Chapter Two

STRUCTURE AND GOVERNANCE

2.0 INTRODUCTION

Nebraska has a very diverse electric utility industry with one of the highest numbers of individual electric systems in any state. This reflects the deeply-rooted philosophy of local control and provides a basis for a governance structure that allows consumer participation and representation at both the local and state levels.

This chapter examines the current structure and governance of Nebraska's electric utilities. The first section provides a profile of the consumer base and electric rates. The second section describes the types of utility systems and their organizational forms. The third section describes how these systems are governed. The last section describes related support organizations that many Nebraska utilities belong to and that help shape their operations.

2.1 CONSUMERS AND ELECTRIC RATES

Consumers are the economic and political cornerstone for the state's utilities. Their density and mix is reflected in cost of service, and their determinations as voters and participants in the public process ultimately affect the policies and structure of the municipal systems, public power districts, and rural electric cooperatives that serve them.

As indicated in Table 2-1 below, 82 percent of Nebraska's 835,905 metered consumers are residential. Nearly 13 percent are commercial, and approximately 5 percent are industrial, irrigation and miscellaneous other types combined.

Table 2-1 Nebraska - Type of Customer

State of Nebraska - Retail
Class of
Consumers
No. of
Consumers
% of
Consumers

Energy(MWH)

% of Sale

Revenues($1,000)

% of Rev.

Residential

687,214

82.2

7,564,902

37.0

$482,306

43.5

Commercial

105,847

12.7

6,648,369

32.5

$339,276

30.6

Industrial

2,368

0.3

4,775,113

23.4

$188,115

16.9

Irrigation

31,569

3.8

749,624

3.7

$61,504

5.5

Other

8,907

1.0

692,219

3.4

$39,049

3.5

TOTAL

835,905

100.0

20,430,227

100.0

$1,110,250

100.0

Source: L.R. 455 Survey

Nebraska's customers can also be categorized as 81 percent "urban" and 19 percent "rural" if classified by predominantly "urban" or predominantly "rural" systems as indicated in Table 2-3. It is important to note that "urban" and "rural" distinctions are made in the context of a geographic region in which a village of 500 residents may be considered "urban" for electric service purposes. It is also important to note that "urban" systems may serve rural customers and vise versa.

Table 2-2 Predominantly "Rural" Systems

Rural Systems- Retail
Class of
Consumers
No. of
Consumers
% of
Consumers

Energy(MWH)

% of Sale

Revenues($1,000)

% of Rev.

Residential

118,245

72.9

1,671,513

49.8

$103,864

49.2

Commercial

12,796

7.9

399,309

12.0

$24,174

11.5

Industrial

373

0.2

554,208

16.5

$23,892

11.3

Irrigation

29,163 

18.0

707,255

21.1

$57,752

27.3

Other

1,615

1.0

21,674

0.6

$1,581

0.7

TOTAL

162,192

100.0

3,353,959

100.0

$211,263

100.0

Source: L.R. 455 Survey

Table 2-3 Predominantly "Urban" Systems

Urban Systems- Retail
Class of
Consumers
No. of
Consumers
% of
Consumers

Energy(MWH)

% of Sale

Revenues($1,000)

% of Rev.

Residential

568,969

84.4

5,893,389

34.6

$378,442

42.0

Commercial

93,051

13.8

6,249,060

36.6

$315,102

35.1

Industrial

1,995

0.3

4,220,905

24.7

$164,223

18.3

Irrigation

2,4063

.4

42,3695

0.2

$3,752

0.4

Other

7,292

1.1

670,545

3.9

$37,468

4.2

TOTAL

673,713

100.0

17,076,268

100.0

$898,987

100.0

Source: L.R. 455 Survey

While consumers in the state's predominantly rural systems make up 19 percent of the consumer base, they use less than 17 percent of total energy (3,353,950 MWH). However, they contributed 19 percent of total revenues ($211,263,000). This reflects the fact that their density per mile of line is lower and their cost of service and rates are higher. It is also important to note that rural utilities' residential customers average usage is meaningfully higher than residential customers in urban utilities-indicating higher monthly bills for the average rural family. Although not indicated here, it is also important to note that irrigation sales are more prevalent in Nebraska than other states, and that rural customer density per mile of distribution line is lower compared to national data for other rural areas.

