NPPD proposes an average 6.5 percent wholesale and retail rate increase in 2012
As a public power utility, NPPD’s rates are set to cover costs. Revenue received is used to pay operating expenses and make necessary investments in maintenance, construction and system upgrades. The rates do not include a profit margin.

Since Nebraska’s utilities are not owned by investors, we can charge lower prices because we don’t have to send dividends to stockholders. While keeping rates as low as possible for customers is NPPD’s main objective, so is being reliable. And sometimes, to achieve this balance, rate increases become necessary.

In 2012, NPPD is anticipating the need for an average 6.5 percent rate increase to its wholesale and retail customers. This is an overall average percent increase for all customer classes. The actual increase will vary depending on customer type and usage. The purpose of this communication is to give you a heads up about this proposed increase to help with your own planning and budgeting. NPPD’s Board will not approve the final rate increase amount until November or December of this year.

Key drivers of the rate increase
Of the 6.5 percent proposed rate increase for NPPD wholesale customers, 4 percent is due primarily to a 75 percent increase in coal transportation costs. Coal is used to generate approximately 45 percent of the electricity NPPD produces and is our second largest operating expense.

Fuel prices that NPPD pays to generate electricity at its power facilities are increasing. While NPPD is fortunate to rely on a diverse mix of fuel sources to produce electricity, fuel costs have risen more than 50 percent in the past five years.

The second driver of the proposed increase in 2012 is due to an increase in annual debt payments for capital investments in electric system plants and facilities. These investments are needed to maintain reliability and meet current regulations.

For NPPD retail customers, about half of the 6.5% increase is due to an increase in costs to generate and deliver power and the other half is due to an increase in capital costs, which includes annual principal and interest for investments needed to maintain reliability of NPPD plants and facilities.  This rate adjustment equates to a monthly increase for an average residential customer of approximately 30 cents a day.

In the past five years, NPPD has invested more than $1 billion in new or existing plants and facilities. The key reason for these continued investments is to meet customer demand for electricity, which has grown nearly 21 percent the past two decades, and to refurbish or build new power plants to address aging plants and facilities.