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As we enter a new era of deregulation and competition, we are presented with a unique opportunity to provide even more services to Nebraskans. However, to compete successfully in the years ahead, we must develop stronger name recognition, higher awareness levels and increase our identity across the state as Nebraska Public Power District, Nebraska's Energy Leader.
The Nebraska Public Power District (NPPD) generates and distributes electricity to about one million Nebraskans in 91 of the state's 93 counties, including customers in more than 205 retail communities, 69 wholesale communities, and 25 rural cooperatives and public power districts. About 60 percent of its power comes from coal plants, with 20 percent from hydroelectric plants, and 20 percent from its one nuclear power plant. NPPD and other public power districts make Nebraska the only state served entirely by public power.
Conversion to Public Power in the Early 20th Century
Nebraska and the other Great Plains states were the last settled by American pioneers. During much of the 1800s it was called the "Great American Desert" and simply bypassed. Even after farmers began moving there after the Civil War, many suffered from drought, temperature extremes, and loneliness. For many years few Nebraskans had access to modern technology, including electrical power.
In the late 1800s Nebraskans began irrigating, but by the early 20th century they realized the limits of getting water from the North and South Platte Rivers. This increased demand for irrigation water and electrical power eventually led to the creation of public power in Nebraska.
Before 1930 few Nebraskans realized the state's potential for hydroelectric power, with plants in the Platte River Basin producing only 10,446 horsepower. But successful power production owned by Nebraska municipalities in the 1920s influenced many to favor publicly owned power over private utilities. With the support of Nebraska's U.S. Senator George Norris, a 1932 federal law allowed the Reconstruction Finance Corporation to provide loans to public entities for irrigation and hydroelectric projects.
In 1933 the Nebraska legislature passed a law allowing the creation of public power/irrigation districts if 15 percent of an area's voters signed a petition submitted to the Nebraska Department of Roads and Irrigation. Although private utilities opposed this law, it opened the door to start public corporations to increase access to water and electricity, both in short supply in many areas of Nebraska during the Great Depression.
Residents in Columbus, Nebraska organized first with the 1933 formation of the Loup River Public Power District. With federal money, construction of a hydroelectric plant began on the Loup River in 1934 and by 1937 the plant was operational. Its sole purpose was to produce electricity.
Meanwhile, the North Platte-based Platte Valley Public Power and Irrigation District was organized in 1933 to produce both power and irrigation water. Construction began in 1934 and was completed in 1936. The new Sutherland Reservoir held about 175,000 acre-feet of water. This effort, often called the Sutherland project, served those in Keith, Dawson, Lincoln, Buffalo, and Hall counties.
The third public power district in Nebraska faced more difficulties than did the first two. To serve Adams, Gosper, Phelps, and Kearney counties, the Central Nebraska Public Power and Irrigation District based in Hastings was organized in late 1933, but it had to resubmit its plans before the federal Public Works Administration finally approved it in 1935. Construction of the Kingsley Dam on the North Platte River near Ogallala started in 1938; power was first generated in 1941; and the project finally was completed a year or two later. Much more expensive than the first two projects, the Central Nebraska project cost $38 million. The new dam produced 233 million kilowatt-hours annually. According to Olson's state history, the Kingsley Dam was "the second largest earthen dam in the world." It measured three miles long, 162 feet high, and 1,100 feet wide at the bottom. It also created Lake McConaughy with its 105-mile shoreline, one of Nebraska's major recreational spots.
In the late 1930s Nebraska's hydroelectric power districts tried in vain to buy private utility companies to increase their production and marketing. So in August 1939 the Nebraska Legislature created Consumers Public Power District. Over the next two years it purchased for about $44.5 million most remaining private power firms using revenue bonds.
In 1940 the Loup River, Platte Valley, and Central Nebraska public power districts signed a joint agreement that created the Nebraska Public Power System (NPPS) that combined their production and revenues under one management board comprised of the general managers of the three power districts. Central in 1949 withdrew from NPPS to focus on irrigation; it sold its hydro generation to NPPS.
In the 1930s rural Nebraska began to organize rural power districts that used federal funds from the Rural Electrification Administration, created by President Franklin Roosevelt with support from Senator Norris. From just 5.8 percent of Nebraska's farms having electricity in 1929, by the early 1950s about 78 percent enjoyed that benefit supplied by about 30 rural power districts.
To represent the increasing number of public power agencies across the nation, including thousands of municipal-owned systems, the federal Tennessee Valley Authority, and area-wide entities like those in Nebraska, in 1940 the American Public Power Association (APPA) was founded. Since that time, it has provided research, training, and counseling for public power agencies seeking support in their ongoing dealings with government and private utilities.
In 1945 the Omaha Public Power District was organized, and the following year it purchased the Nebraska Power Company, a subsidiary of American Power and Light and Electric Bond and Share Company (EBASCO). The Omaha district serving Douglas, Dodge, Sarpy, Saunders, and Washington counties had its own generating plants but sometimes bought power from the interconnected hydroelectric power districts. Thus Nebraska became the only state in the nation where public power totally replaced private utility companies.