Consumers in predominantly urban systems make up 81 percent of the consumer base, use approximately 83 percent of the state's electricity, and contribute 81 percent of total revenues ($898,987,000). Of this urban system total, residential consumers use 34.6 percent; commercial 36.6 percent, and industrial 24 percent.

The total statewide energy sales to residential, commercial, and industrial customers in Nebraska for 1995 were 37 percent, 33 percent, and 23 percent, respectively, not including irrigation and miscellaneous other categories. As indicated above, the respective payments are made by customers reflect the varied rates charged to each customer class. Based on "cost-of-service" formulas, larger customers generally have lower cost-of-service per kilowatt hour of consumption. Residential customers tend to have a higher cost-of service. (Rural customers tend to have the highest cost-of-service because of their lower density.) In view of their greater numbers for consumption and cost, residential customers contributed 43 percent of revenue paid by all customer classes. Commercial and industrial customers followed with about 31 percent and 17 percent of revenues, respectively. All customers paid a total of $1.1 billion for electric service in 1995.

Despite the relatively low level of industrial sales and a low customer density in much of the state, Nebraska's average electric rates compare very favorably to the region and the nation. This finding holds for both Nebraska urban and rural utilities, as well as small and large systems.

Table 2-4 Comparative Average Energy Costs (Cents/KWH) 1995

       ELECTRIC ENERGY COSTS (Cents per KWH)

  ALL SYSTEMS

RURAL SYSTEMS

CLASS   NEB    U.S.  REGION   NEB    U.S.  REGION
Residential

6.4

8.4

7.5

6.2

7.6

7.4

Commercial

5.1

7.7

6.2

6.1

--

6.6

Industrial

3.0

4.7

4.3

4.3

--

4.6

Irrigation

8.2

--

--

8.2

--

8.6

TOTAL

5.4

6.9

6.1

6.3

7.3

6.9

Sources: L.R 455 Survey; DOE EIA Form 861. 1995; National Rural Utility Co-op. Finance Corp. 1995 Ann. Report

On an aggregate basis for all classes in 1995, Nebraska utilities were 22 percent below national prices and 12 percent below regional prices. In the rural sector, Nebraska systems were 13 percent below national rural rates and 9 percent below regional rural rates. The range of average prices for individual Nebraska systems extends from four systems with average kilowatt hour charges below four cents to six systems with charges above eight cents. Chart C2-1 indicating this range is on the following page. (For more information on Consumers and Electric Rates and Ratemaking see the Report Appendix.)

2.2 ELECTRIC UTILITY ORGANIZATIONS AND STRUCTURE

Electric systems serving consumers living in rural areas and the state's 536 cities and villages have entered into 395 electric service territory agreements. Retail electric service is provided to these service territories by three primary types of utilities: municipal electric systems, public power districts, and rural cooperatives. Additional entities provide wholesale power to these utilities and help to coordinate their operations. Map M2-1 on the following page indicates the retail service areas in the state. In total there are 171 entities providing retail or wholesale electric service in Nebraska. 1

121-Municipal Systems
32-Public Power Districts

15-Rural Cooperatives (11 distribution and 4 G&T)

1-Public Power and Irrigation District

1-Municipal Joint Action Agency

1- Federal Agency (Western Area Power Administration) WAPA supplies a significant portion of the state's power through various agencies. WAPA does not serve at retail.

