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Home > About Us > Company > Board of Directors

November 2011 Board Meeting Minutes



November 17, 2011

The regular meeting of the Board of Directors of the Omaha Public Power District was held in the Board Room on the Atrium Level of Energy Plaza East on November 17, 2011, at 10:00 a.m. 

                        Present were Directors M. J. Cavanaugh, N. P. Dodge, J. K. Green, A. L. McGuire, L. Scheve, J. R. Thompson, F. J. Ulrich, and D. D. Weber.  Also present were W. G. Gates, President and S. M. Bruckner and T. Meyerson, General Counsel for the District.  Mr. Green, Board Chair, presided, and Ms. Emerson, Corporate Secretary, recorded the minutes.  Other members of Management present were D. J. Bannister, T. J. Burke, M. I. Doghman, E. E. Easterlin, J. T. Hansen, S. L. Hutcherson, T. R. Monroe, L. A. Olson, D. J. Jacobberger, H. R. Fox, D. K. Petrus, D. L. Morgan, K. A. Roth, R. J. Rogers, and M. R. Jones.  Others present included other OPPD employees and several other customer owners.            


                        The Corporate Secretary read the following:


“Notice of the time and place of this meeting was publicized by notifying the area news media; by publicizing the same in the Omaha World-Herald and Outlets; by displaying such notice on the Arcade Level of Energy Plaza since November 11, 2011; and by mailing such notice to each of the District’s Directors on that same date.


“A copy of the proposed agenda for this meeting has been maintained, on a current basis, and is readily available for public inspection in the office of the District’s Corporate Secretary.


“Additionally, a copy of the Open Meetings Law is available for inspection in the public meeting book located in this meeting room.”


                        It was moved and seconded that the Board reviewed the September 2011 Comprehensive Financial and Operating Report and that the minutes for the last meeting be approved.  The vote was recorded as follows:  Cavanaugh – Yes; Dodge – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Green – Yes.  The motion carried.


                         Thereafter, the Corporate Secretary read the following:


“Persons wishing to address the Board on a particular item are asked to approach the microphone as that agenda item is discussed.  Comments will be heard following Board discussion of the item and prior to a vote by the Board.  Persons wishing to address the Board on all other matters will have an opportunity before the close of the meeting.”


The following resolutions were then read, and upon motion duly seconded, were placed on roll call.  The vote on each resolution is indicated following the description of that resolution.    


                         RESOLUTION NO. 5886 authorizes award of a contract to replace the Platte River crossing near Valley, NE.  Committee Chair Cavanaugh indicated that this is to procure contract labor to rebuild line 16 Platte River crossing.  This contract provides labor to rebuild a 0.85 mile segment of existing 69kV transmission line 16 which crosses the Platte River southwest of Substation 902 (near Valley, NE) and northeast of Substation 983 (near Yutan, NE).   Three proposals were received.  All proposals are legally and technically responsive.  The Engineer’s Estimate is $850,000.   Director McGuire inquired about the need for this work, and Vice President Doghman said these structures require fortification so they are able to withstand future weather such as flooding or ice.  Following the discussion, the vote was recorded as follows:  Cavanaugh – Yes; Dodge – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Green – Yes.  The motion carried.


                        RESOLUTION NO. 5887 authorizes management to award a contract for the purchase of a 161-13kV transformer for Substation 1366.  Committee Chair Cavanaugh indicated that this is to purchase a 161-13kV transformer for a future substation sited at 27th and Platteview Road, Bellevue, NE.  This transformer will serve load growth in southern Sarpy County.  Seven proposals were received.  All proposals are legally and technically responsive.  The Engineer’s Estimate for the total contract is $750,000.  Following the discussion, the vote was recorded as follows:  Cavanaugh – Yes; Dodge – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Green – Yes.  The motion carried.


                          RESOLUTION NO. 5888 approval of the Engineer’s Certification and authorizes management to negotiate and enter into a contract with ABB, Inc. to furnish distributed control system hardware for Unit No. 1 at the Nebraska City Station. Committee Chair Cavanaugh indicated that a recent study recommended replacing certain pieces of DCS hardware with newer versions which will sustain reliability, functionality and provide future support from the manufacturer.  The existing ABB controllers, communication and software modules for the DCS system are several revisions behind current technology provided by ABB, Inc. These components are becoming increasingly difficult to maintain because of vintage and compatibility issues. The technology is complex and utilization of the sealed bid process is not in the public’s best interest.  These upgrades are scheduled for the spring 2012 outage and during an outage in 2013. The total estimated contract amount is $745,000.  Following the discussion, the vote was recorded as follows:  Cavanaugh – Yes; Dodge – Yes; McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes; and Green – Yes.  The motion carried.