Some Americans criticized the public power movement, however, as a form of socialism or even communism. Omaha Senator J. P. O'Furey said public power districts would "set up a group of communistic super states that rival Soviet Russia for nefariousness," according to Donald E. Schaufelberger.
Post-World War II Developments
Economic expansion in Nebraska following World War II resulted in a doubling of power demands from 1948 to 1951. Demand again doubled from 1952 to 1957. As World War II veterans got married, raised families, and needed employment and new housing, increased power demands were not surprising. It was the Baby Boom era in American history.
To meet the demands for more power, the Consumers District proposed building its own generating facilities, but that conflicted with its distribution mission. Litigation resulted over Consumers' right to build energy producing plants. In 1956 the Nebraska Supreme Court ruled that Consumers could generate its own power, so Consumers moved ahead with its plans for a 100,000-kilowatt steam plant near Hallam, along with its 75,000-kilowatt Hallam Nuclear Power Facility built as an experimental plant for the former Atomic Energy Commission, later renamed the Nuclear Regulatory Commission. Once the AEC gained the information it needed, it decommissioned the nuclear part of what became known as the Sheldon Station. In 1961 the coal and gas-fired part of the Sheldon Station began generating power. It was upgraded in 1968 with a second generator and boiler that brought its capacity to 225,000 kilowatts.
From 1952 to 1956 many conflicts occurred between Nebraska's power districts. The state legislature in 1965 tried to merge some generation and transmission facilities by passing legislation, but that effort failed when the legislation was thrown out by the courts. After these merger efforts mandated by state law failed, negotiations began in the 1960s to find ways of voluntarily merging the power districts.
NPPD in the 1970s and 1980s
In the late 1960s negotiations began that culminated in the creation of the Nebraska Public Power District in 1970. The first step was finalized on June 1, 1967 when Loup River Public Power District and the Consumers Public Power District made an important trade. Loup took over Consumers' retail distribution properties in Nance, Platte, Colfax, and Boone counties, while Consumers replaced Loup as the partner of the Platte Valley Public Power and Irrigation District in operating the Nebraska Public Power System.
The second and final step began July 5, 1968 when the directors of both Consumers and Platte agreed to merge. A joint statement from both districts read, "We have long been aware that the State would be better served by one centrally directed power district providing large scale generation and transmission." Completed on January 1, 1970, NPPS and Platte were merged into Consumers, with the new utility named the Nebraska Public Power District. It served 85 of Nebraska's 93 counties and parts of two other counties. Nebraska's other counties received electricity from the Omaha Public Power District.
NPPD ended the waste, duplication, and legal conflicts that had occurred when Consumers and NPPS had built separate facilities to serve their customers living in the same area. "In one short month, the management and directorate of NPPD have swept aside many of the petty irritations of the past, and cleared the way to concentrate on its paramount consideration of providing the best and least expensive electrical service that is humanly possible . . . ," stated a Nebraska State Journal editorial on February 2, 1970.
NPPD's creation united some 1,400 employees under one management team. In 1970 NPPD's combined assets of generating, transmitting, and irrigating properties totaled nearly $588 million. By 1983 NPPD's assets reached about $1.7 billion.
In 1974 NPPD began operating its largest plant, the Cooper Nuclear Station (CNS) next to the Missouri River near Brownville in southeastern Nebraska. Located on a 1,351-acre site, NPPD's only nuclear reactor used uranium fission to produce steam to turn the plant's electrical power producing turbines. Used uranium fuel rods were stored on site, while the federal government made plans to eventually store such high-radiation wastes in a permanent facility elsewhere.
The Cooper plant produced 801 megawatts of electricity. Half that output was sold to Iowa's MidAmerican Energy Company, and the Lincoln Electric System purchased 12.5 percent. NPPD and other utilities used the rest of the nuclear plant's power.
By 1983 NPPD employed about 2,000 individuals and provided them an annual payroll of nearly $47 million. It owned or controlled 33 plants with a generating capacity of more than 2.7 million kilowatts, including the state's largest coal plant, the 1,300-megawatt Gerald Gentleman Station at the Sutherland Reservoir. It also owned more than 6,000 miles of transmission lines. NPPD purchased some hydroelectric power from the Western Area Power Administration and also was interconnected as a member of the Mid-Continent Area Power Pool in eight upper Midwestern states.
In the late 1980s NPPD's major project was building a $700 million, 500,000-volt transmission line called the MANDAN Project linking the Canadian province of Manitoba with the Dakotas and Nebraska. Instead of building new generating plants, the 600-mile line allowed northern areas with surplus power in summer months to send that power south and vice-versa.
Challenges in the 1990s
After several fines for violating federal safety regulations of its nuclear plant, NPPD replaced its management in 1994. In 1996, however, the Nuclear Regulatory Commission (NRC) threatened to fine NPPD $50,000 for another violation. An NRC inspector in November 1995 found that the plant's main steam tunnel blowout panels had been improperly modified in 1985 and had not been approved by the NRC. The panels were designed to relieve steam pressure to maintain the integrity of the nuclear reactor's primary containment area. This level III violation (level I being the most serious) was corrected in the fall of 1995 after it was first reported, which helped the NRC cancel the fine.