These diverse consumer-owned systems are governed by locally elected or appointed boards. (The term "consumer-owned" systems is applied collectively to municipal, rural cooperative, and public power district utilities; as differentiated from private investor-owned utilities.) The local boards oversee rates, quality of service, and operations. This contrasts greatly with the electric industry as it is organized in other states. For consumers in most states electricity is supplied predominantly by private electric companies under the oversight of state regulatory commissions. On average, only one-quarter of all customers in other states are served by consumer-owned systems (public power systems and rural cooperatives) with wide variation ranging from Hawaii with no consumer-owned service, to Tennessee with 98 percent of consumers served by consumer-owned systems. Parallel to this average state ratio of public-to-private service, private utilities produce and sell approximately three-quarters of the nation's power and own and control much of the nation's primary transmission lines. (See Table 2-5 for a national profile of electric utility organizations)

2.2.1 Profile of National and Regional Utility Organizations

The nation's public power, rural cooperative, federal, and private investor-owned electric utilities noted in Table 2-5 on the following page are organized into nine regional electric reliability councils. Nebraska utilities are part of the Mid-Continent Area Power Pool (MAPP) reliability council which covers the geographic region including Nebraska, South Dakota, North Dakota, eastern Montana, Minnesota, western Wisconsin, Iowa and parts of Saskatchewan and Manitoba. The MAPP organization is responsible for setting policy and coordination to assure reliable power flows in the region. MAPP is governed by a board of owners and users of the region's transmission system, including newly emerging power marketers. The role MAPP would play in a competitive market system, and the timing and nature of its policies could have a substantial effect on Nebraska's electric systems. (See sections 3.2.4, 6.2.1 and 6.2.2 for additional detail on MAPP and its possible role in competitive retail markets. Also see Map M4-3 for MAPP's geographic boundaries.)

Table 2-5 U.S. Electric Utility Organizations 1995

Utility Type

Publicly
Owned
Sytems
Cooperative
Systems
Federal
Power
Agencies
Investor
Owned
Systems
Total

Number of Electric
Utilities

2,020
(63.0%)

931
(29.0%)

10
(10%)

244
(707%)

3,205
(100%)

Number of Ultimate Customers
(meters)

16,133,632
(13.7%)

12,936,019
(11.0%)

30,302

88,727,332
(75.3%)

117,827,285
(100%)

Sales to Ultimate Customers
(in Millions of kWh)

431,546
(14.3%) 

239,921
(8.0%) 

49,501
(1.6%) 

2,292,442
(76.1%) 

3,013,410
(100%) 

Electric Revenue
($1,000)

25,983,724
 (12.5%)

16,599,590
 (8.0%)

1,331,411
 (0.6%)

163,816,776
 (78.9%)

207,731,501
 (100%)

Generation
(in millions of kWh)

323,719
(10.8%) 

170,803
(5.7%) 

275,928
(9.2%) 

2,234,041
(74.3%) 

3,004,491
(100%) 

Installed Capacity
(in thousands of kW)

88,378 
(11.9%) 

32,328
(4.3%)

67,194
(9.0%) 

558,054
 (74.8%)

745,954
(100%)

Source: American Public Power Assn. Public Power, Annual Statistical Issue, January-February 1997; DOE EIA Form 861, 1995.

Table 2-6 Mid-Continent Area Power Pool Region Electric Utilities 1995

Utility Type

Publicly
Owned
Sytems
Cooperative
Systems
Investor
Owned
Systems
Total

Number of Ultimate Customers
(meters)

1,418,590
(25.39%)

1,149,940
(20.59%)

3,017,596
(54.02%)

5,586,126
(100%)

Sales to Ultimate Customers
(in Millions of kWh)

34,110,867
(25.36%) 

20,019,636
(14.89)

80,364,536
(59.75%)

134,495,039
(1000%)

Source: American Public Power Association DOE EIA.

Table 2-6 shows that in the MAPP region in 1995, investor-owned systems had more than twice as many customers as public power systems and nearly three times the number of rural cooperative customers. In keeping with the national profile of investor-owned utilities providing a majority portion of electric sales, MAPP's private utilities have the largest share of sales to customers at just under 60 percent. However, the MAPP region's total sales by consumer-owned systems (both public power and rural electric cooperatives) at approximately 40 percent is substantially higher than the national average of 25 percent.

