The Municipal Energy Agency of Nebraska (MEAN) Board of Directors at its board meeting in January approved an overall five percent rate adjustment as part of its total revenue requirement for fiscal year 2024-25 for wholesale power supply participants. It marks just the second increase in MEAN’s rates in the past eight years.
The overall five percent rate adjustment includes a seven percent increase in MEAN’s energy rates. There was no rate adjustment to MEAN’s overall Fixed Cost Recovery Charge that is allocated to participants.
The approved rate adjustment is to address increasing power market activity costs resulting in higher electric energy costs.
MEAN buys and sells energy into two Regional Transmission Organization (RTOs) wholesale power markets, which sets wholesale electricity prices. Market prices for electricity decreased overall during the year, which is beneficial to MEAN when buying energy from the markets. However, decreased market prices also result in MEAN receiving less revenue for electric generation it sells into the markets. Overall, power market activity resulted in higher costs, increasing MEAN’s targeted revenue requirement.
The MEAN Board annually reviews rates and charges to ensure operating revenues are sufficient to pay operating expenses and to maintain financial viability in accordance with policies approved by the Board.
Explanation of MEAN’s Rate Components
The main components in MEAN’s rate structure for collecting revenue include MEAN’s energy rates for long-term (Schedule M) and shorter-term (Schedule K and K-1) participants and the fixed cost recovery charge. MEAN’s budget year runs April 1-Mar 31.
Energy Rates
MEAN’s energy rates, which also include its green energy charge rate, are used to collect revenue from energy sales to its wholesale power participants. This source of revenue makes up 66 percent of MEAN’s targeted revenue requirement. Energy sales are highly variable as usage depends on consumer demand, which varies due to weather, time of day and conservation.
Fixed Cost Recovery Charge
The Fixed Cost Recovery Charge is 34 percent of MEAN’s revenue requirement. This charge is allocated to participants based on each participant’s three-year historical average peak electric demand.
The Fixed Cost Recovery Charge allows MEAN to recover certain known fixed costs related to ownership of power resources, power contracts and operations. Accounting for certain known costs helps protect MEAN’s wholesale electric participants from revenue volatility from energy sales caused by unpredictable factors such as weather-related usage fluctuations, unplanned resource outages and fuel costs.
Transmission and Federal Hydro Allocations
Two other primary cost components on MEAN participants’ monthly wholesale electric bill are for transmission and federal hydropower allocations, which are third-party pass-through costs.