INTRODUCTION

The nation is entering a major transition for electric utilities from a monopoly market to a partially deregulated competitive market. The change marks a shift in the national philosophy of utility regulation and may require extensive restructuring of the industry into generating, marketing, transmission and distribution companies. Decisions at the federal level have set the stage for this transition. Determinations on the timing and form of competitive markets have initially been left to the states.

In 1996, the Nebraska Legislature referred to the Natural Resources Committee Legislative Resolution 455, a two-phase study to examine issues related to competition and restructure of the electric utility industry and the possible effects on the state. The Natural Resources Committee established a Task Force made up of industry representatives and engaged a project manager and a facilitator to direct research and oversee a public process. The Natural Resources Committee also established a 41 member Advisory Group made up of individuals representing a wide range of interests in the state including consumer advocates, environmentalists, labor and business representatives, electric industry leaders, and legislators. The Task Force has met monthly with the Advisory Group to share the progress and details of its research and to solicit suggestions and comments. The Task Force also conducted a survey of all Nebraska electric systems to gather data and information on key issues.

Phase I of the study provides a comprehensive overview of the history, structure, governance, operations, financing and comparative effectiveness and efficiency of Nebraska's consumer-owned systems. Phase II of the study will be focused on the emerging issues of competition and restructuring and the possible effects on consumers and consumer-owned electric systems in the state. This report summarizes the Phase I research. All data is based on reporting for 1995, unless noted otherwise. The findings of the research are:

1) Nebraska's electric industry evolved out of dual needs for power and irrigation and popular support for local control. With federal support the industry in Nebraska was transformed into a unique structure of all consumer-owned electric systems;

2) Consumers are served by 171 entities-municipal electric systems, public power districts, rural electric cooperatives, and others-one of the highest numbers of individual electric systems in any state;

3) While day-to-day management of the systems occurs at the local level, the legislature has played a vital oversight role to encourage coordination of the diverse systems;

4) The state's 835,905 metered customers paid more than $1.1 billion in electric bills in 1995;

5) The statewide average electric rate (5.4 cents/ldlowatt hour) ranked 1 1th lowest in the nation in 1995;

average rates for individual systems ranged from below 4 cents/kwh to more than 8 cents/kwh;

6) Reliability for Nebraska's systems ranks high in a comparison of limited statewide and national data available;

7) The state's electric systems have a total investment in plant and equipment of $6.2 billion, with major plants and thcilities owned by the Nebraska Public Power District, the Omaha Public Power District, and Lincoln Electric System;

8) Peak demand for 1995 was estimated at 5,139 megawatts, with total accredited generating capacity of 6,034 megawatts (excluding certain purchases and sales);

9) The capacity of the fuel mix for 1995 was 54 percent coal, 14 percent nuclear, 18 percent hydro, and 14 percent gas/oil;

10) Power reserves are 17.7 percent but future reserves depend upon generating plant decisions that could reduce reserves to as low as 7.5 percent by 2005;

11) The state has no non-attainment areas for air pollution related to electric utility operations;

new federal standards under consideration could alter that status. 12) The state's diverse electric systems undertake individual forecasting of needs and supplies but engage in Integrated Resource Planning that assists in coordinating their efforts;

13) The work force consists of 6,700 full and part-time employees: 31 percent in generation/production, 46 percent in transmission and distribution, 18 percent in administrative functions with an annual payroll totaling more than $269 million; deregulation and restructuring could affect work force size, levels of safety and quality of service;

14) Nebraska systems have a lower average debt service coverage than other public power systems nationally, however the systems carrying major debt have been ranked as having good competitive position by financial analysts;

15) The electric systems transfer $51.2 million annually to state and local governments through taxes, fees and lease payments;

this indicates a statewide tax equivalent rate of 4.7 percent;

disaggregation of the REA/RUS rural systems indicates a rate of 5.7 percent for public power systems, roughly equivalent to the amount paid by consumer-owned systems nationally (5.8 percent) and investor-owned utilities (5.9 percent) in other states;

16) Governance and statutory requirements varies by type of system with some systems enjoying broader latitude or more expansive powers than others;

17) The state has had open transmission access (above 34.5 kV) and competition at the wholesale level for more than 30 years;

18) Pressures to alter the industry and establish competitive markets at the retail level could arise from federal actions and decisions, regional activities, decisions by neighboring states, and interests for bundled or "multi-service" delivery within the state;

19) Deregulation and restructuring of the electric industry has the potential to alter the current structure, governance, operations, and financing of the Nebraska systems.

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