2.2.2 Nebraska's Electric Systems

The 171 entities serving Nebraska are organized under state statute, by voluntary coordinating bodies and associations, and by contractual relationships. Chart C2-2 on the following page shows the power flows and the interrelationships of the various systems. Nebraska's three largest utilities (Nebraska Public Power District, Omaha Public Power District, and the Lincoln Electric System) serve about 60 percent of the state's retail customers. The remaining 40 percent are served by a mix of smaller public power districts, municipal systems, and rural electric cooperatives. The text below describes each of these types of electric system.2

2.2.2.1 Municipal Electric Systems

Nebraska has 121 municipalities that own and operate their electric systems, 59 of which own generating facilities. Most of the power provided to the municipals flows under contract from the public power districts, Western Area Power Administration, a joint action agency or municipal generating plants. The majority of the 121 municipals are supplied by public power districts. As is common with municipal electric systems elsewhere across the county, Nebraska's municipal systems function primarily as distribution utilities whose main focus is metering, billing, and operation and maintenance of the distribution lines. These municipal electric systems can be divided into three groups; one very large municipality; a group of first class cities and/or those owning generation; and a group of smaller municipalities. The municipal electric systems, in total, serve approximately one-third of the state's consumers.

Lincoln Electric System (LES) is the largest municipal with 100,315 customers, approximately 12 percent of the state's total customers. LES serves a 190 square mile service territory in Lincoln, Waverly, and the surrounding area. LES owned 271 MW of generation facilities and had participation purchases from NPPD plants of 267 MW and WAPA purchases of 109 MW in 1995. The mix for the system in 1995 was 64 percent coal, 16 percent nuclear, 4 percent hydro, 0.4 percent oil/gas and 15 percent wholesale purchase. In addition to its generating capacity, LES operates more than 1,567 miles of transmission and primary distribution lines and has major interconnections with NPPD, OPPD, MidAmerican, MAPP and the Southwest Power Pool. The system has more than 400 employees. (For a full listing of Nebraska's municipal systems see the Report Appendix).

2.2.2.2 Public Power Districts

There are a total of 32 public power districts formed under the authority of the Enabling Act as political subdivisions of the state. These include systems serving about half the state's total retail customers in both urban and rural areas. Nebraska's public power districts may be separated into two distinct groups. The first group consists of generation, transmission, and distribution systems that are vertically integrated and sell power at wholesale as well as retail. This includes the three largest power districts: Nebraska Public Power District, Omaha Public Power District, and Loup River Public Power District.

2.2.2.3 Nebraska Public Power District (NPPD)

The Nebraska Public Power District is the state's largest electric utility, with a chartered territory including all or parts of9l of Nebraska's 93 counties. It was formed on January 1, 1970 by merging the Consumers Public Power District, Platte Valley Public Power and Irrigation District and the Nebraska Public Power System. It leases and operates distribution systems for retail service in 207 towns and villages and sells to 110,119 retail customers (more than 13 percent of the state's total customers). In addition, it provides wholesale electric supplies to 48 towns and 24 rural public power districts and one rural electric cooperative. NPPD also operates a surface water irrigation system.

The NPPD electrical grid system is comprised of about 6,200 miles of transmission and subtransmission lines, which helps deliver power at wholesale and retail to a population of more than one million. In addition to this grid that spans the state, NPPD has major transmission interconnections with other Nebraska utilities, as well as with utilities in the Mid-Continent Area Power Pool and the Southwest Power Pool. NPPD uses a mix of generating facilities to meet the needs of its customers. This includes a nuclear plant, two coal-fired steam plants, ten hydro facilities, nine diesel plants and three gas-fired peaking units, producing approximately 2,700 MW. NPPD also purchases electricity from the Western Area Power Administration. The average mix of fuel to supply NPPD's customers in a typical year is 60 percent from coal, 23 percent from nuclear, 15 percent from hydro and 2 percent from gas or oil.

