Summary of Final Report
Nebraska Legislature
L.R. 455 Phase II Study

December 1999













TRANSMITTAL LETTER                                                           Return to Top of Page

December 28, 1999

Senator Ed Schrock
Natural Resources Committee
Nebraska Legislature
District 38 P.O. Box 94604
Lincoln, Nebraska 68509-4604

Dear Senator Schrock:

It is with great pleasure that the L.R. 455 Task Force submits the Summary of the Final Report of the Phase II Study to the Natural Resources Committee.

The Summary provides an overview of the analysis and discussion contained in the full report. The full report includes completed and anticipated developments in wholesale and retail electric competition. It also includes reviews of Federal Energy Regulatory Commission activity, utility mergers, state regulatory and state legislative activities, and congressional initiatives. It offers an evaluation of the potential effects of these developments on the consumer-owned electric industry in Nebraska.

The primary findings show the nation is entering a major transition for electric utilities from a monopoly market to a partially deregulated competitive market. Decisions at the federal level have set the stage for this transition and determinations on the timing and form of competitive markets have initially been left to the states.

Each state must evaluate the costs and benefits of a transition to a competitive retail market based upon its own unique conditions. Nebraska faces a very different situation than other states in view of its low-cost power and non-profit service from locally-controlled, consumer-owned electric systems.

While states with high electric costs have taken the most aggressive action, Nebraska. s challenge is how to maintain its low power costs. A transition to retail competition without price justification or certain preconditions in place could raise, rather than reduce power costs.

The report finds that expanded wholesale competition and changes in transmission networks may be accommodated by the current structure. Modification of the distribution systems may also take place to enhance efficiencies. However, to establish retail competition, the structure, principles, and operations of Nebraska. s consumer-owned systems would have to be altered significantly to move from non-profit, cost-based delivery of services to a selective transactional market with market-based pricing.

The full report also finds that markets and technology will continue to evolve, and that current low-cost conditions may change. Pressures to implement a transition could arise at the federal and regional levels, as well as within the state.

The full report offers recommendations and a policy framework to address issues of competition and electric industry restructuring. It outlines methods to retain low wholesale power costs, assure low-cost transmission access for all Nebraska electric

systems, and improve the operations of distribution systems. It also outlines the conditions necessary for consumers to benefit from retail competition and a process to prepare for and assess those conditions as the market and the industry evolve.

The full report recommends a two-part legislative process. The first part would allow enhancement of the Nebraska systems and prepare for competition, and the second part would undertake a transition, if and when conditions warrant such a change. Should this transition be undertaken, consistent with the philosophy of local control, each individual consumer-owned electric system would have the ability to conduct a public process to determine whether or not to participate.

This "condition-certain" framework would constitute Nebraska. s unique plan to meet the changing conditions of the industry and provide flexibility and security for consumers.

We thank the Natural Resources Committee and the Legislature for its support and initiative in this effort and express our thanks to those who have contributed to the Phase II research and analysis.

On behalf of the Task Force,

Scott Ridley
Project Manager


L.R. 455 TASK FORCE                                                          Return to Top of Page

Tim Anderson
Central Nebraska Public Power & Irrigation District

Jay Holmquist
Nebraska Rural Electric Association

Clint Johannes
Nebraska Electric Generation & Transmission Cooperative

Philip Euler
Lincoln Electric System

Chris Dibbern
Nebraska Municipal Power Pool

John McClure
Nebraska Public Power District

Ron Mortensen
Omaha Public Power District

Harry M. Trebing, Project Consultant
Charles Pallesen, Project Facilitator
Cline, Williams, Wright, Johnson & Oldfather

Scott Ridley, Project Manager
Ridley & Associates

Individuals who made significant contributions to the Phase II Report: Kate Allen, Scott Andrews, Mike Foley, Charlie Pape and Rich Kosch. Also of substantial assistance were the Nebraska Power Association Joint Planning Committee, Rates Committee, and Lawyers' Committee.

Written comments or questions regarding the Phase II Report should be submitted to: Charles Pallesen, Esq./ Cline Williams/ 1900 US Bank Building/ Lincoln, Nebraska/ 68508


ADVISORY GROUP MEMBERS                                                          Return to Top of Page

Robert J. Amdor
Fred Bellum
Walt Bleich
Senator Ardyce Bohlke
Senator Curt Bromm
Senator Jon Bruning
Terry Bundy
Rex Carpenter
Ruth Chermok
Tom Doering
Randy Gottula
Larry Pearce
Gary Hedman
C.J. Hoke
J.D. Hopper
Duane Hovorka
Senator Carol Hudkins
Rod Johnson
Pat Knapp
Don Kraus
Dick Kuiper
Richard Duxbury
Bill Mayben
Dave Mazour
Dick Mercer
John Musselman
Michael O'Hara
Charles Pallesen, Jr.
E. Charles Pape
Bruce Pontow
Susan Prazan
Senator Don Preister
Frank Reida
Scott Ridley
Senator Ed Schrock
Marvin Schultes
Senator Elaine Stuhr
Tim Texel
Marlin Vrbas
Steve Wacker
Bob White

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