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Public Power 101

Public Power 101. Nebraska Wind Power 2009 Conference November 9, 2009 Kearney, NE Shelley Sahling-Zart Vice President & Assistant Counsel Lincoln Electric System. Electric Industry Fundamentals. Electricity revolutionized the modern economy.

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Public Power 101

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  1. Public Power 101 Nebraska Wind Power 2009 Conference November 9, 2009 Kearney, NE Shelley Sahling-Zart Vice President & Assistant Counsel Lincoln Electric System

  2. Electric Industry Fundamentals • Electricity revolutionized the modern economy. • Almost every activity and transaction ultimately relies on electricity. • Electricity is unique – generally must be produced at the same time it is consumed. • Electric industry has evolved for 100 years but has not experienced revolutionary changes that have affected other industries – e.g. telecommunications (cell phones). • Electric industry moves in cycles and has historically had a herd mentality.

  3. Source: R. W. Beck, Inc. Electricity Timeline 100% Petroleum Renewables/Hydro 80% Nuclear Natural Gas 60% MWH % by Fuel Type Three-MileIsland Coal 40% Utility Deregulation (PURPA) September 11 Atomic Energy Act Natural Gas Deregulation NuStart FutureGen Arab Oil Embargo 20% Chernobyl National Energy Policy Act Source: Energy Information Administration 1950 1960 1970 1980 1990 2000 2010 2020 2025 Fuel Use Act 1974-78 Enron Bankruptcy EPA is formed and Clean Air Act is Passed Climate Change Convention Kyoto Protocol signed by 154 nations in Rio Alan Greenspan“Congress should look at ways to increase energy supplies from nuclear and coal. The two sources together account for about 70% of U.S. supply.” Admiral Lewis L. Strauss “It is not too much to expect that our children will enjoy electrical energy in their homes too cheap to meter.” Jimmy Carter“Resolving the Energy Crisis is ‘The Moral Equivalent of War.’”

  4. What is a Watt? • A watt is a unit of electricity. • Ten 100 watt lights = 1 kilowatt (1000 watts) and if operated for 1 hour = 1 kilowatt hour. • A megawatt is a million watts. • An average home in Nebraska uses approximately 15,000 kilowatt hours per year.

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  6. Uses of Generation • Baseload (runs all the time) • Nuclear • Coal • Large Hydro • Some Natural Gas • Intermediate • Natural Gas • Peaking • Natural Gas • Oil • Certain Hydro • Other • Wind • Solar

  7. Public Power System in Nebraska Unique: • Only state in the nation served entirely by consumer owned electric utilities. • Municipal electric systems date back to 1880’s. • Public Power District Statutes – 1933. • Electric Cooperatives – 1937. • Joint Action Agencies – 1980’s. Low-Cost: • Electric rates in Nebraska are consistently well below national average and among 10 lowest cost states.

  8. The Six Stages of Development of Nebraska’s Electric Power Industry Stage One 1882-1910: Creation of the First Municipal Systems. The City of Crete formed an electric department in 1887. Stage Two 1911-1933: Nebraska is served by several hundred municipal utilities and 42 private electric companies consolidated under the ownership of 5 holding companies.

  9. The Six Stages of Development of Nebraska’s Electric Power Industry Stage Three 1933-1946: Nebraska Legislature moves to create public power districts while Congress passes Rural Electrification Act and Public Utility Holding Company Act. Investor-owned utilities are acquired by public power districts (primarily Consumers PPD and Omaha PPD)

  10. The Six Stages of Development of Nebraska’s Electric Power Industry Stage Four 1947-1973: Substantial growth in demand for electricity and disagreements over who would build new generation. Years of legal and political wrangling culminate in the voluntary formation of NPPD. Also the Power Review Board is formed in 1963 to help resolve territorial disputes and coordinate planning and approval for generation and transmission facilities.

  11. The Six Stages of Development of Nebraska’s Electric Power Industry Stage Five 1973-Mid 1990’s: Arab oil embargo slows demand growth, Congress enacts major environmental legislation and passes the Public Utility Regulatory Policies Act (PURPA) ushering in a new era of independent power production. Significant generation expansion (nuclear and coal). In 1992, Congress enacted the National Energy Policy Act which pushed greater wholesale competition while industrial customers continue to press for competition at the retail level.

  12. The Six Stages of Development of Nebraska’s Electric Power Industry Stage Six 1992-Present: Federal push for wholesale and retail competition. Energy Policy Act of 1992, LR 455 Study (1996-98). LB 901 (2000) annually reviewing wholesale and retail competition. Privately-owned generation (wind) constructed in Nebraska for the first time in more than three-quarter’s of a century.

  13. Nebraska’s Public Power Structure Today • 122 Municipal Systems • 31 Public Power Districts • 14 Cooperatives • 1 Public Power & Irrigation District • 1 Federal Agency

  14. Nebraska Power Review Board • Created in 1963 • 5 members appointed by Governor, confirmed by Legislature • Cash funded, no funds from general tax revenues • Assessments levied on power suppliers operating in Nebraska • Primary responsibilities: • Creation & certification of retail and wholesale service area agreements between electric utilities • Approval of construction of new electric generation facilities and certain transmission lines • Oversees filing of a coordinated statewide power supply plan

  15. Nebraska Power Association • The Nebraska Power Association (NPA) was formed in 1980 • Provides a forum to resolve and discuss intra-industry issues • Represents all of Nebraska’s publicly-owned, electric utility systems • 15-member Board of Directors • Key reports: • Annual load and capability report • Periodic statewide long range power supply plan • Nebraska Wind Integration Study • www.nepower.org

  16. Basic Statutory Structure of Electric Utilities in Nebraska • Provide low-cost, reliable electricity without conflict, competition and duplication of facilities. • Statutory structure focused on consumer-owned utility serving Nebraskans. • Exclusive retail service areas. • Generally cannot construct or acquire generation or transmission facilities without approval of the Nebraska Power Review Board. • No retail wheeling. • Can’t transfer generation to retail customers in another utility’s retail service area. • Statutes don’t contemplate construction of facilities primarily for export.

  17. Why Nebraska’s Public Power Industry is Behind Surrounding States in Wind Development • Some surrounding states have a Renewable Portfolio Standard (RPS) requiring a certain percentage of electricity comes from renewable sources. • IOU’s and other private developers can receive lucrative production tax credits which significantly reduce the capital cost of projects. • Nebraskan generation surplus has been less expensive than adding wind. • Limited transmission in best wind areas.

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