In 1995, NPPD sold 11.7 million MWh at wholesale and 2.8 million MWh at retail. Its total 1995 revenues were approximately $550 million. NPPD made lease payments and gross revenue payments in excess of $21 million on $162 million of retail sales. NPPD has 2,100 employees.

2.2.2.4 Omaha Public Power District (OPPD)

Omaha Public Power District was organized in 1946 as a political subdivision of the state and purchased the equipment and operations of the Nebraska Power Company. In 1965 OPPD underwent significant expansion through consolidation with Eastern Nebraska Public Power District.

The Omaha Public Power District is the largest retail electric utility in Nebraska, serving more than 272,000 customers, 32 percent of the state's total customer base. OPPD operates in a 5,000 square mile chartered service area with a population of 626,000. In addition to the city of Omaha, the utility serves 51 towns as well as the surrounding farm areas in thirteen southeast Nebraska counties, and Carter Lake, Iowa.

OPPD owns and operates 2,033 MW of generation and 12,870 miles of electric lines. It has major transmission interconnections with other utilities in the state, as well with utilities in the Mid-Continent Area Power Pool and the Southwest Power Pool. In 1995, OPPD used a mix of generating facilities to meet the needs of its customers. This included six coal-fired steam units, a nuclear unit and five oil/gas fired combustion turbine units. The mix of fuel used for generation in 1995 was 65.8 percent coal, 33.7 percent nuclear and 0.5 percent oil/gas. OPPD also purchases power from the Western Area Power Administration.

In 1995, OPPD sold more than 7.9 million MWh of electricity, had revenues of more than $420 million, and contributed $15,499,000 of in-lieu-of-tax and gross receipts tax payments. OPPD has 2,231 employees.

In addition to these two large public power districts, a second grouping of power districts operates only distribution systems for retail power sales. All but one of these (Imperial) is a rural electric system.

2.2.2.5 Rural Distribution Districts

There are 39 rural electric systems operating in Nebraska, 37 of which have certified service areas. Altogether they serve some 170,000 farmers and ranchers (20 percent of the state's total customer base) and approximately 200 of the state's smaller communities. Twenty- eight of these systems are organized as power districts and eleven are cooperatives or non-profit corporations. They range in size from Southern Nebraska Rural Public Power District with 18,789 customers and annual revenues of more than $2 million down to Chimney Rock Public Power District with 2,331 customers and annual revenues of $2.8 million. They receive power through wholesale all requirements contracts from different suppliers as noted in Chart C2-2. (For a listing of the rural distribution districts see the Report Appendix.]

2.2.2.6 Cooperatives

There are two different types of electric cooperatives. Generation and transmission cooperatives and rural distribution cooperatives. Eleven rural distribution cooperatives serve 18,646 consumers (slightly more than two percent of the customer base) in Nebraska. They range in size from Niobrara Valley EMC with 4,757 customers to NC} Electric Co-op of Belleville, Kansas that serves 8 customers in southern Nebraska. Of the 11 rural distribution cooperatives, only three are headquartered in and serve only the state of Nebraska. The electric cooperatives have total combined revenues of $35.9 million. They are all members of one of the G&T Cooperatives described below and indicated on Chart C2-2.

The generation and transmission cooperatives provide wholesale power and transmission services to their membership, usually consisting of rural distribution cooperatives and rural power districts There are four generation and transmission cooperatives that have significant operations in or affecting Nebraska systems. They are: Nebraska Electric G & T which serves 22 rural power districts and one cooperative; Tn-State Generation and Transmission Association which is headquartered in Colorado and serves four public power districts and seven cooperatives located in western Nebraska; Rushmore Electric Power Cooperative which is headquartered in South Dakota and serves two South Dakota-based rural systems that have customers in north central Nebraska, and, Basin Electric Power Cooperative which is headquartered in North Dakota and is part owner and operator of the Laramie River generating plant. Basin maintains 147 miles of transmission lines in Nebraska for the Missouri Basin Power Project and provides wholesale service to the Tri-State and Rushmore G&Ts. (See Chart C2-2).

