In life, it’s important to remember there are at least two sides to every story. When approached with differing viewpoints in business, it is our job to listen and look for solutions that make not only financial and operational sense, but also build acceptance.
As we start another year, challenges facing NPPD and the energy industry continue evolving. One of the larger issues is the focus on fuels used to generate electricity now and in the future.
We are getting significantly more pressure from groups who want to see us invest more quickly in renewable energy production. But on the customer side, we are consistently hearing they want their electricity to be reliable and low cost. While both are legitimate schools of thought, we must address them with a balanced approach.
I recently saw a quote attributed to Abraham Lincoln. To paraphrase, he said, “if God had intended some people to fight just for the environment andothers to fight just for the economy, he would have made some people who could live without money and others who could live without water and air. There are not two groups of people, environmentalists and workers. We all need a livelihood, and we all need a livable planet to live on.”
This seems a fitting way to describe what is happening in the electric industry today. While wind energy generation in Nebraska since 2010 will have quadrupled by the end of this year, some still say that is not enough. On the other hand, one of our wholesale customers, the city of Wayne, recently notified usof their intent to begin reducing their power supply from NPPD starting in 2019. Ironically, they plan to purchase this replacement energy from a Kentucky-based supplier that produces electricity from 100 percent coal-based resources. Northeast Public Power District, another wholesale customer, also announced intentions to buy a portion of its future power supply requirements starting in 2018 from this same utility.
According to both customers, the decision to sign with this other entity is not because NPPD’s relationship with them was lacking. Rather, they have indicated this new agreement will result in a potential flat savings of 10 percent below NPPDs wholesale rate and a shorter-term contract.
So, what does all of this mean for NPPD going forward? First, we need to recognize change is occurring and adjust our business model, as applicable. We cannot assume good service and affordable rates alone will keep customers happy.
In a few months, Southwest Power Pool’s Integrated Market will go live. With this action, NPPD’s customers will be served electrically with the lowest-cost generating resources in the SPP region, which will include NPPD resources. I’ve said before, NPPD will be competitive in this market. However, this is not business as usual. We will be looking closely at how we can get the most value out of this market for customers.
Second, we all need to continue looking for ways to do things more efficiently while scrutinizing expenses. I have challenged each member of executive management to find at least one process and either improve it or eliminate it this year. But this can also be done on a smaller scale by each of us. Efforts to reduce budgets along with better-than-average sales helped us end 2013 with a forecasted financial surplus of $48.5 million as of Dec. 17. This is fantastic progress, and we need to continue this trend in 2014 as part of our goal to help get Nebraska back within the top 10 lowest cost states for retail electric service in the nation.
Third, we need to ensure we are working together as an effective team and promote the benefits of NPPD and public power. We are all in this together and need to be proactive when sharing information and addressing issues. Remaining flexible to change and sharing ideas for improvement must become part of our daily routine, not just something we do when we get around to it.
Several of us will be spending a good majority of the first half of this year engaged in conversations with customers as we work together to develop a new wholesale power supply agreement. NPPD is still a great value. Our current generation mix is more than 40 percent carbon-free, and we have maintained competitive wholesale rates and a high level of reliability.
While some of our customers search to find cost savings in the short-term, it’s important to note these deals also come with a higher level of risk and uncertainty. We need to continue talking with our customers to share the benefits of working together over the long-term and investing in Nebraska-based resources.
In fact, when it comes right down to it, our ongoing focus is straight-forward – to safely do every day what is best to serve customers now and in the future.