English (United States)
New contract offers flexibility, renewable options, competitiveness
Columbus, Neb. - On Thursday, during a requested rate hearing, the Nebraska Public Power District Board of Directors took comments from its wholesale customers both against and in support of the District’s proposed 2016 electric rate proposal.
The rate hearing opened with an overview of NPPD’s proposed 2016 General Firm Power Service (GFPS) Rate Schedule. Customers were then given the opportunity to share their concerns or support for the proposal.
“The hearing is an important part of our business communications with customers,” explained NPPD’s Pricing, Rates & Wholesale Billing Manager Todd Swartz. “In addition to accepting comments about rates, NPPD has also been working with wholesale customers for more than two years to negotiate terms of a new wholesale power supply agreement.”
No action was taken by the Board of Directors, but it is expected that a vote on the wholesale rate proposal may be conducted before the end of October.
The Rate Proposal
The GFPS rate proposal calls for an average 3.8% overall wholesale rate increase for 2016, which is comprised of a proposed 3.7% increase in production rates and a proposed 5.7% increase in transmission rates. Production costs comprise nearly 90 percent of the wholesale power costs and transmission costs make up the remainder. The production rate increase is needed to cover an additional $25 million in uncollected retiree healthcare obligations associated with past service. The transmission rate increase reflects the cost NPPD pays for transmission investments in the Southwest Power Pool (SPP).
“The rate schedule proposed to the Board of Directors meets the requirements of state statutes and the wholesale power contract,” said NPPD President and CEO Pat Pope. “Collecting funds for past service now, rather than later, is a fair and reasonable approach.” NPPD is collecting from all customers who benefited from the services provided, regardless of whether or not a customer signs a new power supply contract with us. The difference is the timeframe over which these costs are collected.
Wholesale customers who choose to sign a new, 20-year wholesale contract will receive a 3.57% discount on their 2016 production demand energy rates because NPPD can finance their uncollected retiree healthcare obligations over a longer period of time. The 2016 overall average rate increase for such customers would be 0.6 percent.
NPPD wholesale customers who remain on the existing contract will see an average 3.8% rate increase in 2016.
For two years, NPPD’s wholesale electric rates have remained steady with no rate increase in 2014 and only a half-percent increase in 2015 for transmission costs. The proposed 0.6 percent increase in 2016 for customers signing a new contract repeats a third year of rate stability.
The Contract Options
For more than two years, NPPD has been meeting regularly with its wholesale customers to establish terms of a new 20-year contract. The negotiations resulted in two proposed contract options containing some of the most, if not the most, flexible and customer-oriented wholesale power terms offered by any generation utility in the country, Pope explained.
Option A contains a provision giving customers a way to reduce purchases from NPPD if financial benchmarks are not met, while Option B allows customers the option to reduce their power purchases from NPPD for any reason, up to 50 percent, without an exit fee.
The financial benchmark within Option A compares NPPD’s rate against what more than 800 consumer-owned utility distribution entities across the country pay for power. Today, NPPD’s wholesale rate is 13 percent below the median price of this benchmark.
The new contracts give any customer the ability to add up to 10 percent local renewable generation without a penalty, while still receiving full benefits and services from NPPD. Customers can even add more than 10 percent renewables; however, the percentage above 10 percent would be handled through a different financial arrangement.
“NPPD is committed to providing low-cost energy to our customers,” Pope continued. “Having a contract that spans 20 years helps us plan effectively for the future and provide even lower prices because of the ability to finance over a longer period of time with tax-exempt debt.”
Pope noted that not all contract deals are the same.
“NPPD’s published rate includes everything a customer is required to pay including services beyond the electric commodity. No hidden expenses exist,” he said. “NPPD offers a generation mix which is on track to be nearly 50 percent carbon-free. We have a proven and reputable track record in the energy market, and we are not out to make a profit. We are committed to this state and the customers we serve.”
When are rates set?
NPPD rates are reviewed annually, and any proposed rate changes are normally approved during NPPD’s December Board of Directors Meeting.
Will my bill be higher this month because of the cold weather and rolling outages?
Most NPPD customers can expect to see a higher monthly electricity bill this month due to the recent cold weather event which caused customers to have higher usage. A higher bill would not be the result of a rate increase however because the rates did not change.
Does my NPPD rate change throughout the year?
When proposing a rate change, NPPD typically sets and approves rates during the December Board of Directors Meeting. The rates that are approved go into effect February 1 of the next year.
The only other time NPPD’s rates change during the year is when the higher summer rates automatically go into effect for the months of June through September. Aside from this, any increase or decrease in your bill is likely tied to increased energy usage during severe cold or hot weather.
NPPD retail rates have remained steady with no overall increase in eight years.
How will February’s cold temperatures and rolling outages impact my rates in future years?
The financial impact of the most recent historic polar vortex events as it relates to rates are unclear at the present time. Many factors, including future weather impacts, load growth, and the cost to generate and deliver electricity will impact NPPD’s financial position and rates.