In 1995 NPPD hired William R. Mayben of Mercer Island, Washington as its new president and CEO. A professional electrical engineer, Mayben had worked since 1962 for Seattle's R. W. Beck, a consulting firm specializing in public power. Mayben often had consulted with NPPD on its projects, since he had worked at Beck's office in Columbus, Nebraska from 1968 to 1980. In 1987 Mayben became Beck's CEO.
Electrical utilities across the nation faced new challenges in the 1990s from government deregulation. The federal government in 1992 passed a law permitting competition in purchasing wholesale electricity. California became the first state to take this option when it passed energy deregulation legislation in 1996. By December 1998, 12 states had passed laws giving consumers retail power choices. The idea was to increase competition by ending the virtual monopoly enjoyed by private and public power companies in their respective areas.
Since Nebraskans paid average electrical rates about 20 percent lower than average private utilities, many opposed deregulation or said public power could compete, if required, against private power. Others argued that it would be wise to sell public power facilities to private investors, thus gaining money for government through the sale of assets as well as through taxes on private utilities. Public power entities paid no federal or state taxes.
In any case, private utilities prepared to compete against public power in Nebraska. For example, UtiliCorp United, a $1.5 billion private electricity and natural gas firm in Kansas City, Missouri, sought to expand into new markets like Nebraska. "The 1990s are a time of change," said Dave Penn, the APPA's deputy executive director, in the March 10, 1996 Omaha World-Herald. "I caution people to not be blind to the fact that retail [electrical] competition is developing, but don't go off the cliff with the herd thinking it's inevitable."
In 1996 the Nebraska legislature created a 41-member advisory group to study the energy deregulation controversy. "This is going to be the historic opportunity to shape the industry for a long time to come," said Nebraska State Senator Chris Beutler, chair of the Natural Resources Committee, in the October 4, 1996 Omaha World-Herald. Regardless of what states decided, new 1996 rules from the Federal Energy Regulatory Commission facilitated competition by requiring both public and investor-owned utilities to allow competitors to use their transmission lines and gain information about their transmission capabilities.
In the late 1990s the NPPD took several major steps to improve its technical and financial operations. For example, on April 11, 1996 the NPPD energized its new 345-kilovolt transmission line that ran 98 miles between substations near Hastings and Lincoln. This new line eased a bottleneck that had blocked the district's ability to transfer power to the eastern half of its territory, where most of its load was located. Unlike similar projects that often took three years just for gain permits, this project from conception to completion took three years. During public meetings, NPPD dealt with concerns such as private property loss, damage to crops, and health risks from electromagnetic fields (EMFs), a controversy often discussed in media reports.
In 1996 the Nebraska Power Association and its member utilities, including NPPD, began a $300,000 study of wind power. Monitors collected data on wind speeds, direction, and turbulence. Based on that research, NPPD in 1998 worked with other agencies to build its first two wind turbines located near Springview, Nebraska. These variations on the old windmill already had operated for several years in other areas. For example, dozens of wind turbines were located near Palm Springs, California. But electrical deregulation and increased competition threatened such alternative power sources as wind turbines, unless improved technology could bring their costs below the costs of fossil fuels, hydroelectricity, and nuclear energy.
In the 1990s NPPD also burned old tires as an alternative energy source at its Sheldon Power Station near Hallam in Lancaster County. Beginning in 1991, NPPD contracted with Controlled Materials and Equipment Transportation (CMET) to buy chopped tires for $20 a ton, about the same cost as a ton of coal. The Sheldon plant burned about 600,000 old tires annually. The plant burned 98 percent coal and two percent tires but was allowed by government permit to burn up to five percent tires. The Lincoln-Lancaster County Health Department monitored emissions from the Sheldon plant, which turned out to be well under regulatory limits.
Every year Nebraskans threw away about 1.6 million old tires. The state government banned whole tires from landfills as of September 1, 1995 and extended that ban to tire scraps starting on September 1, 1996. CMET lost money, however, when it charged just $20 a ton, so it requested government subsidies. NPPD said it would pay no more than that amount. Otherwise, it would have to raise power rates for its consumers.
In the late 1990s NPPD improved its customer service by consolidating its offices and using more automated technology, which increased flexibility in paying bills and gaining information and help when needed. Nebraska Public Power District's President/CEO William R. Mayben and Board Chairman Ralph E. Holzfaster, with the help of their other executives and directors and the New York City law firm of O'Melveny & Myers, dealt with other complex issues, ranging from environmental quality and dealing with radioactive wastes from the Cooper nuclear plant. In addition, in the late 1990s NPPD examined its options to offer many new electrical-related services to its clients. Such diversification was seen as a way to prepare for deregulation and increased future competition.
Although public power in Nebraska and other states had proved successful in terms of serving customers with low-cost energy, in 1999 its future appeared uncertain, in large part because of energy deregulaton. Some public power leaders thought it was time to sell publicly owned facilities and move on to a privatized system. Even if that happened, the Nebraska Public Power District would retain its legacy of one of the nation's most significant electrical power utilities.
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