                          RESOLUTION NO. 5889 approves of the 2012 Board of Directors meeting schedule. Chairman Green reviewed the list of 2012 Board meetings and noted the exceptions in the months of June and September.  Chairman Green also noted the August will be an evening meeting a location in Blair, NE.  All other meetings will be the first Thursday following the tenth of the month at 10:00 am at Energy Plaza.  Following the discussion, the vote was recorded as follows:  Cavanaugh – Yes, Dodge – Yes;  McGuire – Yes; Scheve – Yes; Thompson – Yes; Ulrich – Yes; Weber – Yes, and Green – Yes.  The motion carried. 


                           RESOLUTION NO. 5890 was deferred to a future meeting.


                         Copies of the foregoing resolutions are filed in the District’s Corporate Records file.    


At this time, Board Chairman Green said Chief Executive Officer and President Gary Gates and Chief Financial Officer and Vice President Edward Easterlin, would present the Preliminary 2012 Corporate Operating and Capital Expenditure Plan and Electric Service Rate Adjustment and Fuel and Purchased Power Adjustments.   After the presentation, the public was invited to address the Board of Directors with any comments.


Mr. Gates began the presentation by reviewing 2011 accomplishments.  He indicated we have successfully protected OPPD’s major assets totaling $3 billion during the flood.    This was a defining event that tested our company and employees like no other. 


In February we dedicated The Flat Water Wind Farm which represents a significant step in reaching our self-imposed goal of generating 10 percent of our electricity from renewable resources by 2020.  This is the first wind project we have been involved with that is in our service territory and its 40 turbines have a capacity of 60 megawatts.  In addition, we have taken production of wind generation from the Petersburg Wind Farm which is an additional 40 megawatts.



After a lengthy negotiation process, we decided to retain our membership with SPP.   After gaining some needed concessions on cost allocation, we look forward to the benefits of a stronger transmission system that will increase reliability and will provide a broader access to reliable, cost-effective power for our customer-owners.


In October, our new Omaha Service Center became Nebraska’s third LEED platinum-certified building. This project represents yet another example of our company’s commitment to sustainability in its operations.


The District received its eleventh consecutive J.D. Power award for our interface with customers and how we react to customer issues.  OPPD became the only midsize utility to receive the award eleven years in a row.


We also set another record peak on August 1, 2011 of 2,468MW.  Our system reliability remained strong throughout the much warmer than normal summer despite the continued outage at the Fort Calhoun Station.


OPPD also renewed its high bond rating, AA+, despite our significant challenges.


Mr. Gates continued that we when we opened 2011, we thought it would be a normal operating year.  For obvious reasons, the flood tops the list of areas that were of heightened attention during the year.  However, there were several other important issues that we confronted during 2011:

  • Two items relate to the Fort Calhoun Station
  1. First, we continue efforts to get the plant back on line.  It is important to remember that no other nuclear plant in our country has ever had to recover from this type of impact, so a standard procedure doesn’t exist.  Our schedule currently calls for a January return to service but we absolutely will not restart the plant until we can ensure that it is safe to do so.
  2. Second we, have begun the necessary work to correct performance deficiencies identified by the NRC.


There has been a great deal of local and national media attention to the Cross State Air Pollution Rule that will be effective January 1, 2012.  Edward’s presentation will discuss the financial impacts of the rule, but understanding the legislation and developing short-term and long-term plans to ensure compliance has been an important part of our work this year.


Because of the considerable financial costs of the flood, we were successfully able to reduce our O&M spending by $9 million when compared to the budget.  We continue to rely on efficiency and cost management improvements to make permanent cost reductions.


And finally, during 2011 we continued to address strategic initiatives such as the transmission business model, smart grid alternatives, and renewable energy to make sure we all well positioned to deal with changes in our industry.


Mr. Gates continued with a discussion of 2012 challenges. 


We continue to focus on the flooding recovery efforts and its associated costs.


From recently enacted legislation to new regulations that will come into place in the future, the actions of the EPA are causing us to analyze how to effectively balance compliance and cost.


The requirements stemming from the recent NRC decision on Fort Calhoun’s performance are ones that we take very seriously. We know that we must find ways to constantly improve and change our organizational speed to address issues that come with running a nuclear plant.  In addition, the events at Japan’s Fukushima plant will cause some modifications to the Fort Calhoun plant.  These modifications are still being evaluated. 


