April 3, 2008
Have You Seen An Unexpected Change In The Amount Of Your Power Bill Lately?

Picture provided by Lincoln County Power District View of gnerators on the Nevada side ofthe Hoover Dam.

By Dave Maxwell, Staff Writer

The cause could be a change in the amount of energy you normally use, or it could be from the Purchased Power Adjustment Clause on your bill.

Most of our customers are aware that the vast majority of the electric power used in Lincoln County comes from Hoover Dam. Through the availability of this low cost hydroelectric power and the efficient management of our electric system, all of us in Lincoln County have enjoyed some of the lowest rates for electric service in Nevada for many years.

Unfortunately some of our customers have recently noticed a large increase in their monthly bill for service and have been wondering why. This increase is not the result of any rate change here at the Power District. But it may be the result of the Purchased Power Adjustment Clause. The Purchase Power Adjustment Clause was incorporated in our rates back in October of 2005 to cover the cost of buying the power used in Lincoln County when there isn’t enough power coming from Hoover Dam.

For over seventy years, hydroelectric power from Hoover Dam has been meeting our needs. In recent times there has only been one month in which Hoover Dam power was not sufficient to supply all the needs of Lincoln County. That all changed in the fall of 2004. During the fall of 2004 the effects of the drought in the lower Colorado River basin began to impact power production at Hoover Dam. In order to maintain the lakes above minimum levels, the Bureau of Reclamation, the federal agency that operates the dams on the river, began to reduce water releases from Lake Powell and Lake Mead. By reducing water releases, the amount of hydroelectric power generated was also cut.

From October 2004 through the end of March of 2005, Hoover Dam power was not sufficient to meet our needs. During this period we had to purchase a substantial quantity of supplemental power from Nevada Power Company and other sources at a cost of $292,121. Given our rates for electric service are based on the cost of Hoover Dam power, the extra cost for this supplemental power caused us to post an operating loss for the fiscal year. To stem the losses, that September the Lincoln County Power District No. 1 adopted a Purchased Power Adjustment Clause. Before adopting the Purchased Power Adjustment Clause, we under took a detailed study and conducted a public process to seek input from our customers including notices, advertisements and a public hearing. The Purchased Power Adjustment Clause became effective on October 1, 2005.

The purpose of the Purchased Power Adjustment Clause is to allow the Power District to recover the extra cost of purchasing supplemental power from Nevada Power Company when power from Hoover Dam is not sufficient to meet all the needs in Lincoln County. In order to provide funding for operation and maintenance of Hoover Dam, all contracts for federal hydropower require payment regardless of whether power is produced at the Dam or not. Therefore, in months when power production at the Dam is reduced given limited water flow, we get a bill for Hoover Dam power that we did not receive and we get a bill from Nevada Power Company for the power we had to purchase from them to replace the Hoover Dam power. In essence, when Hoover Dam power production is reduced there is a double impact.

The drought conditions that began in the fall of 2004 have not only persisted through to current times, they have gotten worse. The impact on hydroelectric generation is felt most during the winter seasons. In the winter 2005/06 we had to purchase 4,852,747 kWh of supplemental power. During the winter 2006/07 the amount of supplemental power we purchased increased to 6,341,595 kWh, and this winter the amount we have already purchased has reached 7,901,198 kWh.

The worst month by far since the drought began has been this past December. During this month alone the Power District had to purchase $99,322.86 worth of supplemental power. Under the Purchased Power Adjustment Clause, each of the Power District’s customers was charged for their proportionate share of this supplemental power bill. In other words, we purchased the supplemental power in December of 2006 to meet our customers’ needs, we received the bill from Nevada Power Company for this energy in January of 2008, and we billed each customer for his or her share based upon their December usage in February 2008.

If you are a direct customer of the Power District, the amount you are charged for the Purchased Power Adjustment Clause shows up on your bill as a specific line item. Look for the item called “PPAC”. Next to it you will find the rate, the month for which it is being charged, and the amount. If you were wondering why your February bill was so high, look to see if this was the reason.

Many people living in Lincoln County are not directly served by the Power District, and get their bill for electric service from Pioche Public Utilities, the City of Caliente, Penoyer Valley Electric Cooperative, or Alamo Power District. These four other utilities providing retail electric service in Lincoln County purchase their power from the Power District. As a result each is charged a Purchased Power Adjustment Clause amount by the Power District. These utilities all have different ways of collecting their amount of the Purchased Power Adjustment Clause from their customers. For customers served directly by Pioche Public Utilities, the amount you are charged for the Purchased Power Adjustment Clause shows up as a line item called “SUPP PWR” on your bill. For customers of the City of Caliente, the amount you are charged is listed as the “LC Surcharge” on your bill, and for customers of Penoyer Valley Electric the amount is identified as “Supplemental Power.” Alamo Power District does not charge a separate amount for the Purchased Power Adjustment Clause and rolls these costs into its rate for electric energy.

Since the Purchased Power Adjustment Clause amount we billed in February was the largest in the past three years, our telephones have been ringing with questions from customers. Hopefully, we are able to explain the need for and how the Purchased Power Adjustment Clause is calculated. Unfortunately, what we can’t promise is that it won’t happen again. Although we have had good precipitation this winter and snow pack in the basin is slightly above normal, Lake Mead is still only at 50% of its capacity. It is highly likely that next winter, we will again have to implement the Purchased Power Adjustment Clause. Anything you can do to reduce energy consumption during the winter months will have a direct impact on the amount of the Purchased Power Adjustment Clause. We encourage our customers to take advantage of energy conservation programs available from the Power District including our compact fluorescent lighting program and our heat pump rebate program. In the meantime, if you have questions regarding the Purchased Power Adjustment Clause or what you can do to keep your winter usage down, please feel free to call.