Fall 1999

Editor's Note: The last time discussion of deregulation of the state's electric industry appeared in the Quarterly was the Spring 1997 issue when the legislative study was just getting underway.

Will Nebraska Alter Its Customer-Owned Electric System?

For several years, many at the state and national levels have been predicting Americans would be choosing their electric company much like they select a long-distance carrier. They nicknamed this "the breakup of the last big monopoly" or "the battle of the Baby Bulbs." But in Nebraska that option could be far into the future, according to a new legislative study.

For the past three years, a group of 50 Task Force members have been looking at the state's unique power structure - the only state where the ratepayers own all the electric systems - and how to adapt to changes happening in the electric industries in other states.

24% Below the Average

In September, the Task Force released its preliminary findings and recommendations for consideration by the Legislature. One key recommendation was for the state to identify market conditions that must be met before any consumer in Nebraska's structure could be changed. Because the average rates in the state are already 24 percent below the national average, the study group felt few would benefit from opening the state's electric system to competition.

In other states that have opted for competitive electric systems, consumers have either benefited from very small mandated rate reductions - usually five to ten percent - or seen their rates rise.

In California, where hundreds of millions of dollars were spent to explain the new system to ratepayers and in advertising by new electric companies, about one percent of the state's residential customers changed electric companies. An estimated 20 percent of the largest customers, however, have switched electricity providers. Today, because of stranded assets and transition costs, some residential customers are actually paying more for electricity than under the utility monopoly system.

Under the study group's proposal, competition would only be allowed in Nebraska when the wholesale cost of electricity surpassed average regional costs. The group also recommends that the state's Power Review Board examine and propose the conditions triggering restructuring and how such a restructured industry would function. The report suggests that additional changes to laws may be necessary.

Federal Mandate Uncertain

Despite trying for several years, Congress has been unable to craft legislation encompassing nationwide restructuring of the electric industry. In part, this is because a quarter of the nation's customers is served by publicly owned systems. Public ownership was not a factor when other industries: telephones, airlines and natural gas, for example, were deregulated. Another factor is that electricity is deemed far more essential than these other services.

The latest Congressional hearings on proposed legislation have focused on how to resolve tax issues between privately and publicly owned systems. While a House of Representatives subcommittee did forward legislation, experts have predicted it will not be widely supported without substantial changes. The Senate has already abandoned the issue for this year. Previously considered items such as federally mandated restructuring and opening of electric markets by a certain date have been abandoned.

Things to Ponder

Status of States

Group 1: Restructuring legislation enacted

Arizona, Arkansas, California,
Connecticut, Delaware, Illinois,
Maine, Maryland, Massachusetts,
Montana, Nevada, New Hampshire,
New Jersey, New Mexico, Ohio,
Oklahoma, Oregon, Pennsylvania,
Rhode Island, Texas, and Virginia

Group 2: Comprehensive Regulatory Order Issued

Michigan, New York, and Vermont

Group 3: Legislation / Orders Pending

None

Group 4: Commission or Legislative Investigation Ongoing

Alabama, Alaska, Colorado,
District of Columbia, Florida, Georgia,
Hawaii, Idaho, Indiana,
Iowa, Kansas, Kentucky,
Louisiana, Minnesota, Mississippi,
Missouri, Nebraska, North Carolina,
South Carolina, South Dakota, Tennessee,
Utah, Washington, West Virginia,
Wisconsin, and Wyoming

The Advisory Group made a number of recommendations that may be considered by the Natural Resources Committee or the full Legislature:

1. A new market system must have mechanisms in place so prices are fair, just and reasonable for all consumers. There must also be a statewide body so prerequisites to a competitive market are in place before moving to the next step.
2. Adequate consumer protection mechanisms must be in place prior to moving to retail competition, including a statewide oversight agency, and provisions for a consumer bill of rights, consumer education and protections from abusive marketing practices.
3. Availability, affordability, reliability, efficiency, quality, safety, environmental protection and opportunity for economic development must be maintained or enhanced. These features should be available in a competitive market through a combination of regulated and competitive market elements . with local, state, regional and possibly federal oversight.
4. Principal benefits and elements of public power, including low costs and local control, should be preserved.
5. Benefits of integrated resources planning, including demand-side management, conservation and renewable resources, should be preserved.
6. Existing environmental, financial and contractual commitments should be honored. The new structure should fold in commitments and contracts during the transition period and mitigation should allow recovery of stranded costs and benefits. These commitments to be honored include reasonable employee programs for early retirement, retraining, severance pay and adequate transition time.
7. All electric suppliers should have the flexibility to offer products, services, prices, terms and conditions that meet unique and diverse customer needs. To be competitive, incumbent electric suppliers should have the opportunity to offer other services.
8. All suppliers of electricity to Nebraska consumers are to be subject to fair and consistent laws, rules and regulations, including public access to information.
9. Price information should be public knowledge, competitors should be able to keep commodity cost information confidential. A statewide oversight agency should have sufficient access to confidential information to ensure against abusive market practices.
10. If retail competition is allowed in Nebraska, all electric suppliers should have the authority to conduct retail electric operations and provide products and services outside of Nebraska. Products and services offered outside of the state should not be at the detriment of Nebraska electricity consumers.
11. There should be a comprehensive plan implemented in step-by-step process that allows for meeting step goals before moving to next step.
12. Legislature should allow decisions by voters and local boards and commissions for electric systems to opt out of or into restructuring.
13. As part of a comprehensive plan to make a transition to retail competition, the Legislature should determine criteria and standards for divestiture of utility asset sales to private entities. The state should not mandate divestiture. The decision to divest should be at the local level. Municipals and cooperatives currently have these rights. Consider extending right-of-first-refusal to public power agencies for purchasing assets being divested.
14. In terms of timing, waiting for federal standards may not be prudent if the market moves faster than legislation. A better trigger point is having certain regional or state conditions met; such as when an open, competitive, efficient generating/wholesale market is in place in the region, oversight agencies are in place, and it can be demonstrated that all consumers will benefit from retail competition.
15. The preferred approach would be to set target dates for achieving discrete market steps. The process would not move forward without achieving the trigger mechanism goals for each step. Possible steps could include satisfactory development of regional wholesale market mechanisms such as an independent system operator, generator competition and vibrant wholesale energy market. Other steps should include having appropriate state oversight and public protection agencies in place.
16. Mergers should be voluntary, with decisions made at the local board level.
17. Alliances should be encouraged. Multiple service provisions involving alliances should also be encouraged.
18. Local actions needed to preserve Nebraska's options in considering structural and operational changes include: maintain local control authority for significant decisions involving participation in retail competition.
19. State actions needed to preserve and enhance Nebraska's options in considering structural and operational changes include: remove barriers from consumer-owned utilitys' ability to compete; take away barriers to divestiture of assets and expand participation of the Nebraska Power Review Board in current national debate on competition in electricity; qualify existing Nebraska hydroelectric resources as renewable.
20. Regional actions needed to preserve Nebraska's options in considering structural and operational changes include: delineate role of Nebraska Power Review Board for regional transmission and power exchange organizations and remove state barriers to public power participation in regional transmission organizations.
21. Federal actions needed to preserve Nebraska's options in considering structural and operational changes, include: maintain preference power; maintain tax-exempt debt for asset financing; support opt-out/opt-in choice for federal customer choice legislation; and support Nebraska hydropower to qualify as renewable in proposed federal portfolio standards.

What's Next

The Natural Resources Committee of the Legislature will likely have a hearing on the recommendations during the next session which begins in early January. Bills implementing the study group's recommendtions may also be considered.

The complete text of the legislative task force's preliminary report can be found at the Energy Office's web site at Nebraska Energy Office.

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Feds Say Natural Gas and Propane To Cost More This Winter

In October, the federal government renewed its prediction that consumers will pay more than last year for natural gas and propane used to heat homes this winter. Both higher costs for fuel - propane and natural gas - and a return to more normal wintertime weather were cited as factors.

Nationally, consumers could pay between $120 to $390 more than last year for propane, depending on the severity of the wintertime temperatures. An average of $230 or more in higher propane costs was predicted by the federal agency. For households using propane, a 36 percent rise in heating costs was projected.

Since July, the federal agency has been predicting higher natural gas prices as well. The latest Outlook projected natural gas wellhead prices could be 40 percent higher than last winter. The impact on Nebraska consumers might not be as severe since a significant portion of the retail price is made up of transportation and other costs not expected to change with the wellhead price.

