Negotiations Stall Between ERPPD And City Of Neligh

After months of communication, the City of Neligh and Elkhorn Rural Public Power District took a step closer to shifting the power supply within the recently annexed areas.

While the two didn’t reach a settlement on Wednesday, they do have a firm timeline for closure. On Wednesday morning, ERPPD received an offer from the City of Neligh to purchase the infrastructure of the recently annexed area, along with a severance package for lost customers. 

Neligh City Attorney Jim McNally said ERPPD declined the City’s offer on Wednesday. Both parties will now present their case to the Nebraska Power Review Board on Friday morning in Lincoln with a final decision on what Neligh will pay ERPPD expected either in February or March. 

“The Power Review Board will set the values,” McNally said. “After the hearing on Friday, they will take it under advisement and give both attorneys the right to file a legal brief in regard to the evidence that has been presented. It normally takes at least 30 days after those briefs have been filed for a decision to be made.”

How Did We Get Here?
When the City of Neligh finalized annexation July 15, 2015, with the areas on the west and east sides of Neligh, the City became eligible to serve that area with power and water, should the City so choose.

The City of Neligh then had one year after annexation was complete to file its plan, which it did on July 13, 2016. 

“According to statute, once a city annexes an area, they have an absolute right to serve the area,” McNally said. “But before they consume that right, they have to pay for the facilities constructed in that area.”

Per the application, Neligh plans to serve the annexed area with power, although much of the west area annexed of was already being served by the City. Among those that would be transferred to City power are Farmers Pride Co-op, Green Line Equipment and Reinke’s Farm and City Service. Bomgaars has been served by City power since 1980.

What Is Being Negotiated?
Neligh is required to purchase the infrastructure in the annexed area, such as poles, wiring and transformers, along with paying ERPPD 2.5 times one year’s income they receive from that area as liquidating damages.

While the actual cost of the infrastructure in the newly annexed area is not seriously in dispute between the two parties, there are two issues that they have not agreed upon. That’s why the Power Review Board will serve a mediator role on Friday. 

The first issue in dispute is ERPPD’s substation located on east edge of the annexed area. ERPPD argues it cannot fully utilize that substation since Neligh will be taking over many of those customers. ERPPD is asking the city to compensate it for a portion of the substation.

However, Neligh argues that’s not provided for in the statute.

The second issue in dispute involves the payment for lost customers. While Neligh is supposed to pay 2.5 times one year’s lost income, the parties have not agreed on who the customers are that would be lost since Neligh has served some of that area for years, including Bomgaars.

Negotiations End
In a special meeting on Tuesday night, which included an updated agenda sent to media Monday morning, the City of Neligh authorized McNally to submit an offer to ERPPD in hopes of reaching a settlement prior to Friday’s hearing.

That offer was given to ERPPD’s attorney, who presented it to the ERPPD board of directors on Wednesday. The offer was denied, McNally said.

Also at Tuesday’s meeting, the City Council authorized McNally to negotiate with MEAN for additional power capacity, if more capacity is necessary with the additional power customers.

In order to serve the newly annexed area, the City must have at least 1 megawatt of additional power. The City has repeatedly said it can meet that standard; however, it is now required to verify the capacity.

McNally said the City Council chose to be pro-active with the capacity and gave him the authority to secure it, if necessary.

“On the outside chance that we’re short, we thought we’d better have authority to secure additional capacity. MEAN has offered to give us that additional capacity if we need it, but I don’t think we will need it,” McNally said. ​

Next Step
The Nebraska Power Review Board will meet on Friday, Jan. 27, at 9 a.m. in Lincoln. The sixth item on their agenda is to "consider whether the Board will take preliminary action on application SAA 400-16-A. This is an application filed by the City of Neligh to transfer retail service area and the resulting customers from Elkhorn Rural Public Power District to Neligh, and determine the compensation due to Elkhorn RPPD, based on an annexation."