Current News > Letter to Editors
Two weeks ago the Omaha Public Power District (OPPD) recommended that the Fort Calhoun Nuclear Power Station be shut down by the end of 2016. OPPD management recommended this because the plant is too costly to operate; annually losing money on the energy it produced. Keeping the plant open would mean a rate increase to customers. Northeast Power (Northeast) appreciates that this is an extremely difficult decision because it affects loyal, hardworking employees of OPPD, who are Northeast's own employees' brethren. Northeast also appreciates OPPD's willingness to make this hard decision for the benefit of its ratepayers, who are, after all, the "public" in public power.
This probably was not a sudden jolt to OPPD’s management. Nuclear plants all over the country have steadily been closing as their electric utility-owners cannot afford to run them. Once considered the least cost way to produce electricity, when they were built in the 1970s, nuclear plants have fallen victim to competition as federal policy pushed utility companies to join competitive regional markets operated by federally-chartered grid coordinators called Regional Transmission Organizations or RTOs.
RTOs stripped away the notion that a utility company like OPPD or NPPD own generating plants to provide energy to only their customers. These RTO controlled energy markets have the effect of "wringing the fat" out of production costs by making each power plant compete directly with every other power plant. The RTO in the Great Plains area (from Texas to Canada) is called the Southwest Power Pool or SPP. Nuclear Power Plants and many coal fired plants can no longer compete on price during many hours when consumers are not using much energy and demand/prices are low. This can be hard on the owners of noncompetitive plants, but it is good for the ratepayers and that is the goal.
The SPP only pays a power plant to run for specific hour(s) it is needed. Traditional utilities like OPPD and NPPD bid in the lowest price they can. But the competition does not stop there. Merchant producers of electricity with plants running on low priced natural gas can ramp their production up and down to match consumer demand thereby avoiding losing money in the same way as a nuclear or coal fired plant designed to run all hours at near maximum output. And wind energy and other alternative forms of generation also compete in these markets, further benefitting ratepayers.
Not all nuclear and coal fired plants will be forced out of business. For a big base load generating plant to survive in this new era of competition, the plant must support reliability over a large load area and be efficient to produce at the lowest cost. Profits are now razor thin, as they should be in a competitive commodity market.
There are frequent news reports of coal and nuclear plants no longer being financially viable in the market environment. Filling the gap seems to be new investments in wind power, which we believe, will eventually take up much of the slack as older coal and nuclear units retire. Wind power holds a lot of promise for new investment, economic development and property tax relief in our service area and throughout Nebraska as utilities across 16 States look for new low-cost sources of energy from wind. Harnessing the power of wind is one of the lowest cost ways to produce electric energy and is easily paired with efficient gas fired power plants that can ramp up when the wind is not blowing.
The coming years will see continual change in how power is produced, priced and consumed. To remain viable and provide rate stability for customers in the uncertain future, a utility will need to focus on efficiency and cost control in its operations. This would include things like reducing debt obligations, using competitive bidding to keep costs down, and doing more work with fewer employees. These are the kinds of things that we, at Northeast, have committed to doing to benefit our customers.
Don Larsen, President