The agency also noted the unusual volatility of natural gas prices since August. However, both import levels and storage supplies of natural gas are nearly equal to last year. Because of adequate supply levels, the agency expected natural gas prices to remain below $3 per thousand cubic feet, except during periods of extremely cold weather.

A 19 percent rise in heating costs was projected for those using natural gas for home heating.

The agency said supplies of both natural gas and propane should be sufficient to meet normal wintertime demands.

The latest Short-Term Energy Outlookfrom the Energy Information Administration projected that increased demand and much higher prices for propane and natural gas used for heating would result in higher bills for homeowners.

Updated information on natural gas and propane supplies and prices can be found at the Administration's web site at U.S. Energy Information Administration.

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What is Restructuring or Deregulation?

Historically, the electric industry has been comprised of three units: generation, transmission and distribution.

Generation is the component that produces electricity, usually from nuclear, coal, natural gas or hydropower resources. Transmission moves the electricity from the generating stations over high volume towers closer to the point of use. Distribution is comprised of local lines that move the electricity from the tall towers to homes and businesses. Many times in Nebraska, snow, wind and ice storms have destroyed distribution lines, but rarely transmission lines.

Many states have decided to require electric companies to choose what type of business they want to operate: generation, transmission or distribution. In essence, transmission and distribution will still be operated as monopolies and only generation will be opened to competition.

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4-Year Wind Study Confirms Pioneer Adage

Native Nebraskans could have told the scientists it wasn't necessary. Nebraskans for generations have known the winds on the Plains were powerful. Now, wind speed monitors have confirmed what locals already knew: it's windy enough on the Plains to produce lots and lots of electrical power.

At the end of the study, Springview and Valentine in north central Nebraska claimed the title as the best prospects for wind-to-electricity generators. The least windy spots studied were Winnebago in northeast Nebraska and Wahoo, near Lincoln.

For four years, eight sites across the state were monitored, season-in and season-out, 24 hours a day. Monitoring equipment was even placed at different heights in the same location. The goal at each site was the same: to find out where and when wind speeds in the state were the greatest and consistent.

In fact, according to Global Energy Concepts, which performed the study, all the Nebraska locations have sufficient wind resources for a large wind farm capable of generating 10 megawatts or larger. The annual average wind speeds ranged from 14.4 to 16.4 miles an hour.

Slow Speed, Greatest Need

Seasonally, spring and fall produced the strongest, consistent wind speeds. The slowest winds were recorded in July and August during summer's peak, when the electricity need is usually the greatest.

The wind study cost $336,000 and was paid for by a $74,428 grant from the National Renewable Energy Laboratory, a $59,600 from the Utility Wind Interest Group, a $10,000 grant from the American Public Power Association and the balance from major utilities including Omaha Public Power District, Nebraska Public Power District, Lincoln Electric System, Nebraska Municipal Power Pool, Southern Nebraska Rural Public Power District, Loup River Public Power District, Niobrara Valley Electric Member Corp., Nebraska Electric G & T Coop, Inc., Wayne County Public Power District, Norris Public Power District, Central Nebraska Public Power and Irrigation District and Tri-State G & T Association, Inc.

A copy of the complete wind study is available at the Nebraska Energy Office's web site, Nebraska Energy Office.

Four turbines _ two in Springview and two near Lincoln _ are generating electricity in the state. However, much larger wind turbine projects are operating or under construction in Minnesota, Iowa, Wyoming and Colorado. By 2009, Texas plans on producing 2,000 megawatts of electricity from turbines.

According to the federal energy department, about 1,000 megawatts of wind-to-electricity was constructed last year, making windpower the fastest growing renewable energy resource in America.

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Power in the Wind: An Educational Resource

Is wind a viable energy source in Nebraska? Students can chart real-life data from nine monitoring wind locations in the state. Critical thinking skills are needed to deal with such issues as: Is there enough data? What seasons have more wind potential? What seasons have the highest demand for electricity? Which location would you recommend for a wind turbine? Would you pay more for electricity generated from renewable sources?