On the transmission side: we are participating in an industry-wide regulatory recommendation by NERC to assess our 790 miles of 161kv and 345kv transmission system and to mitigate discrepancies found between actual field conditions and design specifications to ensure adequate clearance between lines and other objects.


For many years running a utility was all about operational excellence.  However a combination of factors from uncertain environmental regulations, emerging technologies, and challenging economic conditions are forcing a more strategic focus.  Understanding these dynamics and the best way to manage them will be a significant challenge for OPPD and the industry.


He also said that health care costs continue to be an issue for us just as they are for other companies.  Mr. Gates said that 40% of OPPD employees are currently enrolled in a high-deductible health care plan and we continue to focus on wellness and prevention.


While the decision to maintain our membership status in SPP involved a lot of analysis and effort, we must now turn to fully integrating into the system and how we fit into a much larger transmission grid. 


Mr. Gates concluded that our focus is to provide a balance of safe, reliable, affordable electric service in an environmentally-sensitive way.    


Mr. Easterlin continued the presentation by saying he will discuss the Preliminary 2012 Corporate Operating  and Capital Expenditure Plan and the proposed rate adjustments, both of which are  dependent on each other. 


The following assumptions were reviewed: 


Retail Energy Sales

4.3% increase from 2011 budget

2.8% increase from 2011 projected


Retail Revenues

4.5% general rate adjustment ($36.5 million)

1.4% Fuel and Purchased Power Adjustment ($11 million)


Other Operating & Non-Operating Income

Reduced interest income


Mr. Easterlin indicated given the low interest rate environment, we are receiving less interest  income on the funds we have available to invest, and this is reducing the amount of income we have to offset expenses


Wholesale Revenue

$27 million reduction due to environmental regulations

$16 million reduction in margin


Mr. Easterlin said that the CSAPR requirements mean we will reduce our off system sales by $27 million.  Of that $27 million, $16 million is margin. The margin represents the money left over after the cost of producing the energy.  The loss of the $16 million means we do not have that money to offset cost which is another rate driver. 


Debt Retirement Reserve

$30 million utilized in 2012


Rate Stabilization Reserve

$32 million cash used to fund flood-related fuel and purchased power in 2011

Utilize Fuel and Purchased Power Adjustment to replenish reserve over a 3-year period



Capital expenditures are planned to maintain system reliability and serve future load growth

$1.8 million budgeted for Strategic Initiative Projects

In-service wind purchased total 148 MW

$8 million of increased coal costs for ultra-low sulfur coal


Major Planned Outages

Nebraska City Station Unit No. 1 – 16 day outage

Nebraska City Station Unit No. 2 – 16 day outage

North Omaha Unit No. 1 – 30 day outage

North Omaha Unit No. 3 – 30 day outage

North Omaha Unit No. 5 – 23 day outage


Mr. Easterlin provided a comparison of Retail Revenue for 2008 through 2010 and a projection for 2011 and 2012 for the retail, commercial, industrial, and government and municipal revenue classes.


Mr. Easterlin reviewed the comparison of Wholesale Revenue for 2008 through 2010 with projections for 2011 and 2012 for Other (off-system sales) and NC2 Participants (cost collection from the participants who receive output from the NC2 unit).     


The last area of revenue that Mr. Easterlin talked about was the comparison of Other Operating and Non-Operating Income for the same time period. He indicated that the biggest change is the reduction in Interest Income.   


Mr. Easterlin reviewed Operation and Maintenance Expenses.  In 2012 the District is projecting  $798.2 million which is $1.9 million less than the 2011 projected amount.  He reviewed the different categories with fuel expense representing the largest portion.    


A comparison of Capital Expenditures, which is where OPPD invests into the business to replace aging infrastructure and also provide for future load growth, was given.  Capital expenditures for 2012 are budgeted at $197.2 million and that compares to $227 million in 2011.  The largest portion is in the T&D category representing 51% of the total. 


Mr. Easterlin discussed the 2012 Large Capital Projects.  Production projects include: 



FCS Extended Power Uprate $15.0 million

Although the EPU has been deferred until 2015; there some processes cannot be stopped and payment will be made for equipment already ordered

FCS NRC Power Reactor Security Requirements $6.0 million

FCS Minor Capital Blanket $4.0 million

NC1 Sorbent Injection $6.0 million


Transmission & Distribution


Transmission & Distribution Improvement Program $23.0 million

Transmission to support wind development $16.0 million

Transmission to support future load growth $10.0 million

Customer Service Projects for Commercial/Industrial Customers $5.0 million


Mr. Easterlin said that the District funds capital projects from two sources:  revenue from rates and issuing debt to pay for a portion of construction costs.  In 2011 we do not anticipate issuing bonds.  In 2012 we anticipated the issuance of $140 million of new revenue bonds in March.  Mr. Easterlin then said that due to favorable market conditions, the District sold $138 million in bonds to pay off the existing bonds on Wednesday, November 16.  The savings will be approximately $11 million in interest.  Due to the sale on the 16th, OPPD issued the $140 million that was forecasted for 2012.       


