MEAN Board, Committee approve decrease in wholesale electric rates
January 27, 2019
The Municipal Energy Agency of Nebraska (MEAN) Board of Directors and Management Committee at their joint meeting Jan. 17 approved a 5.8 percent decrease in MEAN’s overall targeted revenue requirement for fiscal year 2019-20.
As part of the overall decrease, the Board and Management Committee also approved a 5 percent decrease in MEAN’s flat energy rate for its 54 long-term (Schedule M) wholesale electric Participants and a 3.3 percent decrease in its fixed cost recovery charge. Additionally, the energy rate for MEAN’s wind-generation resources decreased 9.8 percent. The new rates take effect April 1.
It is the fourth straight year MEAN lowered its targeted revenue requirement, which is the total net revenue required to cover MEAN’s cost of operation.
Primary reasons for the decreases include:
- Decreased fuel and contracted energy costs;
- Favorable market conditions for owned generation resources; and
- Decreased capital costs.
MEAN’s wholesale electric rate structure has two primary components for collecting revenue: a flat energy rate (usage) charged for electric energy sales and a fixed cost recovery charge.
Electric Energy Sales
This source of revenue makes up 59 percent of MEAN’s targeted revenue requirement. Energy sales are highly variable as usage depends on consumer need, which varies due to weather, time of day, conservation, etc.
Fixed Cost Recovery Charge
The Fixed Cost Recovery Charge is 41 percent of MEAN’s targeted revenue requirement. It allows MEAN to recover certain known costs related to ownership of power resources, power contracts and operations and better handle energy usage volatility due to weather and other unpredictable factors. 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.
Two other primary cost components on MEAN Participants’ monthly wholesale electric bill are for transmission and federal hydropower allocations. These are third-party pass-through costs.
The MEAN Board and Management Committee annually reviews rates and charges to ensure operating revenues are sufficient to pay operating expenses in accordance with policies approved by the MEAN Board.