This math-based exercise is designed for students grades 5-8 and is offered by Nebraska Public Power District. To obtain a copy of Power in the Wind, contact any of the District's regional consumer education specialists or visit the utility's web site at NPPD "Power in the Wind".

Printed copies of "Power in the Wind" are limited.

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An Animated Wind Web Site

The U.S. Department of Energy has recently redesigned its wind power web site.

It now features animated graphics on how wind turbines work. These turbine graphics also include cutaway diagrams that clearly illustrate how turbines produce electricity.

The site is ideal for teachers and students. Other aspects include the basics of wind energy, projects funded by the federal government, current turbine technology and research and links to other wind energy sites.

The web site is located at EERE Wind Energy Technologies Office

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More Power from the Wind by 2020?

By 2020, the federal energy department aims to have five percent of the nation's electricity come from wind, up from one-tenth of one percent from wind power today.

According to national and international energy sources, wind generated electricity has become the fastest growing energy source in the world. Presently, all the wind turbines in the country can generate only 2,500 megawatts. The power from the wind turbines is about three times the amount of power produced at Cooper Nuclear Station near Brownville, Nebraska.

Renewable energy experts agree that wind is the most cost competitive with traditional sources such as coal, natural gas, oil and nuclear. Currently, the price of a kilowatthour from a wind turbine costs about five cents. In the 1970s, the cost of the same amount of power from wind cost 40 cents or more. The Energy Department believes the cost of production must fall about two cents a kilowatthour in the first part of the next century for the goal to be reached in 2020.

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The Saudi Arabia of Wind

Tomorrow's industries in Nebraska could be wind-to-electricity farms. That's what a federal energy lab study suggests in a recent report.

"Choices for a Brighter Future" says the seven states in the Midwest Region - including Nebraska - could potentially generate 5.4 trillion kilowatt-hours of electricity from wind turbines. That's nearly twice the electricity used in the United States every year.

All states in the region, except Missouri, have more than enough wind energy available to meet all their electrical needs. Nebraska, for example, could become a net exporter of electricity since it has the potential of producing nearly three and a half times the power needed by the seven state region.

A complete copy of the report can be found at the National Renewable Energy Laboratory web site at "Choices for a Brighter Future" report

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How to Shave Dollars Off Your Electric Bill

Increasing your lighting efficiency is one of the fastest ways to decrease your energy bills. If you replace your lights in high-use areas with fluorescents, you can save about 50 percent of your lighting energy costs.

Use linear fluorescent and energy efficient compact fluorescent lamps in fixtures throughout your home to provide high quality and high efficiency lighting. Fluorescent lamps are much more efficient than incandescent bulbs and last six to ten times longer. Although fluorescent and compact fluorescent lamps are more expensive than incandescent bulbs, they pay for themselves by saving energy over their lifetime.

Lighting Tips

• Turn off the lights in any room you're not using, or consider installing timers, photocells, or occupancy sensors to reduce the amount of time your lights are on.
• Use task lighting; instead of brightly lighting an entire room, focus the light where you need it. For example, use fluorescent under-cabinet lighting for kitchen sinks and countertops under cabinets.
• Consider three-way lamps; they make it easier to keep lighting levels low when brighter light is not necessary.
• Use four-foot fluorescent fixtures with reflectors and electronic ballasts for your workroom, garage and laundry areas.
• Consider using four-watt mini-fluorescent or electro-luminescent night lights. Both lights are much more efficient than their incandescent counterparts. The luminescent lights are cool to the touch.
• Use compact fluorescent lamps in all the portable table and floor lamps in your home. Consider carefully the size and fit of these systems when you select them. Some home fixtures may not accommodate some of the larger compact fluorescent lamps.
• When shopping for new light fixtures, consider compact fluorescent lamps with reflectors. The lamps range in wattage from 13-watt to 32-watt and provide a very directed light using a reflector and lens system.
• Take advantage of daylight by using light-colored, loose-weave curtains on your windows to allow daylight to penetrate the room while preserving privacy.
• Decorate with lighter colors that reflect daylight and/or electric light. u If you have torchiere fixtures with halogen lamps, consider replacing them with compact fluorescent torchieres. Compact fluorescent torchieres use 60 percent to 80 percent less energy, can produce more light and do not get as hot as the halogen torchieres.
• Look for the Energy Star label when purchasing these products. "Energy Star Bulbs represent the cutting edge in lighting technology and bring long life, brightness and savings into any family's home," Energy Secretary Bill Richardson said when launching the Energy Star lighting effort. Energy Star compact fluorescent lights must have a minimum lifetime of 6,000 hours, though many Energy Star light bulbs are rated for 10,000 hours of use - that's seven years of use at four hours per day for every day. The bulbs do not need to "warm up," and come in a wide range of styles, shapes and wattage values. Specifics on lighting specifications and products can be found at Energy Star.