2.2.2.7 Municipal Energy Agency of Nebraska

The Municipal Energy Agency of Nebraska (MEAN) is a joint action agency providing wholesale power supply and support services to 46 Nebraska members. MEAN was established in 1981 following passage of the Municipal Cooperative Financing Act by the legislature. The act encouraged cities and villages to work together to supply, treat and distribute water, generate, transmit and distribute electric power and energy; and other services. MEAN was created to help communities cooperate in financing, acquisition and operation of electric facilities and power supplies. MEAN currently provides electricity under wholesale contracts to 58 communities: 10 in Colorado, one in Wyoming, and one in Kansas in addition to the Nebraska members. These cities combined serve about 250,000 customers at retail. MEAN's 46 Nebraska members serve 86,872 customers. In 1995 MEAN sold 1 million MWh and had revenues of $33.5 million.

2.2.2.8 Central Nebraska Public Power and Irrigation District

Although this system in south central Nebraska exists primarily for water management and irrigation, its four hydroelectric plants produce power sold at wholesale to NPPD for distribution to electric customers. Water flowing through Central's system can generate up to 104,000 kilowatts of electricity. In 1995 Central Nebraska sold 378,922 MWh at wholesale for total revenues of $9.6 million.

2.2.2.9 Western Area Power Administration (WAPA)

Western Area Power Administration (WAPA) is a federal wholesale supply agency providing service to consumers in 15 western states, including Nebraska. WAPA markets and transmits low-cost electric power, provides related services and encourages energy efficient management. Hydroelectric power is marketed from 55 power plants operated by the Bureau of Reclamation, the U.S. Army Corps of Engineers and the International Boundary and Water Commission. All of Nebraska's customers benefit from WAPA power either directly or indirectly as indicated on Chart C2-2.

2.3 GOVERNANCE OF CONSUMER-OWNED SYSTEMS IN NEBRASKA

The power flow and contractual relationships between the systems are guided by a process of public governance. This governance takes place at several levels based on statutory and regulatory powers of state and local government discussed in Chapter 3. The scope of governance is also affected by operational and jurisdictional forces at the regional and federal levels.

Generally, the locally controlled framework relies upon consumers/citizens represented on elected or appointed boards. These board members may serve as directors of a municipal system, a public power district, or a rural cooperative. Access to board members, management, utility offices, and board meetings is important to consumer participation. Voters may also petition for certain issues to be placed on the ballot as referenda questions.

Public governance also relies on representation in the state legislature and oversight by the Power Review Board and other agencies for specific issues. The opportunity for citizens to participate in these arenas is vital to the policy-making and structure of the systems. The ability to participate often depends upon access to information and the ability to analyze, or to hire specialists to analyze technical issues.

The process of governance varies by type of system.

2.3.1 Local Government Franchise or Lease

Local franchises or leases and the retail service territory provide the base level of the governance system. The Power Review Board recognizes some 395 retail service territories agreements in the state. NPPD leases and operates distribution systems in 207 municipalities. Other municipalities franchise their service territory to public power districts, cooperatives or other municipal systems. Local control for the leased or franchised municipalities that do not operate their own distribution systems is through the terms of the agreements.3

Determinations on the terms of the agreements are made by the local governing body. Most of the cities have a mayor-council form of government while exceptions like Nebraska City have a commissioner form of government, and several others use the council-manager form. Each village is governed by a five member Board of Trustees. Nebraska's Constitution grants the option of home rule to cities with more than 5,000 residents, meaning they may operate under their own government charters and may enjoy broader powers and authorities. Although public power districts, municipal systems and cooperatives all offer forms of local control, there are distinct differences in those forms.4 (See the descriptions below and Table 2-7 for an outline of the differing mechanisms for consumer, or local control.)

