NPPD discount for long-term power contracts upheld by Nebraska Supreme Court

June 16, 2018 GMT

The Nebraska Public Power District was well within its rights to offer local and regional wholesale power customers discounts off of shared labor costs for signing long-term contracts, the Nebraska Supreme Court ruled Friday.

The Columbus-based power producer also had the authority to require customers who made no such commitment to pay the same labor costs over a shorter time, the court decided in upholding an arbitrator’s ruling.

Wayne, Wakefield, South Sioux City, Beatrice, Scribner, Valentine and the Village of Walthill joined Northeast Nebraska Public Power District’s lawsuit alleging that NPPD had violated their contracts and treated them inequitably, punishing them for considering other power providers.

The NPPD rate plan for 2016 set out to increase rates 0.6 percent for customers who signed long-term contracts and 3.8 percent for those who didn’t.

The litigants argued that NPPD was illegally and unfairly pressuring them and others to sign long-term contracts to purchase power. The arbitrator disagreed, forcing the appeal to the state’s high court.

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NPPD had presented contracts from 2002 that said it could set rates to cover costs including restoring “post-retirement benefit reserves.” NPPD knew it needed to cover roughly $150 million in unfunded retiree health costs.

The utility argued that it could offer discounts to longer-term customers because they were committing to the utility’s financial health and could spread their repayment of those charges over a longer period of time.

NPPD was trying to overcome uncertainty at the time about the stability of its power generating future by showing bond raters that it could move the majority of its customers into new long-term deals.

The state’s high court sided with NPPD, saying, “We conclude that NPPD’s rate structure for 2016 and 2017 was fair, reasonable, and non-discriminatory.”

Jeanne Schieffer, NPPD spokeswoman, said the utility was pleased the court saw evidence of good faith and fair dealing with its partners under contract.

Representatives with Northeast Nebraska Public Power referred questions to their attorney. He did not immediately return calls seeking comment.