A portion of the above article was excerpted from Energy Savers: Tips on Saving Energy & Money at Home. Readers can contact Jerry Loos in the Energy Office for free copies of Energy Savers, or additional tips can be found at the U.S. Department of Energy web site: EERE

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40 Ways to Finance Your Improvements

This is the last chance to obtain free copies of the Energy Office's popular financing guide, 40 Ways to Finance Your Improvements, that was revised, enlarged and updated for 1999.

The Guide focuses on financing options for making energy efficiency and pollution prevention improvements. The Guide also examines four basic financing methods: self-financing, direct borrowing, alternative financing techniques and community-based financing. To aid users, the guide is divided into sections that focus on building or operating types:

• commercial, manufacturing and industrial
• multi-family housing
• all types of buildings
• community-based financing.

Each financing source is profiled in terms of eligibility, borrowing limits and other features. Contacts for additional information about the financing option are also listed as well as web sites, if available.

To obtain free copies of 40 Ways to Finance Your Improvements, contact Jack Osterman in the Energy Office or by email at Jack Osterman

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The Nebraska Energy Quarterly features questions asked about 6% Dollar and Energy Saving Loans.

Loan forms may be obtained from participating lenders or the Energy Office.

Questions and Answers...

5% Dollar and Energy Saving Loans

A borrower is considering improvements that include replacement of doors and windows, siding and roof repair. Which forms need to be completed and submitted with the loan application?

I know some Nebraskans have not heard of Dollar and Energy Saving Loans. How are they publicized and how can one access information and application forms?

Which lenders offer Dollar and Energy Saving Loans?

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Energy Saving Appliances and More Are Just a Click Away

If you are planning to replace a major appliance or heating and cooling equipment, you've probably searched newspaper ads looking for the best prices. Now, there are several other places to look that could save you hundreds of dollars more.

Consumers who want to know which products are the most energy efficient can quickly access and download lists of information on top-rated refrigerators, clothes washers, dishwashers, room and central air conditioners and heat pumps. Within the next several months, the best furnaces, boilers and water heaters will be added to the list.

When you buy a refrigerator, you are not only paying for the appliance, but also the operating cost for as long as you own it. Over the life of the appliance, the operating cost can be many times the original price of the equipment.

For example, replacing a 15-year-old refrigerator with a top-rated new model will typically save $50 to $100 in electricity bills each year. Savings from an energy-efficient clothes washer could easily reach $750 to $1,200 during the washer's lifetime. The list contains 12 clothes washer models from 5 different manufacturers that could easily achieve these savings.

The Council's list of energy efficient products is compiled from directories and manufacturer's data. Only models that are widely distributed in the United States are reviewed for inclusion on the list.

For a complete list of the "best of the best" of consumer appliances, visit the American Council for an Energy-Efficient Economy at American Council for an Energy-Efficient Economy.

A second source, the Consumer Federation of America Foundation, provides information about the economic, environmental and health benefits of buying energy-efficient products for the home.

The web site gives tips on what to look for when purchasing new home appliances and heating and cooling equipment and provides answers to frequently asked questions about energy-efficient products.

The Federation Foundation site is located at Consumer Federation of America Foundation. Nearly all the products on these lists can be financed with 5 percent Dollar and Energy Saving Loans from the Energy Office.

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The Savings Are Real

Replacing a vintage furnace can reap a bagfull of money according to Nebraskans who did just that.

In the first four years when Dollar and Energy Saving Loans became available, 114 Nebraska homeowners replaced their natural gas furnace with one that was more than 90 percent efficient.

The Energy Office then began surveying energy use in those homes with new furnaces. On average, the new high efficiency furnaces reduced natural gas use by more than 20 percent, saving about $140 a year.

