Nebraska currently does not allow retail competition among electric suppliers operating in the State. Nebraska's electric utility industry is instead based on a system of retail service areas, where individual electric utilities hold the exclusive right to supply electric service to all customers located within the designated area. The electric utility holding the service area right is then required to establish electric power to all customers requesting service, if it is economically feasible to service and supply the customer.
In 1996, the Nebraska Legislature commissioned a three-year study to review Nebraska's electric system and determine whether retail competition would be beneficial for Nebraska's ratepayers. The study was created through Legislative Resolution 455 (L.R. 455). The study was referred to the Natural Resources Committee. A project manager was retained, and the Committee formed a ten-member Task Force. Assisting the project manager and Task Force was a forty-one member Advisory Group comprised of state senators, electric industry representatives, government officials, consumer advocates, environmental groups, labor organizations, and other groups. The study was separated into two phases. Phase I examined the background and current status of the electric industry in Nebraska. The Final Report of the Phase I Study was released in December 1997. Phase II examined the developments in retail and wholesale competition in the electric industry in the United States, and evaluated the possible effects those developments might have on Nebraska's electric industry. The Final Phase II report contained recommendations concerning what changes may be necessary in Nebraska's industry, and whether retail competition would benefit Nebraska's electric ratepayers.
The Final Report of the Phase II study was released in December 1999. Along with the full report (approximately 250 pages), there is also a Summary of Final Report containing a synopsis of the report and setting out the primary recommendations. The Summary of Final Report is available through the Nebraska Energy Office's website at www.neo.ne.gov/phase1/index.htm (Phase I) and www.neo.ne.gov/LR455Final/final.html (Phase II).
Overall, the report found that at the present time Nebraska has little incentive to institute retail competition due to the low electricity rates enjoyed by Nebraska's ratepayers, and that competition may cause an increase in electric rates for small electricity users such as homeowners, rural residents, and small businesses. However, it acknowledges that ratepayers with high electricity demands, such as industrial sites, may benefit from competition. The report recommends the state take a "conditions certain" approach to deregulation. Under this approach, the state would not set a date by when retail competition will occur in Nebraska. Instead, the state would consider implementing retail competition in Nebraska if and when certain conditions are met that indicate Nebraska would benefit from electric retail competition.
Legislation
During the 2000 session, legislative bill (LB) 901was passed. The pertinent provisions of LB 901 are now codified at Neb. Rev. Stat. section 70-1003(5) to (8). Neb. Rev. Stat. section 70-1001 adopts the "condition certain" approach recommended in the L.R. 455 study, and Neb. Rev. Stat. section 70-1003(5) to (8) authorizes the Power Review Board to prepare a report to be submitted to the Governor and the Legislature concerning the status of certain conditions that may indicate whether retail competition in Nebraska's electric industry would benefit Nebraska's citizens. The conditions are: 1) whether or not a viable regional transmission organization and adequate transmission exist in Nebraska or in a region which includes Nebraska; 2) Whether or not a viable wholesale electricity market exists in a region which includes Nebraska; 3) To what extent retail rates have been unbundled in Nebraska; 4) A comparison of Nebraska's wholesale electricity prices to the prices in the region; and 5) any other information the Board believes to be beneficial to the Governor, the Legislature, and Nebraska's citizens when considering whether retail electric competition would be beneficial, such as, but not limited to, an update on deregulation activities in other states and an update on federal deregulation activities. In addition to the annual report, Neb. Rev. Stat. section 70-1003(5) authorized the Board to conduct one or more public hearings to examine the conditions the conditions that may indicate whether retail competition in Nebraska's electric industry would benefit Nebraska's ratepayers and what steps, if any, should be taken to prepare for retail competition in Nebraska.
Although the report was originally required to be prepared annually, during the 2010 session the Legislature enacted a bill (LB 797) removing the requirement that the report be prepared annually. Likewise, the annual requirement that a hearing be held was removed. Whether the report should be prepared or a hearing held is now left to the Board's discretion.
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