Mr. Easterlin reviewed Net Income and in 2012 we are projecting $43 million.  This includes $13 million from the revenue we project to operate the system and the $30 transfer from the Debt Retirement Account (which is the use of our reserves).  Mr. Easterlin pointed out that if we did not

use the reserves, $13 million worth of net income is a very slim amount.  Projected net income for 2011 is $62 million with $17 million transferred from the Debt Retirement Account.


Mr. Easterlin discussed Debt Retirement and Rate Stabilization Account balances by stating that in 2011 we are projecting $41 million in the Debt Retirement Account.  We will use $30 million of that in 2012 which leaves a balance of $11 million at the end of 2012.  We expect to have $11 million back into the fund (part of the 3-year funding) and at the end of 2012 we will be at $22 million.   


Mr. Easterlin indicated that the District’s capital structure and how the investments are funded is about 50% funded with debt and 50% funded with equity. 


Mr. Easterlin discussed Coverage Ratios which is important to the financial community, such as bond holders and people who loan us money.  He noted that the utilities are the second most capital intensive industry in the country, behind only the railroads, and maintaining our current credit rating is essential to continue to be able to attract capital at favorable rates. 


A comparison of Days Cash on Hand was given.  He said that our internal target is to maintain a cash-on-hand balance of at least 100 days, up from 85 days in previous years.  This level is prudent in order for us to be able to manage around potential disruptions in the financial markets so that we can be assured of being able to raise adequate capital at competitive rates.


Mr. Easterlin indicated a consultant has been retained, R.W. Beck, who provides an independent review and assessment of our budget and noted the areas included in the review.  He said that OPPD expects the report to be issued to the Board of Directors prior to asking for approval of the budget in December.


Mr. Easterlin concluded the Preliminary 2012 Corporate Operating and Capital Expenditure Plan presentation by saying the Plan balances high customer satisfaction, competitive rates, and financial stability.  It also covers continuous improvement opportunities such as managing O&M expenditures, prioritizing and managing capital investments, and risk management.


Mr. Easterlin continued with the 2012 Electric Service Rate Adjustments and Fuel and Purchased Power presentation. 


Assumptions included the rate adjustments are based on the 2012 Preliminary Corporate Operating Plan, excluding Offutt costs and revenues, and is reviewed by the District’s rate consultant, CH2M HILL.


Mr. Easterlin reviewed 2012 Projected Retail Revenue Requirements which is the cost of operating the system.


Retail Revenue Requirements

            O&M                                                   $  736

            Debt Service                                       $  119

            Payments in Lieu of Taxes                  $    30

            Capital Improvement Fund                 $  126

            FPPA Under Recovery from

              Prior Year                                          $    12


Gross Revenue Requirement                          $1,023



Revenue Credits

            Off System Sales                                $  101

            Other Revenue                                    $    34

            Debt Retirement account                    $    30


Total Revenue Credits                                                $  165


Net Retail Revenue Requirements               $  858



He also reviewed the Proposed Rate Adjustment:


                                                                        Millions           % Increase


2012 Projected Revenue Requirements          $  858


2012 Revenue with Current Rates                  $  810


            Difference – Necessary Increase        $    48              5.9%


FPPA Increase                                                            $    11              1.4%


General Rate Increase                                     $    37              4.5%



Mr. Easterlin then reviewed the General Cost Drivers for the rate increase.


Increased Environmental Regulations

Reduced Off-System Sales Margin - $16.8 million


Increased Cost Trends/Reduced Market Expectations

Health Care - $13.0 million

Retirement Plan - $3.4 million


Increased Retail Revenue and Miscellaneous

Payment in Lieu of Taxes - $2.2 million

Other - $1.1 million


Mr. Easterlin said that this morning we are reviewing 2010 costs and comparing to 2012 costs because that is the last time we had a general rate increase.  When OPPD’s costs increase faster than sales, we have rate pressure, and that is what we are currently experiencing.  Based on higher costs, OPPD has identified  the following FPPA Rate Increase Drivers:  Increased costs due to CSAPR requirements, Increased wind purchased, Increased generation at Fort Calhoun, Lower fuel costs, and Recovery of 2011 Fort Calhoun replacement power.  The FPPA occurs annually and considers cost changes from 2011 to 2012 including the estimated under recovery of 2011 fuel and purchased power expense.