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20th Century Oil Milestones

During this century, America's dependence on petroleum became a dominant factor in its development and economy.

At the dawn of the century, all of the nation's needs were met domestically. But by the end of the century, more than half the nation's needs were met by oil imported from other nations, especially OPEC members which accounted for nearly half of all imports for the first six months of 1999.

Some of the more significant events in the development of the oil industry during the 20th century are listed below.

1908 Oil is discovered in Persia, now called Iran. This find begins a century-long trend of exploration and production in the Middle East.

1938 Oil is found in Saudi Arabia. This once impoverished nation of nomads will soon become the world's largest oil exporter.

1943 Venezuela became the first nation to demand and get an equal share of the profits from oil produced on its soil. Over time, actions in other countries would lead to the nationalization of oil company operations.

1947 The world's first off-shore well begins production 10 miles off the Louisiana shoreline in the Gulf of Mexico.

1960 The Organization of Petroleum Exporting Countries, or OPEC, is created. Over time, the original 11 members exert control over the oil production and prices oil companies previously controlled.

1973 Arabic nations embargo oil shipments to the United States and other countries. Oil supplies in America are disrupted and prices soar.

1978 The Shah is deposed in Iran, and oil prices skyrocket when the world's second-largest oil exporter cuts production by 75 percent.

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New Vehicle Fuel Economy Guides

Want to know how many miles a gallon a Ferrari 550 Maranello gets, even if you can't afford one? Or, if you want to compare the fuel economy of different vehicles visit the federal government's Fuel Economy website. The web site contains an interactive version of the Fuel Economy Guide: Model Year 2000.

These Guides have frequently helped consumers compare the gas mileage of similarly sized cars, light duty trucks, minivans, sport utility vehicles and special purpose vehicles. Web site visitors can also find gas mileage data by class of vehicle, or by manufacturer, search for vehicles that have specific mileage performance and find out which cars get the best and worst mileage in their respective classes.

In the past, the federal government has produced printed copies of the Guide, but since the information can be printed from the web site, traditionally printed copies of the Guide may not be available.

Information on the fuel economies of 2000 Model Year vehicles, compiled by the U.S. Department of Energy's Office of Transportation Technologies from U.S. Environmental Protection Agency data, can be found at Fuel Economy

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Energy Education Resources: Kindergarten Through 12th Grade

More than 150 organizations, government agencies, utilities, industries and foundations that offer free or low-cost energy-related educational materials for students, educators and information users are listed in Energy Education Resources: Kindergarten Through 12th Grade.

Each listing in Resources includes the address, telephone number, description of the organization and the type of materials available. Most of the listings include Internet and electronic mail addresses.

Copies of Resources are available from the National Energy Information Center, EI-30, Energy Information Administration, Room 1E-238, Forrestal Building, 1000 Independence Avenue, S.W., Washington, DC 20585, phone 202-586-8800 or email to Info Request.

The list is also available on the Internet at EIA Bookshelf

Educators should note that some organizations listed in Resources take policy positions on certain energy issues and express them in the educational materials provided.

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Information Services and Resources

The Energy Efficiency and Renewable Energy Clearinghouse provides fact sheets, brochures, videos and publications on energy efficiency and renewable energy.

Energy Efficiency and Renewable Energy Clearinghouse,
P.O. Box 3048,
Merrifield, VA 22116

Phone between 7am-4pm CT,
Monday-Friday. 1-800-363-3732
or for the hearing impaired call
1-800-273-2957 8am-6pm.
Fax 1-703-893-0400

Internet: Office of EERE

Ongoing

Mission

“The mission of the Nebraska Energy Office is to promote the efficient, economic and environmentally responsible use of energy.”

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Americans with Disabilities Act

In accordance with the American Disabilities Act, the state will provide reasonable accommodation to persons with disabilities. If you need reasonable accommodation to participate in any program or activity listed in this publication, please contact the Energy Office at 402-471-2186 to coordinate arrangements. Upon request, this publication may be available in alternative formats.

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U.S. DOE Grant

This material was prepared with the support of the U.S. Department of Energy (DOE) Grant No. DE-FG47-92CE60410. However, any opinions, findings, conclusions, or recommendations expressed herein are those of the author and do not necessarily reflect the views of DOE.

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