COLUMBUS - Officials with Nebraska Public Power District (NPPD) are projecting a 6.5 percent rate increase for the utility's retail and wholesale customers next year.
The increases, outlined during the board of directors' budget committee meeting last week, would then continue at lower levels through 2017, according to the preliminary rate outlook.
Donna Starzec, controller and financial planning manger for NPPD, identified multiple factors in the proposed rate changes.
"We were projecting when we put together the 2011 budget that it would be basically a break-even year and that we would have rate stabilization funds to carry forward," she said.
But in March, financial projections for this year showed a $6.5 million shortfall, which then jumped to $13 million in April.
Starzec said the key drivers for this change included low in-state sales and prices and the extended refueling outage at Cooper Nuclear Station, which cost NPPD approximately $36 million.
Additionally, the district utilized approximately $19 million in excess bond proceeds for interest expenses and has seen increased wholesale power and fuel costs. The price of coal transportation alone jumped 75 percent after NPPD renegotiated its contract with Union Pacific Railroad and is to blame for about 4 percent of next year's projected rate increase.
"That's really where the hit comes from," said Pat Pope, NPPD CEO and president.
Traci Bender, the district's chief financial officer and vice president, told the board that managers have already begun looking for ways to offset the projected shortfall. However, operation and maintenance expenses for 2012 are expected to exceed this year's budget by $6.3 million in all areas except salaries.
Despite planning 2-3 percent raises for employees, NPPD is projecting a $600,000 decline in salary expenses next year, largely because of some 60 full-time positions that will be left unfilled following an early-retirement program instituted last month. Savings from the program could reach $6.6 million, district estimates show.
"There's no increase due to salary," Bender said of the future rate hike.
Looking past next year, NPPD is projecting rate increases of 4 percent for 2013 and 3 percent each subsequent year through 2017.
But Starzec warned, any projections could still fluctuate as market demand and prices and fuel costs remain largely unpredictable.
The rate hikes also don't factor in certain equipment purchases or potential Nuclear Regulatory Commission and environmental regulations.
The rate changes outlined Thursday will be communicated to customers later this month.
While nobody likes rate increases, Pope said, customers do appreciate having some predictability. "We're trying to provide outstanding customer service."
NPPD Board of Directors will not make a decision on the 2012 budget and rates until November.
Approved rate adjustments would take effect Jan. 1.
This year, NPPD raised rates an average of 11.4 percent for its 89,000 retail customers - those who receive a bill directly from the district - and 9.7 percent for wholesale customers, which include 25 Nebraska public power utilities and rural cooperatives and 52 municipalities that purchase power from NPPD to be resold to customers, who then faced higher rates.