MEAN Executive Committee approves wholesale rate decrease
February 26, 2018
The Municipal Energy Agency of Nebraska (MEAN) Executive Committee in February approved a 1.2 percent decrease in MEAN’s long-term wholesale electric energy rate and a 2.2 percent decrease in its overall targeted revenue requirement from its current year for its 54 long-term (Schedule M) wholesale power participants for fiscal year 2018-19. The new rate will take effect May 1.
The decreases in the energy rate and targeted revenue requirement are due largely to the decrease in the average cost of energy (purchased and produced) during MEAN’s budget year. It is the third straight year MEAN has lowered its targeted revenue requirement, which is the total net revenue required to cover MEAN’s cost of operation.
MEAN’s wholesale electric rate structure includes a flat energy rate (usage) and a fixed cost recovery charge that allows MEAN to recover certain known costs and better handle energy usage volatility due to weather and other unpredictable factors. These two components are MEAN’s primary sources of revenue.
Fixed Cost Recovery Charge
The Fixed Cost Recovery Charge is 41 percent of MEAN’s targeted revenue requirement. It covers certain known costs related to ownership of power resources, power contracts and operations. This charge is allocated to long-term (Schedule M) and 10-year (Schedule K) Participants based on each Participants’ three-year historical average peak electric demand.
Accounting for certain known costs protects MEAN wholesale electric Participants from revenue volatility from energy sales caused by unpredictable factors such as weather-related usage fluctuations, unplanned resource outages, fuel costs and transmission congestion/outages.
Electric Energy Sales
This source of revenue makes up approximately 58 percent of MEAN’s targeted revenue requirement. Unlike the fixed cost recovery charge, energy sales are highly variable as usage depends on consumer need, which varies due to weather, time of day, conservation, etc.
The MEAN Board and Management Committee annually reviews rates and charges to ensure operating revenues are sufficient to pay operating expenses, including aggregate debt service obligations, capital costs, as well as to have an adequate rate stabilization fund and sufficient cash reserves in accordance with policies approved by the MEAN Board.