May 21--COLUMBUS -- The Loup Public Power District Board of Directors authorized President/CEO Neal Suess to send a letter to the Nebraska Department of Natural Resources requesting the department administer the district's water right for the summer of 2009.

Suess recommended the directors approve a letter being sent to the DNR

"In order to move forward and to continue to protect the district's water right on the Loup River, management recommends the board approve a letter asking the DNR to administer the district's water right on the Loup River." Suess told the directors. "This is the same as making a call on the river."

Suess said the need for an annual "call on the river" was discussed a year ago and gave a brief history of the issue.

He said that upstream irrigators with newer water rights than the district must have a subordination agreement with the Loup Power in order to be able to continue using water from the river and pay the district when a call on the river by the power district is in effect.

"Neither the district, nor the DNR is aware of any irrigation user who has not entered into a subordination agreement with us," Suess said. "With a call on the river, any upstream users who do not have a subordination agreement could be subject to cut-off with the district's call on the Loup River. Management believes that all upstream irrigation users with a water right newer than the district's have subordination agreements with the district."

Suess reminded the directors the district made an initial call on the river in 1955 to protect its water rights. He said the call had remained in place through 2007 because the DNR had considered it a continuous call since 1955.

During discussions with the DNR in early 2008, the state had requested the district to make annual calls on the Loup River in order to protect its water right. The directors approved the first of the annual letters to the DNR at the April 2008 meeting.

"District staff continues to monitor new irrigation users upstream of the diversion structure in order to offer subordination agreements to those new irrigation users," Suess said.

In other business, the board revised its large power-2 rate schedule which it developed for Archer Daniels Midland and its current power load. The board also adopted two new large power (LP) rate schedules as a means of providing a rate structure for ADM's current expansion and other large power customers that may locate in the district in the future.

The current rate structure for the LP-2 rate schedule takes the district's wholesale rates from Nebraska Public Power District and passes those costs onto the retail customer with a mark-up of 4 percent, similar to the margin the district has on other rates.

Suess said NPPD has worked several years to develop rates for wholesale customers that have retail customers, such as ADM, that add a large generation facility.

"In order to accommodate this new type of customer, NPPD has developed special purchase products (SPP) to their wholesale rate tariffs in order to meet this customer-owned generation need," Suess said.

He said the buy/sell arrangement is similar to the agreement Loup has with NPPD regarding its hydrogeneration output. Loup sells its generated power to NPPD, which adds it to its generation mix, and then NPPD sells Loup back 100 percent of the power it sells to its retail customers.

The standby arrangement is much more complicated and requires a closely monitored coordination of effort between ADM, Loup and NPPD in order to make it work.

"Under the stand-by generation arrangement, the retail customer would use its generation to meet all or part of its requirements," Suess said. "The remaining power need and backup service for when the customer's generation facility is off-line would be purchased from the wholesale customer.

"This requires a significant amount of coordination between the retail customer, the wholesale customer and NPPD."

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