Dawson Public Power District purchases all of the power they sell to customers from Nebraska Public Power District. We want to be upfront with our customers about the projected rate increase. Mr. Asche's explanation gives all of us insight into the future of electric rates with just the current economic impacts. The 7-12% projected increase is not good news but it could be worse.
Imagine what will happen if congress decides to MANDATE renewable portfolio standards for every state? NPPD has made a commitment to add renewable power (wind) to their generation mix. They have set a goal of achieving 10 percent of our energy supply for NPPD’s native load from renewable resources by 2020. What they propose has sound merit for the State of Nebraska and we stand behind them. Our board of directors pledges to help NPPD be the best power supplier they can be.
From Ron Asche, CEO of Nebraska Public Power District:
"NPPD, like many other utilities across the country, has seen upward pressure on electric rates. Unfortunately, facility improvements and fuel costs continue to increase, while at the same time, off-systems sales margins have decreased dramatically. Preliminary estimates show a need to raise wholesale rates between 7 and 12 percent for 2011.
To be more specific, let’s break down the 2011 rate increase into its three main drivers.
1. Fuel costs—as in the past, the cost of coal, uranium, and fuel transportation costs continue to increase as world demand for these fuels rise.
2. Deferred maintenance outage - In order to minimize the rate increase in 2010, NPPD decided to move a major planned maintenance outage at Gerald Gentleman Station to 2011. Because this was deferred, NPPD will have two major plant outages in 2011, one at Gentleman Station, and one at Cooper Nuclear Station. Having two major outages in the same year will increase 2011 costs by around 30 million dollars.
The third largest factor driving the 2011 rate increase is…
3. Non-firm energy sale prices. Often times, NPPD can generate more energy than our customers need, and as a result, we can sell this excess energy to other utilities outside Nebraska, which helps offset some of NPPD’s fixed costs that otherwise have to be paid by our Nebraska customers. Recently the market price for this energy has gone down considerably. In 2008, for example, we sold energy on the market at an average of 48 dollars per megawatt-hour. In 2009, this dropped to 26 dollars per megawatt-hour. For 2010 and 2011, it looks like the market will average about 26 to 29 dollars per megawatt hour - which will mean a significant drop in expected revenue for NPPD. The decrease in wholesale energy market prices is primarily due to the recession, which has reduced the demand for energy in the region. In addition, the supply of natural gas in the United States has increased significantly, which means that many natural gas plants are able to produce energy at more competitive prices - which, in turn, drives down energy prices on the open market.
Other utilities in the region have increased wholesale rates from 21 percent to 54 percent between 2006 and 2010 (compared to NPPDs increase of 31 percent). We realize it’s little comfort to know that others are also raising rates, but thought it pertinent for you to know that other utilities are feeling the cost same pressures."
Dawson Power applaudes NPPD for everything they do to keep our rates low. We especially thank them for their integrity and willingness to be open about the future of wholesale power costs in Nebraska. We are as concerned as they are about the rising cost of electricity.
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