Public Power: 5 Findings from Our Latest Study

Is public power in Nebraska still affordable? The answer is yes…for now. Energy prices and policy are changing rapidly, and ratepayers want to know where their power bills are headed. Here are five findings from our recent study of public power energy rates that illuminate where Nebraska stands:
 

1. Nebraska’s electric rates increased by 60 percent from 2007 to 2013.
 

This price jump is the fastest among the region and almost five times the national average.
 

One factor is lower natural gas prices, which have kept Nebraska utilities from selling excess natural gas power at previously higher rates and using the earnings to lower electricity rates for customers here in Nebraska.
 

The shutdown and recovery of the Fort Calhoun Nuclear Generating Station was also a major driver of Nebraska’s rapid growth in electricity prices beyond 2011. Recommissioning ultimately cost ratepayers an estimated $177 million, which is approximately 18 percent of OPPD’s yearly operating expenses.
 

2. Electricity costs for agriculture in Nebraska have increased by more than 100 percent over the last decade, costing the farming industry more than $400 million in added expenses over the last five years.

 

But as bad as that sounds, it’s not entirely a bad thing. The boom in agriculture over the last decade helped Nebraska’s net farm income reach $8.37 billion in 2013, mainly due to high commodity prices.[1] Nebraska’s farmers have rapidly expanded the state’s total irrigated acres, incurring more expenses to reap record profits.

 

Rural areas also tend to be more expensive to serve because of the investment required to build distribution infrastructure and meet the power needs of irrigation systems during high-demand times of year.

 

3. Nebraska’s electricity rates are lower than Iowa and the region when accounting for the costs paid by taxpayers for energy subsidies.
 

Taxpayers are picking up 11.7 percent of the cost of energy rates in Iowa as opposed to only 2 percent in Nebraska, primarily due to subsidies for wind power. These considerations reveal that without subsidies, the true cost of electricity in Nebraska is, at the moment, still lower than the entire region.


The real question is whether that will remain to be the case as the federal government targets coal-fired power plants, Nebraska’s source for the vast majority of its power, in its current regulatory approach.

 

4. More wind and less coal is not a cost-effective strategy to contain Nebraska’s electricity prices.
 

Coal is a reliable, affordable baseload power source, and the distribution infrastructure for this power source has already been built and paid for by Nebraska’s ratepayers. However, electricity prices increase when a state uses more wind energy as a percentage of total generation due to high transmission costs. As a result, Nebraska’s electricity rates will increase by roughly 7 percent with every 10 percent reduction in coal and 10 percent boost in wind production by 2018.
 

5. Increasing federal regulations present the biggest threat to Nebraska’s public power model.

 

Many of the state’s smaller municipalities operate single unit coal-fired generating stations, which is one reason their electricity rates remain particularly affordable. Additionally, Nebraska’s utilities have already spent millions of ratepayer dollars to retrofit existing coal plants pursuant to federal regulations. The EPA’s Clean Power Plan would shut down many of these facilities entirely. While all power plants are eventually retired and replaced over time, this premature phase-out would deny ratepayers a return on the significant investments they have already made.

 


While the price of keeping the lights on in Nebraska means a lot for economic development, it means even more for our quality of life. High energy costs are just another kind of tax, which hurt those on limited and fixed incomes the most and take away other opportunities for their household budgets.

 

Nebraska has the tools to be an affordable, competitive, public power state. But rapid changes in the energy-generation field and, most of all, federal mandates, present major barriers to delivering low-cost and reliable electricity.


Learn more with our new report on public power electricity rates in Nebraska.

 

[1] Bergin, Nicholas. “Study: Farm income to plummet in 2015.” Lincoln Journal Star, July 8, 2015 http://journalstar.com/business/agriculture/study-farm-income-to-plummet-in/article_68f23ead-4250-5d45-adc9-cde4549606bf.html

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