Monitoring Report SD-2: Rates Public Information Committee Report May 15, 2018 1
SD-2: Competitive Rates The Board of Directors shall establish a rate target of no general rate increases for a 5-year period starting January 1, 2017 and ending December 31, 2021, and a directional rate target of 20% below the West North Central Regional average published rates on a system average basis. In implementing this rate target, OPPD shall adhere to these principles: 1. Maintain fair, reasonable and non-discriminatory rates as stated in Nebraska Revised Statute 70-655; 2. Equitably assign costs across and within all customer classes; 3. Monitor affordability indicators; 4. Pursue rate process and structure changes to reflect the cost of energy when it is used; 5. Offer flexibility and options; and, 6. Be simple and easy to understand. 2
Rate Target - Objective Energy Information Administration (EIA) categorizes the country in regions OPPD is located in the EIA West North Central Region EIA West North Central Region North Dakota, South Dakota, Minnesota, Iowa, Missouri, Kansas, Nebraska 3
Rate Target History 1995-2016 0.0% -2.0% -4.0% OPPD Average Retail Rate Compared to Regional Average (1995-2016) NC2 Construction Recession Coal Transportation Flood / 0350 $0.00 $10.00-6.0% Declining Market Prices -7.1% $20.00-8.0% -10.0% -12.0% -14.0% -16.0% -18.0% -20.0% -10.5% -14.0% ~$120 million gap 20% Target '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 OPPD % Below Regional Average Target Off System Prices No General Rate Increase 2017-2021 $30.00 $40.00 $50.00 $60.00 Source: Energy Information Administration 4
SD-2: Competitive Rates The Board of Directors shall establish a rate target of no general rate increases for a 5-year period starting January 1, 2017 and ending December 31, 2021, and a directional rate target of 20% below the West North Central Regional average published rates on a system average basis. In implementing this rate target, OPPD shall adhere to these principles: 1. Maintain fair, reasonable and non-discriminatory rates as stated in Nebraska Revised Statute 70-655; 2. Equitably assign costs across and within all customer classes; 3. Monitor affordability indicators; 4. Pursue rate process and structure changes to reflect the cost of energy when it is used; 5. Offer flexibility and options; and, 6. Be simple and easy to understand. 5
Rates Principles - #1 and #2 Rate classes are based on customer usage characteristics. Industry standard cost of service study is performed annually. Rate design strives to align revenues with fixed/variable cost structure. Entire rate setting process is reviewed by the Board s outside consultant (The Brattle Group). 6
SD-2: Competitive Rates The Board of Directors shall establish a rate target of no general rate increases for a 5-year period starting January 1, 2017 and ending December 31, 2021, and a directional rate target of 20% below the West North Central Regional average published rates on a system average basis. In implementing this rate target, OPPD shall adhere to these principles: 1. Maintain fair, reasonable and non-discriminatory rates as stated in Nebraska Revised Statute 70-655; 2. Equitably assign costs across and within all customer classes; 3. Monitor affordability indicators; 4. Pursue rate process and structure changes to reflect the cost of energy when it is used; 5. Offer flexibility and options; and, 6. Be simple and easy to understand. 7
3.0% Competitive Statistics 2.74% % of Median Household Income for Electricity* 2.5% 2.29% 2.20% 2.14% 2.0% 1.88% 1.5% 1.0% 0.5% 0.0% Avg. % of Highest 26 States National Average West North Central OPPD Avg. % of Lowest 25 States* * Includes the District of Columbia Source: 2016 U.S. Census Bureau Table H-8 Median Household Income by State and 2016 Energy Information Administration, U.S. Department of Energy 8
2016 MEDIAN HOUSEHOLD INCOME * Median Household Income and Avg. Residential Price per kwh $80,000 $75,000 $70,000 $65,000 $60,000 $55,000 $50,000 District of Columbia Washington Colorado Minnesota Utah Virginia Nebraska Texas Illinois North Dakota Iowa U.S. Median Oregon Kansas Wyoming South Dakota Oklahoma $45,000 $40,000 $35,000 7.0 9.0 11.0 13.0 15.0 17.0 19.0 21.0 2016 RESIDENTIAL ENERGY PRICE (CENTS/KWH)** * Source: Census Bureau Table H-8 Median Household Income by State ** Source: Energy Information Administration, U.S. Department of Energy Includes District of Columbia and removed Hawaii due to scaling 9
2016 MEDIAN HOUSEHOLD INCOME * Median Household Income and Avg. Residential Monthly Bill $80,000 $75,000 Minnesota $70,000 $65,000 $60,000 $55,000 Colorado Utah Washington District of Columbia New Jersey California North Dakota Illinois Vermont New York Wisconsin Iowa Wyoming Oregon U.S. Median Nebraska South Dakota Kansas Virginia Texas $50,000 Oklahoma $45,000 $40,000 $35,000 $70 $80 $90 $100 $110 $120 $130 $140 $150 2016 AVERAGE MONTHLY RESIDENTIAL BILL** * Source: Census Bureau Table H-8 Median Household Income by State ** Source: Energy Information Administration, U.S. Department of Energy Includes District of Columbia and removed Hawaii due to scaling 10
SD-2: Competitive Rates The Board of Directors shall establish a rate target of no general rate increases for a 5-year period starting January 1, 2017 and ending December 31, 2021, and a directional rate target of 20% below the West North Central Regional average published rates on a system average basis. In implementing this rate target, OPPD shall adhere to these principles: 1. Maintain fair, reasonable and non-discriminatory rates as stated in Nebraska Revised Statute 70-655; 2. Equitably assign costs across and within all customer classes; 3. Monitor affordability indicators; 4. Pursue rate process and structure changes to reflect the cost of energy when it is used; 5. Offer flexibility and options (i.e. Rate Rider 500, Rate 261 M); and, 6. Be simple and easy to understand. 11
Rate Rider 500 Community Solar New option for customers to participate with more and different renewable energy resources than was previously offered by OPPD Cost and credit values are consistent with how the market values current or future OPPD generation assets Pricing methodology provides foundation for future distributed energy resource rate options 12
Rate 261M Key development in attracting new development and expansion Facebook will be first customer to use rate Discussed in industry articles and forums as creative solution to meet corporate customer renewable objectives Consistent with principles of Equitably assigning costs Offering flexibility and options 13
SD-2: Competitive Rates The Board of Directors shall establish a rate target of no general rate increases for a 5-year period starting January 1, 2017 and ending December 31, 2021, and a directional rate target of 20% below the West North Central Regional average published rates on a system average basis. In implementing this rate target, OPPD shall adhere to these principles: 1. Maintain fair, reasonable and non-discriminatory rates as stated in Nebraska Revised Statute 70-655; 2. Equitably assign costs across and within all customer classes; 3. Monitor affordability indicators; 4. Pursue rate process and structure changes to reflect the cost of energy when it is used; 5. Offer flexibility and options; and, 6. Be simple and easy to understand. 14
Rates Principles - #6 All rate schedules available online Increase in market based rates allowing customer-owners the understanding and confidence of market values 15
Recommendation The Public Information Committee has reviewed and accepted this Monitoring Report for SD-2 and recommends that the Board find OPPD to be sufficiently in compliance with Board Policy SD-2. 16
Revisions Discuss if any revisions are needed to the current SD-2 policy language 17