How will cold temperatures and rolling outages impact my monthly bill?
Simply put, if you use more electricity than “normal” you will have a higher bill. Rates have not changed. Think of it as a consistently priced fuel, that never fluctuates in price per gallon. If you need to fill up more often, it will require a larger amount of product, and as a result you have higher costs.
Does it take more energy and cost more to lower my thermostat now, only to raise it later to regain warmth?
This is a myth that many have heard for years. Contrary to belief, your system will operate for longer periods to recover and heat pump systems may switch to supplemental or auxiliary heat, but overall energy use is reduced if the setback occurs over at least a few hours.
NPPD operators at our control center handle increases and decreases in load and train for these situations. The operators refer to this as the Cold Load Effect. When customers are returned to service from a long outage, there can be a sharp increase in electricity usage that must be accounted for. As motors begin to start when the load is energized and more equipment powers on than was previously when the customer was interrupted. This means, when there are several customers experiencing an outage at the same time, operators need to consider the load when the circuit is restored can be higher than when it was interrupted. The longer a circuit is interrupted, the more pronounced the Cold Load Effect will be.
In the case of this most recent event, homes were using heat so consistently during the day and the interruptions were short enough that there was no significant change in electricity usage when one circuit was brought back online and another was turned off. During the rolling blackouts, when one group of customers was experiencing an outage, a new set of customers would betaken offline before the first group was returned to service. This helped ensure that there were no spikes in electricity usage that would have a negative impact on the generation and load balance.
Who can I contact for assistance with payment arrangements for my NPPD bill, or information on assistance agencies?
Payment arrangements can be arranged by contacting NPPD at 1-877-ASK-NPPD.
Those in need should also contact NPPD at the above listed number for more information and a listing of energy assistance from local agencies.
What is a rolling blackout outage?
Rolling blackouts, also known as rotating outages, are controlled, temporary interruptions of the electrical service directed by the Southwest Power Pool (SPP). These outages can occur when electricity generating resources cannot meet the electricity demand in the region. NPPD and others must reduce demand in an amount directed by SPP and act upon this within minutes.
When is a rolling blackout necessary?
Rolling blackouts are necessary as a last resort to maintain the reliability of the electrical grid system. SPP directs rotating outages when electricity generating resources cannot meet the electrical demand in the region. They rotate or roll to different systems and areas so we can all absorb a short outage at different times versus a long outage for one specific area.
The recent situation was extraordinary and an unprecedented chain of events, including historic low temperatures across the entire SPP footprint, lack of wind generation, reduced amounts of natural gas because of frozen wells and sky rocking natural gas prices. A situation never seen before in this region since SPP was founded.
Why was there little notice before power was shut off to some customers?
Just like many of our retail and wholesale customers, NPPD received the emergency notices from SPP with little warning, requiring us to load shed with just a few minutes to act.
NPPD did our best in this emergent situation to communicate not only to our large industrial and residential retail customers, but also with as many wholesale customers as we could. This was done with a press release, via emails, regularly scheduled wholesale customer meetings throughout the event, and using social media. Unfortunately, with the short timeframe not all customers were able to be reached before some outages began.
We continue to evaluate and review the events of this situation and will look for ways to learn and improve our process, should it ever be needed again.
Is there an easy way to track my energy usage?
Tracking your energy usage can easily be done by downloading NPPD’s mobile application, “NPPD On The Go!”. Download by searching “NPPD” in the Google Play or Apple App store. Then click “Register” and have your account number, service address zip code, and phone number ready. Finally complete the account information.
What are the benefits of using “NPPD On The Go!”?
Who and what is Southwest Power Pool (SPP)?
NPPD is a member of the Southwest Power Pool (SPP), a non-profit regional transmission organization in the central part of the United States. SPP is mandated by the Federal Energy Regulatory Commission to ensure customers in the region receive reliable power, adequate transmission infrastructure and competitively priced electricity. SPP and its members coordinate the flow of electricity across more than 65,000 miles of high-voltage transmission lines spanning 14 states.
Why is it important to have a diverse energy mix?
NPPD believes a diverse generation mix serves our customers best. We use wind -- when it is available. We use coal -- which is reliable and helps keep electric rates low. We use water -- one of the oldest forms of renewable energy. We use nuclear -- which offers emission-free, around-the-clock power. We use natural gas -- to complement the portfolio.
NPPD’s diverse energy generation mix helps keep our electricity reliable and keep rates as low as possible.
Public power, as it always does, answered the call to help protect the bulk electric system which serves the central portion of the country and is part of the larger Eastern Interconnect. The system requires real-time balancing of generation and load. In doing so, we also protected our customers from more detrimental, long-term blackouts.
All of NPPD’s plants were available to SPP during this emergency event. They performed as beautifully during the emergency as our NPPD teammates who worked around the clock to manage the safety, health and financial risk for our customers.
