Annual Report 2007
Executive Report
Ed Pratt
Chairman of the Board
In 2007 we began to transform Midwest Energy to meet your needs for the next generation.
The signs of change are everywhere. We are part of the magnificent new Smoky Hills
Wind Farm along I-70, acquainting tens of thousands of travelers daily from across
the country with the benefits and beauty of wind energy. We began to build our first
new power plant in a generation, the Goodman Energy Center just northwest of Hays.
We upgraded an existing transmission line between Great Bend and Hays to 230 kV,
the same as our backbone transmission line that leads from Salina to Hays. Over
100 miles of electric lines were rebuilt in northwestern Kansas, while another 1,000
miles were severely damaged in ice storms. We grew our gas business as we provided
more residential customers with a safe alternative to gathering field gas and as
gas irrigation again became competitive with other fuels. But this is not the real
story. Every facet of our business will undergo major change in the next few years.
The Four-Part Problem of Power Supply
Midwest Energy provides you with safe, reliable, environmentally responsible and
cost effective electricity.
Earnie Lehman
President and General Manager We do this in four ways. Most electricity
comes from power plants that run around the clock. These power plants burn coal
because of its relatively low cost. On hot days and for short-term needs (a few
hours or days at a time), we rely on gas-fired power plants. It costs a lot to run
such plants, particularly with natural gas costing anywhere from $8 to $10 per MMBtu,
several times the cost of coal. Our third and increasingly important source is renewable
energy provided by wind power whenever the wind blows. And finally, we work on your
side of the meter to help you conserve energy.
We're pleased to report Midwest Energy is well-positioned to meet your needs
for peaking energy, renewable energy and energy conservation. The Goodman Energy
Center will be completed in two phases in June and September of 2008. We currently
have enough wind energy to meet 8% of our peak demand (if the wind is blowing hard
enough) and by year end we will have 16% wind energy. This puts Midwest Energy in
the lead among all Kansas utilities. Our How$mart program is the first in Kansas
and among the first in the nation to allow you to pay for energy saving investments
in your home or business by capturing part of the savings on your utility bill.
Unfortunately the story is not so good with respect to around the clock energy from
what we call "baseload" power plants. Our contracts with Westar Energy
in Topeka that provide us with this energy are expiring. We plan to replace those
contracts and meet some of our growing needs with energy from one of Sunflower Electric's
new Holcomb units and with a new contract that will allow us continued access to
Westar's older, less-efficient coal plants. The arbitrary denial of an air permit
for Holcomb has cost us valuable time and will ultimately cost you money as we scramble
to find other sources of energy while the future of Holcomb is debated. The longer
we are unable to renew our access to baseload energy, the higher your bills will
be, tomorrow and far into the future.
Wires and Pipes
These are the backbone of our business. We are making unprecedented investments
in new and replacement electric transmission and distribution lines. It's partly
driven by the devastating ice storms of the last few years, partly by growth and
partly by the advanced age of many of our facilities. Investments in transmission
lines will, along with the Goodman Energy Center, improve the reliability of service
to customers in much of our service territory. On the other hand, the fire last
summer in the switchgear of our old Hays power plant created significant inconveniences
for many customers and signaled the need for largescale improvements in Hays as
we are doing in Oakley, in areas acquired from Westar Energy and other locations.
Customer Service
We are improving our ability to maintain service in times of natural or other disasters
through improvements in our communications and computer systems. We're improving
our ability to pinpoint outages and restore service faster. We're providing
employees with tools to help them do their jobs more easily and more quickly. We're
upgrading our training and safety programs. We're working to bring you more
information and make it easier for you to do business with us on the internet and
in person.
Employees
Midwest Energy employees mirror the area we serve. As a group we're getting
older, almost 46 years old now, on average. Many of us will retire over the next
five to ten years. That's why we have more apprentice workers now than at any
time in the Company's history. It's why supervisors encourage and assist
employees in developing their own capabilities and careers. It's why we are
reaching deeper into our communities to hang on to our youth and to get them excited
about some of the best jobs central and western Kansas has to offer. We're excited
about the future, about the opportunities you continue to give us in "Making
Energy Work for You".