| 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.
Nebraska’s customers can also be categorized as 81 percent "urban" and 19 percent "rural" if classified as served by predominantly "urban" or predominantly "rural" systems as indicated in Table 2-2 and Table 2-3 below.* * 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 vice versa.
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.
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. Chart C2-1
State average = 5.4 cents/kWh (Survey & EIA) 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. In total there are 171 entities providing retail or wholesale electric service in Nebraska: 121 - Municipal Systems * 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 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.) ** The term "consumer-owned" systems is applied collectively to municipal, rural cooperative and public power district utilities, as differentiated from private investor-owned utilities. Chapter Two - STRUCTURE AND GOVERNANCE Chapter Three - STATUTORY AND REGULATORY OVERSIGHT Chapter Four - PLANNING AND OPERATIONS Chapter Five - FINANCE AND TAX Chapter Six - DEREGULATION AND RESTRUCTURING The Central Nebraska Public Power and
Irrigation District
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