Today, Nebraska Public Power District’s Board of Directors approved a 6.5 percent average rate increase for both its wholesale and retail customers. The increase will take effect January 1, 2012.
NPPD’s wholesale customers include rural public power districts and municipalities, while NPPD’s retail customers are those that receive an electric bill directly from NPPD. NPPD began communicating and the need for the increase with many of its customers in early 2011.
Of the 6.5 percent rate increase, 4 percent is due primarily to a 75 percent increase in coal transportation costs next year.
“Fuel prices NPPD pays to generate electricity at its power plants continue to rise,” said President and CEO Pat Pope. “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 and fuel transportation costs are rising significantly in 2012.”
The remaining 2.5 percent of the 6.5 percent increase is due to an increase in annual debt payments for necessary capital investments in electric system plants and facilities.
“In the past five years, NPPD has invested more than $1 billion in new or existing plants and facilities,” said Pope. “These investments are needed to maintain reliability and meet current safety, security and regulations.”
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.
“Keeping rates low and electric service reliable are important components of NPPD’s mission,” said Vice President and Chief Financial Officer Traci Bender. “For the past several years, balancing these goals has been a challenge, yet we are committed to running the organization as efficiently as possible.”
To minimize the rate increase in 2012, NPPD has heavily scrutinized capital and expense budgets and have either cut or reduced costs. The District is also evaluating inventory levels while reducing travel, training and outside services, and staff, where possible.
“We are committed to doing what we can to keep rates as affordable as possible for our customers,” Pope said.
NPPD’s electric rates remain competitive, regionally and nationally. Based on preliminary data from the U.S. Department of Energy’s Energy Information Administration, the average per kilowatt-hour for NPPD customers is 7.35 cents, compared to the national average of 9.88 cents.
The actual percentage rate increase amounts in 2012 will vary depending on the type of customer class (i.e., residential versus commercial) and the amount of power used during a month’s time. The increase to NPPD’s approximately 70,000 retail residential customers, using 1,000 kilowatt-hours per month, equates to an estimated $9 monthly cost increase.