2.3.2 Municipal Electric Systems

Municipal electric systems are established by local voters and their elected officials in an act that constitutes a self-franchise to undertake electric service. All 121 municipal electric utilities in Nebraska are locally regulated by the city council or village board (12 have boards appointed by the city council and mayor). These boards set rates, oversee quality of service, and make financing and budget decisions. The boards often operate in coordination with the city or village council. Lincoln Electric System, for example, has a nine member administrative board that oversees operation of the system. The city council, however, retains the right to approve rates, budgets and financing. Meetings of municipal utility system boards are subject to open meeting laws and public records requirements. Major policy issues regarding the electric utility can be brought to voters as referenda questions in general elections.

2.3.3 Public Power Districts

Each public power district is governed by an elected board of directors. Directors serve for a term of six years and there is no limit on the number of terms which can be served. The boards must have at least five members and no more than 21. Persons running for the board of a PPD having annual revenues of $40 million or more appear on the primary election ballot. Directors of all PPDs are elected at the general election in November.

The public power district boards provide the governance for the system, overseeing decisions on budgets, power supply, rates and other policies. Board membership is not a fill-time job. Each board appoints a chief executive officer who manages the district's affairs, as directed by the board. Board members can be paid for their services and are reimbursed for expenses as specified under state statutes. As political subdivisions of the state, the public power districts are subject to open meeting laws and public records requirements.

Table 2-7

GOVERNANCE OF UTILITY: MECHANISMS FOR LOCAL CONTROL

PPD Municipal Joint Action Distribution Co-op
Election of Directors Public Ballot 1 Public Ballot 2 Private 4 Private 3
Open Meetings Required Required Required Not Required
Public Records Required Required Required Not Required
Referenda on Major Issues Limited 5 Yes No Limited 6

1 See description contained in Section 2.3.3. 2 See description contained in Section 2.3.2. 3 See description contained in Section 2.3.4. 4 Directors are appointed by member cities and towns. 5 Statewide referenda may address all PPDs, but there is no established process for an individual PPD. 6 Those organized as private non-profit organizations may have referenda if determined by directors.

2.3.4 Rural Electric Cooperatives

Three of the eleven rural distribution cooperatives noted above are based in Nebraska. These rural cooperatives are governed by boards of directors elected at annual meetings of their member/consumers. Candidates do not appear on the general election ballot like public power district board candidates. Board members are reimbursed for expenses and may receive compensation for their service on the board, but the form and amount of that compensation is determined by the board rather than state statutes. Because the rural distribution cooperatives are organized under laws for non-profit organizations they are not subject to the same statutory requirements as municipal and public power district systems. Open meeting laws and public records requirements do not apply to cooperatives.

2.3.5 Nebraska's Governance Contrasted with Governance In Other States

The structure of governance in all states utilizes a mixed form of state-and-local regulation of electric utilities. In most states, served predominantly by private electric utilities, the balance of this control resides at the state level. The legislature maintains oversight and legislative authority, but policy making and direct regulatory control is delegated to a state agency or public utilities commission. The commission has responsibility for rate setting and implementation of a range of uniform requirements from standard record-keeping to approval of forecasts and investments in facilities. Private electric utilities are managed by directors who are privately appointed or elected. They are motivated by goals of maximizing profits and providing reliable service. State regulatory commissioners, who may be either elected or appointed, have the contradictory task of protecting the interests of both stockholders and consumers. States in which regulatory commissions are judged to be pro-consumer by financial analysts can witness a rise in the cost of capital as the ranking of the commission is downgraded and investors seek to gain rewards for risk or protect investments. This judgment by financial analysts acts as a check or restraint on the actions of regulatory commissions.

