Lubbock Power & Light System Bond Rating Raised to ‘A+’

The S&P Global Ratings decision to raise the rating comes after successful migration to ERCOT and transition to the retail competitive market.

Standard & Poors (S&P Global Ratings) raised its long-term rating and underlying rating (SPUR) from 'A' to 'A+' on the City of Lubbock, Texas' electric light and power system revenue debt; issuing an outlook of stable. The decision to increase the rating for Lubbock Power & Light (LP&L) comes after the successful migration of all customers from the Southwest Power Pool (SPP) to ERCOT and historic transition to the retail competitive market in ERCOT.

"The upgrade is based on our view of Lubbock Power and Light's reduced operating risks as a result of shedding its responsibility for procuring electricity in the Electric Reliability Council of Texas (ERCOT) market on April 5, 2024, and now operating exclusively as the provider of distribution and transmission services, a lower-risk business," said S&P Global Ratings credit analyst Scott Sagen.

The decision from S&P highlights the fact that customers in LP&L's service territory now have retail choice and can choose among multiple retail electric providers for their power supply. Based on LP&L's lower business risk profile, they anticipate its financial performance will be more stable and predictable with likely improved coverage and liquidity metrics in the near term.

"The stable outlook reflects LP&L's more predictable cost structure by eliminating its power supply obligations, and our expectation that it will likely produce stronger coverage and liquidity metrics over the near term," added Mr. Sagen.

The increased rating will benefit Lubbock ratepayers as LP&L continues to invest in the locally owned electric grid and responsibly plan for its expansion. Alongside grid investment, LP&L plans to engage in an aggressive debt reduction plan in the coming years in order to provide reliable service at an affordable cost for ratepayers. With the constantly increasing demand for electricity and electric infrastructure, it is important that LP&L continue to invest in the local grid to stay ahead of growth on the system and with this decision, the utility can do so at a more affordable cost to its customers.

“This is great news for LP&L affirming our historic and successful transition into the retail market as a transmission and distribution service provider,” said Harvey Hall, LP&L’s Chief Financial Officer. “We are excited to take on our new business model and our stated goal is to run Lubbock’s electric grid in a reliable manner while working to be the low cost delivery system in the state.”

LP&L currently hold an A+ rating with Fitch Ratings and A1 rating with Moody’s Investor Services.