July / Aug. / Sept. 2009 - Nebraska Public Power District

average price for the same time period in 2008.
Actual revenues from the wholesale non-firm
energy sales are forecasted to be $33 million below
our revised budget for the year. Projected revenue
shortfalls from sales to our Nebraska customers—
coupled with declining energy prices—are about
$57 million for this year.
Thankfully, we’re able to offset some of this
shortfall. Earlier this year, we looked for ways
to reduce our 2009 costs and were able to cut
approximately $20 million from our budget.
Because of the decrease in energy sales to our
Nebraska customers, our fuel and purchased power
costs are going to be less than budgeted. We’re also
expecting our O&M expenses to be slightly less
than budget. Between the revenue shortfall and
the cost cuts, NPPD is currently projecting a $19
million deficit for 2009. This deficit in 2009 will in
part be covered by use of existing rate stabilization
funds.
What about 2010 electric rates?
Our preliminary 2010 budgets indicated
additional revenue shortfalls. To mitigate these
shortfalls, we looked first at cutting costs. We did a
review of our preliminary 2010 budgets. That effort
resulted in $21 million of proposed cost reductions.
We changed some of our short-term financing plans
resulting in additional reductions of $11 million
for 2010, for a total reduction of $32 million in our
operating budget for next year. We also deferred or
reduced our capital budget for next year by more
than $60 million. One thing we did not cut were
expenditures necessary to maintain safety and
reliability of our system.
Even with these cost reductions, we will need
to increase both wholesale and retail rates around
6 percent for next year. The main reason this
ENERGY INSIGHT • JULY / AUGUST / SEPTEMBER 2009 5
Some of things we will do to reduce
our operating budget for next year
include:
• freeze executive salaries at current levels for 2010
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defer merit pay adjustments for colleagues across the
District until the fall of 2010 (merit adjustments are
typically made in March), and then we will look to see
if our financial situation has improved before making a
final determination
defer filling vacant positions wherever possible
defer enhancements to the 401k retirement program
reduce employee travel and training
reduce software enhancements and outside contractor
services
reduce tree trimming and pole inspections provided it
does not impact safety and reliability
increase is necessary is to cover the cost of new
facility additions and improvements that have been
made to our system, such as the new 80‑mile 345 kV
transmission line from Columbus to Lincoln that will
be completed later this year, improvements made at
Cooper Nuclear Station, and payment of our share
of the costs of OPPD’s new Nebraska City coal-fired
plant which began operation late this spring.
Next steps
Our Board of Directors will consider final rate
changes for 2010 later this year. The new proposed
rates, if approved by the Board, would likely have an
effective date of Jan. 1. The proposed rate adjustments
would have been substantially higher if we had
not been able to reduce our costs. The support of
colleagues across the District has been tremendous.
I thank everyone for their support in addressing our
financial situation in these trying economic times. Our
customers expect nothing less from all of us.