In Nebraska, consumers are both customers and owners of the systems. There is not the same underlying drive to expand sales and profits that characterizes the private power companies and consumers elect their utility directors in most cases. The structure is still a mixed local-and-state system of regulation, but the primary authority is delegated to the local level. Rate-making by local entities is based on non-profit cost-of-service. Many of the problems and disputes concerning rate-setting and policy making may be similar to those of private utilities, but the tensions and conflicts may be addressed locally (unless the dispute is taken to the Power Review Board or to the court system). While this system offers greater opportunities of direct consumer control over rates and policies, it does not establish the same type of uniformity in policies. The disparity in the types of services that are utilized, or may be allowed by public power districts, municipal systems, cooperatives and others are indicated in Tables 3-land 3-2 in the next chapter. The establishment of competition would require policies to address issues related to a uniform playing field.

The lesser relative scope of jurisdiction and authority of the Power Review Board and other state regulatory agencies in Nebraska places greater oversight responsibility on the legislature. As a result, the Nebraska Legislature has taken a much more active role as an oversight body than legislatures in other states. The periodic studies that have been undertaken by the legislature, and its on-going involvement in the evolution of the industry in Nebraska are unparalleled in other states which often rely primarily on state regulatory agencies for policy leadership. While one might question the ability of the legislature to provide the same degree of attention to statewide utility matters as provided by full time regulatory commissions in other states, it is significant to note that the current surge of interest in deregulation and competitive markets in other states is based in part on the perception that state regulation has failed in its mission to protect consumers and to keep rates down. (See Chapter 3 for additional information on regulatory and jurisdictional issues.)

2.4 SUPPORTING ORGANIZATIONS

Most of Nebraska's electric utilities belong to various support organizations that provide services difficult for the utilities to economically provide for themselves, or offer a forum for addressing issues of common interest. Some are state-level organizations and some are regional or national organizations.

The three primary statewide organizations are:

2.4.1 Nebraska Power Association (NPA)

The Nebraska Power Association is the statewide umbrella organization for the consumer owned systems. It is headquartered in Lincoln with administrative support provided by LES. Various subcommittees of NPA coordinate the industry's response to federal and state legislation and regulations, and also work directly with the Power Review Board to complete statutorily-mandated power supply, transmission, and energy conservation studies. The two organizations below are members.

2.4.2 Nebraska Rural Electric Association (NREA)

The Nebraska Rural Electric Association (NREA), headquartered in Lincoln, was formed in 1936 and currently has 32 rural electric cooperatives and public power districts which are members. The purpose of the association is to provide job training, safety education, assistance with government regulatory compliance, legal support, government relations, community and other services to support staff and operations.

The Nebraska Municipal Power Pool (NMPP) is the sister organization to the Municipal Energy Agency of Nebraska (MEAN) NMPP was incorporated in 1975 for the purpose of identifying, evaluating and resolving problems common to and shared by the membership of NMPP, or any portion of such membership, and relating to the energy needs of NMPP's members. NMPP consists of 129 members in the Midwest.

In addition to these statewide organizations there are both regional and national organizations that help to address larger issues affecting the operation and policies of the Nebraska systems. These include the Mid-Continent Area Power Pool, the Missouri Basin Systems Group, the Mid-West Electric Consumers Association, American Public Power Association, National Rural Electric Cooperative Association, the Large Public Power Council, the National Rural Utilities Cooperative Finance Corporation, and the National Rural Telecommunications Cooperative.

2.5 SUMMARY AND EMERGING ISSUES

Guided by the principles of local control and low-cost service, Nebraska is served by more individual electric systems than nearly any other state and currently enjoys an average electric rate that was eleventh lowest in the nation in 1995. However, the industry's structure and its local governance could face an undetermined degree of change to address the pressures of a competitive market environment. This prospect gives rise to fundamental questions:

What would the options for structure and governance be in a competitive market system? For generation? For transmission? For distribution?

Would these competitive market system options assure lower rates and price stability for the long term for all classes and types of consumers?

Would these options allow for continued control by consumers at the local level?

What would the impacts be upon existing contracts and cooperative relationships?

What changes would be needed to address issues related to a level playing field for provision of diverse services to consumers?

Alteration of the structure and governance of Nebraska's electric systems could require changes in the state's statutory and regulatory framework. The following chapter examines the framework as it currently exists.

Back