Winter 2024 Generator

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BOARD OF DIRECTORS Bob Cerv Chairman Jim Donoghue First Vice Chairman Mike Fleming Second Vice Chairman Rich Aerni Secretary Dick Tooley Treasurer Alan Drozd Steve Heesacker Larry Zach HOW DO WE SET ELECTRICITY RATES? Loup Power District identifies electricity rates based on cost of service while keeping our customers and our communities front and center. As a not-for-profit company, Loup does not answer to remote shareholders and is not driven by a profit motive. Revenues are invested right back into the company and communities. EXECUTIVE STAFF Neal Suess President/CEO Walt Williams Vice President, Accounting & Finance/CFO Todd Duren Vice President, Corporate Services Korey Hobza Vice President, Engineering Dan Hellbusch Vice President, Operations The Loup Generator is published quarterly as a service for Loup employees, families, friends, and associates. For feedback, story ideas, and submissions, contact: Stacy Wemhoff Communications Coordinator 402-562-5711 swemhoff@loup.com ADD UP ALL THE COSTS. Loup conducts a cost-of-service study to determine the revenue requirement — how much revenue is required to maintain financial stability. The costs are separated into three areas: power supply and transmission, distribution, and customers. DIVIDE REVENUE REQUIREMENTS by customer class — commercial, industrial, residential. The cost-of-service study identifies how and when each class uses energy, and how the utility incurs costs from each class. The study identifies the amount to recover through customer, demand, and energy charges for each customer class, and how costs vary by time of day or season. This amount is then compared with the rates for each class. FACTOR a rate adjustment strategy into a financial plan. The plan takes input from management and the Board of Directors and lays out a strategy for how rates should be implemented in the future. The plan ensures adequate revenues are recovered for each class of customer and explains how each rate component (customer, energy, demand) should vary over time. BALANCE the recommended rates with the governing body’s input and community objectives. Loup’s managers present the rate study to the Board of Directors. The Board decides whether the proposed rate structure meets the needs of the community and the utility’s revenue requirements. FINAL RATE. The newly set rates go into effect on customers’ monthly bills. 2 | GENERATOR
president’s message Construction cost increases affecting the bottom line As I have mentioned in previous columns, Loup Power District is working hard on many facets of economic development, including looking at new, large loads that might be located within Loup’s service area. With these new loads comes increasing investment necessary to serve these loads, which could provide financial challenges. During the budgeting process for 2024, Loup management laid out detailed one-and six-year construction budget estimates to provide long-term financial information to the Board of Directors. Loup is looking at a significant increase in construction budget costs in the near future, specifically for 2025, 2026, and beyond. What are the reasons for these increased construction budgets? There are several factors involved: • NEW LARGE LOADS — These new loads create the need to expand existing infrastructure to provide service to these facilities. • LONGER LEAD TIMES — It’s taking long to purchase vehicles, transformers, and general supplies. • INFLATION — There are continuing increases in inflation across all facets of the electric utility industry. How can the District deal with these increases in costs that are occurring? There are four ways to handle this: • Borrow money to provide a longer time period to recover costs from all Loup customers. • Review and update customer service policies to provide security deposits/aid in construction for those customers creating the need for new infrastructure. • Modify and increase rates to collect additional dollars to cover the cost of the new construction. • Reduce cash reserves on hand, although these are currently near record-low levels. Loup management and the Board of Directors are reviewing all of these options and trying to balance out what would work best for Loup and our customers. NPPD recently updated its transmission extension policy to require a security deposit for new loads creating additional infrastructure needs. Loup management and the Board are discussing similar options on the distribution side. Unfortunately, rate increases will also be part of the conversation. While these are never easy to implement, please remember that Loup’s current rates are 30.3 percent below the national average and 9.5 percent below the Nebraska average, which puts us in the lowest tenth percentile both nationally and statewide. That is something to be proud of and to promote. Management and the board have been working extremely hard over the past several years to stay ahead of what we know is coming. By staying ahead of these changes, we can keep rates at a reasonable level while maintaining Loup’s financial health. NEAL SUESS President/CEO WINTER 2024 | 3
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Winter 2024 Generator

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