The NIPCO Board of Directors approved a resolution setting NIPCO’s 2024 Wholesale Power Rate at 61.94 m/kWh at its meeting on October 31. This rate reflects a slight increase from the 2023 rate of 60.92 m/kWh.
In her presentation, Jane Scheitler, NIPCO Chief Financial Officer (CFO), attributed current inflationary pressures, rising interest rates on long-term debt and short-term borrowing, and anticipated rate increases from our primary power providers as negative influences on rates moving forward.
NIPCO’s ongoing construction efforts continue to rebuild and upgrade aging facilities, and these costs have been factored into the rate. NIPCO’s original 5-year accelerated construction plan started in 2017 to rebuild approximately 180 miles of transmission line and to upgrade various switches and transmission stations. NIPCO currently has 265 miles of 69kV line, 23 substations, and 64 switch station upgrades that are 50 years old or older, so these upgrades are necessary to keep the system reliable.
This construction will affect NIPCO’s projected depreciation and interest costs. Current inflationary conditions and rising interest rates are causing additional upward pressure on these costs. Looking to the future and anticipated upward pressures on the NIPCO rate, NIPCO’s Renewal & Replacement Plan will slow in 2025.
Approximately 76 percent of NIPCO’s total cost of service includes purchased power costs. While rates from Western Area Power Administration (WAPA) and Basin Electric Power Cooperative are steady for 2024, both WAPA and Basin Electric have signaled additional rate increases to be put in place on January 1, 2025, and subsequent years. Scheitler cautioned: “We need to be prepared that rate increases from our power providers may have a significant effect on our wholesale rate.”
Scheitler detailed other events that may impact rates that are not included in the 10-year forecast. These include:
Federal legislation and regulatory impacts to NIPCO and/or our power providers
An economic downtown or recessionary conditions
Load growth within the NIPCO system to be more or less than forecasted
Market conditions, specifically market prices for natural gas, electricity, and other commodities
Unfavorable changes to the bio-energy industry
Unfavorable weather conditions and
Unfavorable changes to the farm and agricultural economy
Executive Vice President and General Manager Matt Washburn offered some perspective on the increase to the 2024 power rate. “This increase signifies a modest uptick of just under 2 percent. When we look back to 2016, it’s evident that our power rates have remained relatively stable. It’s crucial to contextualize this rate increase against the substantial value that our members have consistently derived from NIPCO. Looking ahead to 2025, we anticipate considerable pressure on our rates due to various factors, including rising interest rates, an impending rate hike from WAPA, and heightened expenses linked to supply chain management,” stated Washburn, “Inflation is beginning to impact our operations here at NIPCO.”
The new rates will be entered into NIPCO’s 2024 Policy and will go into effect on January 1.