CEO’s Report: Steady rates for 2020

November 5, 2019

We recently traveled to three different customer communities to host our budget meetings, where we announced steady rates for 2020.

It’s been three years since we formally adopted a strategic plan outlining goals for Heartland’s future. Stabilizing rates was arguably our most important goal and as you have heard us say many times over the past year, our goals were largely accomplished with the sale of our share of the Missouri Basin Power Project, namely our 51 MW ownership of Laramie River Station.

The sale of LRS decreased the amount of excess generation in our portfolio and minimized our exposure to the market. It also allowed us to maintain our strong financial metrics.

Divesting of LRS certainly provided the biggest chunk of rate stability for our customers for the next several years. But that doesn’t mean we’ve stopped looking for other ways to reduce costs and increase load.

Coinciding efforts lead to stability

Heartland continually pursues new load, whether it be internal growth in our customer communities or the acquisition of additional customer contracts.

  • Heartland welcomed Valentine, Nebraska as our newest customer in 2019. Heartland currently supplies supplemental power to the city until their contract with NPPD expires at the end of 2021, at which time Heartland will become Valentine’s full-requirements supplier.
  • Our Energy ONE incentive continued to draw in new load in 2019 as we saw the addition of Prairie AquaTech in Volga, SD, Quality Custom Meats in Howard, SD and additional load at LG Everist in Akron, IA.
  • In an effort to reduce costs, Heartland issued $35 million in taxable debt at the end of 2018 for the buyout of a transmission service agreement with Nebraska Public Power District. The agreement was no longer needed after Heartland’s integration into SPP and the buyout allowed for stabilization of otherwise escalating transmission costs, resulting in cash flow savings.
  • Additional savings will come in the form of a re-powering at the Wessington Springs Wind Energy Center, scheduled to be completed late this year. Heartland purchases the entire output of the wind farm from NextEra Energy Resources. They are upgrading the performance of the wind farm which will result in an estimated 14% increase in efficiency. By extending our contract with NextEra, Heartland and our customers will benefit from a price reduction resulting in significant cost savings in 2020 and beyond.
  • Additionally, Heartland will be terminating our SPP Drive Out transmission service which allows us to serve load in the MISO footprint. As we continue to gain knowledge of the markets, we found it would be more cost-effective to procure energy directly in MISO rather than paying for the drive-out service. Heartland will be purchasing a 35 MW block from NextEra Energy to serve MISO customers, beginning in 2020.

Due to these factors and more, Heartland’s rates will remain unchanged in 2020. We continue looking toward a strong future for Heartland and our customers and will continue working to ensure the ongoing success of our customers.

Guest speakers highlight budget meetings

Our budget meetings also included a few guest speakers this year. At the two meetings in South Dakota, we were fortunate to welcome Jodi Endres from Western Area Power Administration.

Endres share WAPA’s objectives of participating in the energy imbalance market including ensuring reliable delivery of hydropower while adjusting to a changing energy mix. She also described some of the innovative ways WAPA is seeking cost savings including unmanned aerial vehicles to inspect equipment and helicopters to replace dampers.

At our budget meeting in New Ulm, Steve Watson of ISG discussed capital improvement planning and why it is essential to municipal systems. Heartland has worked with ISG to procure special pricing for Heartland customers interested in this service.

Looking ahead

As we head into the last two months of 2019, we look forward to finishing the year strong and setting new goals for 2020 and beyond.

We are grateful for our customers and your support in getting to this point. We value our relationships and will continue working every day to fulfill our vision of being a trusted leader and partner of choice while adding value to the communities we serve