power in 2019 when the Xcel power agreement expires. To my knowledge, the board has failed to even discuss in public its preference for our future power needs. The future power needs of our city are too important to be the subject of back room discussions and negotiations. In addition, Utility Director Gary Zheng has never addressed the council or any other city board in public as to his recommendations or proposals for LP&L after 2019. Complicating matters further is an expensive lawsuit involving the City of Lubbock, WTMPA, Diversified Energy and Republic Power Partners that was caused either directly, or at best indirectly, by the actions of past LP&L board members. How did we get here? I’ll give a brief recap below and then offer my solution for a path forward for LP&L.
In September 2002, the City Council was notified of LP&L spending irregularities. The spending irregularities were related to a 6 million debt owed by WTMPA member cities to LP&L for power service that had not been collected by LP&L and $800,000 in WTMPA expenses which were paid by the City of Lubbock rather than WTMPA. Additionally, it was determined that LP&L had failed to hedge against natural gas hikes which, in the winter of 2002-2003, were at all time highs. The projected deficit of LP&L for that year was 18 million. By February of 2003, the deteriorating finances of LP&L cost its director, Paul Thompson his job. Two weeks later, it cost the job of City Manager Bob Cass. In March of 2003, 69 year old Carrol McDonald came out of retirement to take over LP&L. He has now retired again and, at 78 years old, is a 2012 appointee to the LP&L board. The Mayor of Lubbock during the LP&L melt down was Marc McDougal. He is also a new 2012 appointment to the LP&L board.
As a response to the mismanagement of LP&L by it director and the person responsible for the director, former City Manager Bob Cass, it was determined that the solution to the problem was a charter amendment establishing a board of private citizens to run LP&L without the control of the city manager or the city council.
In 2004, the voters passed a charter amendment establishing a nine member Electric Utility Board appointed by the city council. The amendment gave the board the power to hire a Director of Electric Utilities and General Counsel for utilities, both of whom serve at the pleasure of the of the board and NOT the city manager or council. In addition, the board was given the exclusive authority to determine the transfer and disbursement of all net revenues of LP&L. The council did retain the ability to establish electrical rates, issue debt on behalf of the utility, exercise eminent domain and approve the budget of LP&L. These changes were incorporated into the code of ordinances along with a “reserve” requirement that before any payments are made to the City for franchise taxes or other purposes, LP&L must set aside three months gross revenues from electricity sales as a reserve. This sum is approximately 48 million.
Despite spending more than 4 million dollars over the past 8 years on advertising, LP&L is not well thought of among city residents. Complaints abound regarding the failure to read meters on a monthly basis, poor service response, poor customer service and heavy handed billing and collections operations. Although no accurate exit polling exists from the spring city elections, many veteran political observers credit the defeat of incumbents Paul Beane and Tom Martin to their vote to purchase the Xcel power lines and growing frustration among the voters that LP&L is being mismanaged from the top down.
Where do we go from here? I believe that there are three things that need to be done immediately.
The city council should schedule a charter election with the express intent of repealing Article XII of the charter. The current system in which non-elected individuals are responsible for the operations of an entity with the income, size and complexity of LP&L is not working. The citizens own LP&L and they should be overseeing its operations through their elected city council and its city manager. It should be made clear to the voters that if the charter election fails, LP&L will be sold to a private entity. Either way, voters should be made aware that the current system is not working and will not be continued regardless of the outcome of the election. I believe an overwhelming majority of citizens agree with this assessment.
Next, the city should withdraw from the WTMPA. Our association with a power partnership in which the other cities are Brownfield, Floydada and Tulia, makes no economic or political sense and has been a constant source of political infighting, lawsuits and accounting irregularities.
The city council should also commission an outside consulting firm with utility consulting experience to provide a top down evaluation of current LP&L operations. The emphasis of the evaluation should be focused upon improving consumer service and reducing complaints, improving scheduled maintenance to prevent future blackouts and moving the financial accounting of LP&L away from the Executive Director to a standardized accounting system overseen by city auditors.
There should also be a complete and thorough city council evaluation of LP&L management including Utility Director Gary Zheng. Zheng is paid more than the city manager, more than a federal judge or state judge, more than a congressman, more than most employees of Texas Tech with the exception of the Chancellor, and more than every county employee except the county coroner. Are we getting our moneys worth? That should be the question.
We can wait no longer. We must right LP&L’s sinking ship before it is too late. The Lubbock City Council should act now to implement these common sense recommendations so that we move forward in protecting and preserving one of Lubbock’s most important resources.