Mr. Easterlin talked about actions that OPPD is taking to reduce rate adjustments.  These include:  sale of excess energy, use of debt retirement account, and three-year amortization of flood-related FPPA expenses


He also discussed the Estimated Monthly Customer Impact in each class with an overall average increase of 5.9%. 


A retail rate comparison was given that indicated OPPD rates are 6.3% lower than the regional average at 7.3 cents/kWh and OPPD rates are 24.3% below the national average of 10.17 cents/kWh. 


Mr. Easterlin then reviewed two miscellaneous service charge adjustments that are included in the electric service rate adjustment:  add new LED street lighting methods and miscellaneous other charges. 


The CH2M HILL review will include review and comment on the District’s cost of service study and rate proposal, advise the District on industry accepted methods for allocating costs to various classes of customers as a basis for reflecting costs in District’s rates, critical review of rate changes proposed by the District, and advise the Board as to whether the proposed changes are fair, reasonable, and non-discriminatory.

Mr. Easterlin provided a summary slide that showed the 2012 rate proposal:


Increase general rates by 4.5% ($36.5 million)

Increase FPPA by 1.4% ($11.0 million)

Total increase of 5.9% ($47.5 million)

Miscellaneous service charge adjustments

Retail cents/kWh – regional and national price differences                              


Mr. Easterlin provided a chart that listed Annual Average Retail Rates which displayed discounted rates for the CPI from 1980 through 2011. 


Mr. Easterlin ended the presentation by displaying the schedule for public notice and comment process.

                         The next item of business was the opportunity for those in attendance to address the Board on any items of District concern.


                         Mr. Cory Hoover of 5020 S. 80th Street, Omaha, NE, addressed the Board to voice his concerns over the proposed rate increase and how adversely it will affect customers on fixed incomes.  Chairman Green indicated that an option may be to contact the Energy Assistance Program individuals.

                          Mr. Patrick Rinn, 13871 Sprague Street, Omaha, NE, asked the Board about a lobbyist to address the EPA mandates, his concern that the Fort Calhoun Station was built on a flood plain, and his concerns over the proposed rate increase.  Chairman Green indicated OPPD does have a governmental group that is addressing the EPA mandates with our congressional delegation.   

                            Mr. Duane Hovorka, 409 310 Street, Elmwood, NE, asked the Board to look at large scale energy efficiency and demand-side management projects as a low-cost alternative to upgrading the power plants to meet the new EPA requirements and to help keep rates lower in the future. 

                         Mr. Mark Welsch, of 5611 Howard Street, Omaha, NE, thanked the Board for continued work with wind and solar power projects and also wants the Board to increase the the speed and scope for this type of generation.  He also wants the Board to consider additional flood protection.  Chairman Green said that OPPD is looking at additional requirements that are a result of the Japan’s Fukushima event.


                           Mr. Rex Knutson, of 700 S. 35th Avenue, Omaha, NE asked John Green to read his comment to the Board.  Mr. Knutson wanted the Board to be advised that piling more greed on the poor people is immoral and un-American.


                          Ms. Erin Porterfield, of 5014 Burt Street, Omaha, NE, who represents the Metro Area Continuum of Care for the Homeless advised the Board that while she regrets the necessity to increase rates, this places an increased financial burden on already stressed low-income people.  She also recognized the efforts of OPPD to offset the impact of a housing emergency by working with customers through its Energy Assistance Program.


                          Mr. Joseph Opocensky, of 6629 S. 91st  Street, Omaha, NE addressed the Board to voice his concerns about not having COLA increases for several years for OPPD retirees.  Chairman Green indicated an individual from OPPD would get back to him.   


                          There being no further business, the meeting adjourned at 11:25 a.m.





________________________________                    _______________________________

E. E. Easterlin                                                             D. S. Emerson            

Assistant Secretary                                                     Corporate Secretary




Board of Directors

bullet Board Mtg Schedule
bullet Board Mtg Minutes
bullet Committee Mtg Material
bullet Rules for Public Participation
bullet Approved Board of Directors Redistricting
bullet Preliminary 2014 Corporate Operating Plan
bullet Sustainablity Update March 20 2014
bullet Energy Assistance Program (EAP)/Common Fund

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