Between the lines: Beyond 2020: Phase 1 results

May 2021
By Gwen Kautz
Dawson PPD General Manager
gkautz (at) dawsonpower.com
308-324-2386
To study the possible merger, the consultant needed lots of information. Dawson PPD submitted over 49 pieces of information in which some pieces contained data for five and 10 years. The Central Nebraska Public Power and Irrigation District had to provide similar information. The challenge and opportunity are that we are not combining two similar distribution systems. Dawson PPD is a distribution system and Central is a generation system with other inter-related responsibilities.
Phase 1 was a high-level overview of strategic fit based on trendlines and did not go into detail. We looked at things like staffing, physical facilities, power supply, alignment of mission/goals and governance.

Staffing

Because we don’t do the same thing, very few employee overlaps were found initially. It is anticipated that over the next 10-15 years, approximately 11 full-time employee positions could be alleviated, but only through attrition – retirements and people changing jobs. Our consultant, Power Systems Engineering, Inc., felt there would be some new hires required, but some other positions would be absorbed due to changes in technology. Phase 2 will look at workforce financial impacts in greater detail.

Facilities

Facilities – both systems have done a good job of keeping facilities up to date or on an improvement schedule. Central is facing the possible need for a new headquarters and Dawson PPD faces three more sub-transmission line projects and a focus on aging infrastructure. Dawson PPD’s headquarters was built in 2009 and was designed for expansion. We have also been using attrition to reduce workforce based on technology streamlines – which means we have room without making any physical changes. Central plans on keeping a strong water service presence in Holdrege.

Power Supply

Dawson PPD is under contract through the Nebraska Electric Generation & Transmission Cooperative and Nebraska Public Power District. That contract does not expire until 2035. Central has about 60 MW of hydro generation available beginning in 2024. A clause in Dawson PPD’s current contract allows us to purchase up to 20 MW from Central or another renewable option. There are significant savings to that based on reducing our peak summer load and gives our board a sneak peek at a future in self-generation.

Mission and Goals

Both companies are interested in strengthening central Nebraska as a whole by keeping hydro power in our state. We envision there could be some economic opportunities by pairing hydro power with a robust distribution system as a result of the merger. For example, we could offer ‘products’ to our customers/stakeholders and to new or existing companies wanting green power.

Governance

In this case, we are talking about elected board members and the general managers of both organizations. Because this piece is critical to our success, Phase 2 could lay out a plan that might take several years to implement. For now, we believe both boards would need to stay fully intact and operate much like they do now simply based on the diversity and charter of both companies. Opportunities to make changes that keep strong customer and stakeholder representation will be reviewed and considered as needed.
The ultimate issue for Dawson PPD’s board is whether the consolidation of these two companies has any benefit to Dawson PPD electric ratepayers. Likewise, Central will have to look at benefits to their business model and stakeholders. It’s imperative that as general managers and boards, we look at long-term decisions and impacts, not just 10 years down the road.
An initial general savings of about $5 million per year is possible in a consolidated environment if you combined the simple aspects identified in Phase 1. We know nothing is simple when looking at an endeavor such as this.
At the Dawson PPD board meeting held on April 7, 2021, our board voted 9-1-1 to move forward to Phase 2. Nine said yes, one abstained, and one board member was absent. Central’s board also voted to move forward to Phase 2 at their regular meeting.
Phase 2 objectives are being adjusted based on what we learned in Phase 1 and items our directors have identified. We could be looking at late summer to complete Phase 2, so stay tuned.