Annual Report 2007
Major 2007 Accomplishments
Storms Hit Area
A monster snow and ice storm hit western Kansas in January and Midwest Energy began the process of restoring power to as many as 10,000 customers as
quickly as conditions would permit.
The Cooperative applied for reimbursement from Federal and State Emergency Management Agencies to help pay for reconstruction of facilities devastated
by the storm. This was the second of three FEMA projects 
Midwest Energy has in process. The first was in 2005, and the Company received $17 million in assistance.
The January 2007 storm reconstruction will cost $84 million, and the May 2007 Greensburg tornado caused damage to Midwest Energy facilities of nearly five
million dollars. While the costs and inconvenience of service restoration is a burden on customers, reconstruction will add to service reliability and customer
satisfaction in the years ahead.
December 2007 brought another round of ice and snow storms, this time in the southeastern portion of the service territory. At the height of the storm,
approximately 9,000 customers were without electricity. Midwest Energy crews, as well as crews from neighboring cooperatives and electrical contractors from
several states worked for over a week to repair the damage. At one point, over 430 linemen and support personnel worked to repair 1500 damaged or downed
poles, replace over 2000 cross arms and replace 200,000 feet of wire. This latest round of winter weather has been estimated to cost at least another $39 million.
Throughout all this, Midwest Energy employees showed their dedication and expertise, while working quickly and safely to restore service.
Customer Service
On a more positive note, the Atwood Chamber of Commerce
recognized Midwest Energy as Business of the Year in 2007. The company
also received the Northwest Kansas Business Achievement Award from the
Kansas Department of Commerce.
The Company added to its menu of energy efficiency services for
customers early in the year with the How$martSM Program. This pilot
program targets rental property as well as homeowners and provides a
funding source for these customers to upgrade heating and air equipment,
insulation and other energy efficiency measures. The funds are paid back
with a surcharge on the customer's utility bill that is less than the energy
savings. If the customer moves or sells the property, the How$martSM
surcharge repayment is assumed by the next customer who benefits from the
efficiency improvements.
The Community Fund continued its record of assisting Midwest Energy
communities. The program provides monetary assistance to educational,
civic and nonprofit agencies in the service territory. Advisory committees,
comprised of customers throughout 41 counties, approved donations to 290
organizations or projects. These donations totaled over $88,000.
The Midwest Customers Care program, initiated last year to help deserving
customers pay winter heating bills, remained viable and growing. The first
disbursements through the Salvation Army were made in January of 2008.
Reliability
The company expanded its ability to deliver energy in 2007, by
upgrading the 115kV line from Hays to Great Bend to 230kV. The project
cost $6 million and included installing a new transformer in the South Hays
substation. More construction work to address transmission work, including
installing a new substation for the Smoky Hills Wind Farm, was completed
by the end of the year.
Another major project was begun in May, with the groundbreaking
of the Goodman Energy Center. This natural gas fired power plant costs
$62 million and is scheduled for completion in 2008. It will provide 75
megawatts of peaking electric capacity as well as additional reliability
in case of more storm caused outages. Midwest Energy also signed a
contract to take 25 megawatts of wind energy from the Smoky Hills Wind
Farm in Ellsworth and Lincoln counties. This contract will provide the
company with some renewable power within our energy portfolio.
Natural gas crews were kept busy installing several miles of line, one
of the most notable was improving and extending the main into Catherine.
Crews replaced several aging lines throughout the service territory.
Future Challenges
Rate Increase
Midwest Energy announced in December that it filed a request with the Kansas
Corporation Commission to increase its electric revenue by $10 million. The action
will affect all Midwest Energy electric customers. If approved, the request would
result in an average increase of 10.5% in customers' monthly bills. Since the last
rate case in early 2003, the Cooperative has made major investments in upgrading
service to customers. Base rates have remained essentially unchanged since 1989.
If approved, an average residential customer's bill would increase by approximately
$13.01 per month. There are several reasons for the increase request, including the
damage from the recent storms. Additionally, extraordinary events such as the
2005 Gulf Coast hurricanes and explosive economic growth in markets such as
China have resulted in materials cost increases well above the cost of inflation.
SHARP Award
The company and its employees earned the Safety and Health Achievement
Recognition Program award from the Occupational Safety and Health
Administration for five more work locations, making a total of 26 now in the
program. Acceptance into SHARP identifies Midwest Energy as a model for
worksite safety and health. This is a very prestigious award, and reinforces the
fact that employees continue to embrace the need to promote a culture of safety
companywide. Our employees will continue to work to keep electric and natural
gas service both reliable and affordably priced, while reinvesting in the system
that delivers these services to customers throughout central and western Kansas.
Aging Workforce
It is widely known that aging of the working population will provide
many challenges in the future, and there are many potential implications this
trend holds for Midwest Energy. The possible workforce scenarios predicted
to play out during the next five to 10 years range from severe labor shortages
because of baby boomer retirements to minimal workforce disruptions as these
employees continue working past traditional retirement age.
Midwest Energy recognizes its longer-term business strategies could
be compromised by a shortage of available talent and is taking steps to
find qualified craft workers and professionals needed in the next few years.
However, today's realities raise important issues about what it will take to meet
critical business needs for workers, skills and knowledge in the future.
The Company will need to consider the full range of
economic implications associated with the aging of the
workforce, taking into account both cost and productivity
factors. What is needed is a new approach to managing the
changing demographics of the workforce, and Midwest Energy
is working to achieve that goal. Whether providing scholarships
at local technical schools or assisting older workers in their
endeavors to stay productive in the workforce, the Company
is committed to providing the necessary skills and career
development path to maintain a qualified, knowledgeable
employee base in the future.
Transmission and Generation
As the Company looks to the challenges of providing reliable, affordable
electricity to all customers, several transmission and generation issues will
affect these goals the next several years. It is projected that demand for
electricity will increase 20 percent in the 
United States the next decade. To
meet this challenge, new transmission infrastructure, as well as new base load
generation will be necessary.
By developing more wind generation and other sources of renewable
energy, new transmission lines will be necessary to realize the value of these
resources and connect them to the electric grid. There is talk of dramatic change in
the industry with respect to carbon regulation and global warming. As it becomes
more difficult to build base load coal plants, it will also become more difficult to
ensure reliability and affordability for Midwest Energy customers.
Distributed generation, storage and hybrid vehicles all will pose huge
challenges to the national electrical grid and raise the spectre of higher costs
for Midwest Energy and its customers. The Southwest Power Pool (SPP), of which
Midwest Energy is a member, is a Regional Transmission Organization, mandated
by the Federal Energy Regulatory Commission to ensure reliable supplies of
power, adequate transmission infrastructure, and competitive wholesale prices of
electricity. SPP manages the electric grid for all or part of seven states: Arkansas,
Kansas, Louisiana, Missouri, New Mexico, Oklahoma, and Texas. Recently, SPP
identified approximately $2.2 billion of transmission network upgrades necessary
in the next decade. Midwest Energy will be required to participate in a portion of
these upgrades and must budget accordingly.
Another challenge is the availability of affordable base load generation
capacity. Securing contracts to replace those that expire in the next few years
will be a challenge. However, without enough transmission capacity, even when
generating capacity is secured, there will be an even greater
challenge to deliver that energy to local customers.