Utilities take revenue hits from cooler temperatures

Nebraska Utilities Revenue Shortfall driven by a mild summer, lower energy demand, and collapsing wholesale power prices, affecting NPPD, OPPD, and LES through reduced peak load, megawatt-hour pricing, and deferred capital projects.

July's record-setting cool temperatures idled air conditioners — but they also lowered revenues for the state's three biggest electric utilities.

Sales are down by 5 percent at the Nebraska Public Power District, the state's largest utility, it says.

"If this summer... continues the way it is, I would not be surprised to see a revenue shortfall of $10 million to $15 million because of this mild weather," said NPPD president and CEO Ron Asche of NPPD.

The Lincoln Electric System and Omaha Public Power District also report reduced revenues.

The first half of June was marked by below-normal temperatures and July was one of the coldest on record.

Lincoln Electric System is waiting for final numbers before making a statement, spokesman Russ Reno said. Those numbers will be discussed at its Administrative Board's August 21 meeting.

"There was a significant decrease in revenue but we don't have our power costs, yet," Reno said.

NPPD's Asche said the 5 percent figure was only through June; the utility hadn't yet closed its books on July.

NPPD officials had anticipated warmer weather this summer because last summer wasn't overly hot. It projected a summer peak (the highest demand for electricity) of 2,450 megawatts, compared to last summer's peak of about 2,300 megawatts.

NPPD will be below its forecast and last summer's actual peak, Asche said.

During mild summers, NPPD tries to sell excess capacity on the wholesale energy market across the Midwest to generate additional revenues. But this summer, wholesale energy prices have "collapsed or gone down from a year ago," Asche said, mostly because of the economy.

Last year, NPPD was selling power for about $48 per megawatt-hour, he said.

This year? About $28 per megawatt-hour.

NPPD is still selling the same amount of energy as last summer but for about $20 less, Asche said.

"When you sell 1.5 million megawatt-hours, it's about a $30 million shortfall for our system," Asche said. "This revenue shortfall has us concerned." NPPD management plans to talk to its board of directors this week about ways to offset revenue losses, even as electric shut-offs jump in other markets.

That doesn't mean layoffs, he said, but it could include cuts in salaries, consultant services, materials, and deferred capital improvement projects.

The Columbus-based utility is planning a rate increase that reflects alternative energy pressures as a broader trend, but not because of this summer's weather.

The increase — 6.5 percent for now — is needed to cover costs associated with a new transmission line from Columbus to Lincoln, and the utility's participation in a power plant in Nebraska City, he said.

"We don't want to increase rates next year because of revenue shortfalls this year," Asche said.

Any budget changes won't occur until 2010, he said, even as farm rate plans are debated in neighboring states.

The only good side to all this? NPPD's generation and some fuel costs are down. It's also relying more on its base load power plants, which are less costly to operate.

Reno, of LES, said power generation costs were lower in July because customers demanded less energy — and that will affect the utility's bottom line. LES has its highest revenues from June through September.

OPPD's power sales are down 5 to 10 percent, said utility spokesman Jeff Hanson. Basically, that means the average OPPD residential customer is paying about 10.7 percent less for their summer power bills compared to what they paid last year at this time, he said.

OPPD serves more than 340,000 customers in all or parts of 13 counties in east and Southeast Nebraska.

This July tied 1994 for the seventh coldest on record, even as heat pushing up electricity bills elsewhere, according to the National Weather Service office in Valley. The average temperature in Lincoln in July was 5.1 degrees below normal.

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