When we talk to Dawson Public Power District customers about this opportunity, something commonly asked is “why?” We usually hear that customers do not care what we do so long as we continue to provide low-cost, reliable power. When they flip the light switch, it better come on. We know this industry well and we care about all of this on your behalf. Our efforts will continue doing what we do best using a different, but diverse, and better business model.
We have two choices: Stay on the same path, or we can be pioneers to provide our customers with a stronger future.
1. Local control
Nebraskan George Norris is considered the founder of public power. His original plan was to create a little TVA (Tennessee Valley Authority) inside his home state. This merger is that vision. The joining and managing of power and water to get maximum benefit from those locally owned resources advances central Nebraska as a whole. We have a “George Norris moment” in our hands. This crossroads opportunity means we have 2 choices. Stay on the same path, doing what we’ve always done; or we can be pioneers like Norris whose dream was to provide our customers with a stronger future — where they have a say with the local control that is the hallmark of public power.
2. Vertical integration
Multiplying the opportunities for success through service to the people in the south-central Nebraska area maintaining and improving the quality of life for this region — it equates to political and industry clout to make a difference for our customers. Greater revenue stability and an expanded operational scope will give us increased influence for our communities and counties. We will be stronger together.
There’s an old saying “whiskey is for drinking and water is for fighting.” Water (access to/control of) will be one of the single biggest issues in a matter of 10 years or less. The Central Nebraska Public Power and Irrigation District has been a manager/caretaker of the water resources in this footprint since 1934. A merged entity will join the interests of water necessary to generate power, irrigate crops and provide recreational opportunities, which benefits our customers.
4. Savings of $1.5 million annually
Of course, that’s a projection and it’s solely based on savings from purchasing 20 MW of hydropower from Central starting in 2024. The savings were calculated prudently — meaning we expect Central’s hydro to affect our peak about 50% of the time. We strongly believe we could affect our peak about 80% of the time. Central has 110 MW of hydro — so you do the math. Even though, at this time, we cannot take advantage of the other hydropower until our wholesale contract with NPPD ends in 2035. There is very little overlap in employee responsibilities. We will see a small amount of savings on the workforce through attrition and combining positions.
5. Rate stabilization and resource management
Because we have control over some generation, this gives us the ability to direct rather than be directed. Diversified and complementary revenue streams also improve stability. Again, this adds value for our customers. This new company will benefit from hydropower generation, groundwater recharge, and direct access to the Southwest Power Pool, while its irrigation and recreational operations provide us with revenue diversity. We know our customers have busy lives and have an expectation of low-cost electricity and water resource management. Merging our two companies is a path to this expectation. We know both pieces well as great individual companies, so we will continue to provide the best of both inside one organization.
6. Serving central Nebraska
Central’s average cost of generating hydro compares well to NPPD’s combined resource mix. The actual costs are proprietary, but we’ve researched this component well. We are interested in keeping hydropower in central Nebraska. The ability to control the resource to benefit the circumstances at hand is a game changer. Again, this benefits Dawson PPD customers.
7. Purchase power agreement (PPA) vs. a merger
Yes, Dawson PPD could buy 20 MW of hydropower with a purchase power agreement, providing we negotiate very good terms. A merged company adapts quickly to the changing environment. Separate companies are bound by contracts that may have been negotiated fairly in the beginning (where both sides were satisfied with what they got out of the deal) but over time, that contract can become lopsided without the ability to get back the original balance. A merged company wants what’s best for the whole; separate companies want what is best for them individually. For example, NPPD has older wind contracts and those are now not as beneficial as they were initially.
8. Economic development
Today’s business world is demanding more carbon free electricity. If a new economic development load, wanting renewable generation, provided us with revenue that exceeds the $1.5M we would have gained by shaving our peak noticeably (see answer #4) — that would be a better allocation for the hydro. When the resource and customer are married, we can make the right decision every day in every situation for our customers.
9. Location, location, location
The service territory of both companies overlaps strongly. Three hydros are located within Dawson PPD’s service area. The new company can only distribute electricity to the electric customers Dawson PPD serves today. The footprint overlap of these two companies extends from Ogallala to just east of Shelton along the I-80 corridor. It’s a great fit overall.
10. Access to Southwest Power Pool
The SPP organization is extremely complex and analyzing the market is better left to experts. What we know is that hydro is not just about generation; it’s also about irrigation and scheduling the generation in concert with the irrigation demand. After 2035, a merged entity sets us up to have direct access to market power, both buying and selling, with perhaps the ability to capitalize on Southwest Power Pool incentives, including Federal Energy Regulatory Commission Order 2222 scheduled to be implemented in 2024.
11. Move forward or perish
Things are changing faster than ever. Federal and state regulations bind our hands with the knowledge things seem to be getting worse and more difficult to manage under this administration. Some things cannot be walked back (closing a coal plant). A merger could give us wiggle room and decision making ability. The merger gives us other revenue streams, which support the entire base of the new company — creating a stronger company for our customers. The public power district managers in Nebraska know involuntary consolidation of the smaller systems is a possibility. In our particular case, wouldn’t you agree it’s better to pick your partner rather than having them picked for you? We also know NPPD may not look the same in a few years.
This isn’t about ANY OF US sitting around the table TODAY, tomorrow, or next year. It’s about the next generation and the next. It’s about creating a stronger presence in central Nebraska for a long, long time. To see this value, we MUST look beyond 2035. The recent changes in the industry alone dictate the need to change the business model for our collective future.
There is just one question which we wish we had an answer:
What happens to Dawson PPD 10-20 years down the road if we don’t merge?
Anyone know where we can get a reliable crystal ball?
Did you notice we did not LEAD with the dollar savings related to merging with Central? While it’s very important, it’s not THE most important value. We believe the vertically integrated utility model will open doors we never knew existed. We are certain local control of a politically astute influencer is what’s best for our central Nebraska residents.
Both boards have a challenge and even though we’ve listed 12 great reasons, they have lots of things to weigh about these values. There are negatives on some directors’ minds and we need to listen to them as much as they have listened to our positives. These directors have been around for a long time, and we respect their opinions. If any of our customers have comments or concerns, we’d like to hear from you too!
Email either or both of us!
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