midwest report annual 2019...midwest energy’s 2019 experience might appear as a typical year....
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2019ANNUAL REPORT
M I D W E S T
E N E R G Y
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EXECUTIVE REPORT 3
STATEMENT OF OPERATIONS 4
SELECTED COMPARATIVE STATISTICS 4
BALANCE SHEET 5
PATRON’S EQUITY 5
CHARTS 6
BOARD OF DIRECTORS/MANAGEMENT 7
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Midwest Energy’s 2019 experience might appear as a typical year. Financially, the cooperative’s goal for net margins was met. Members’ equity as a percentage of total assets grew to a healthy 38.8 percent. Electric and natural gas rates continued to be competitive with other Kansas utilities, and even the lowest in some categories. Major construction projects totaling $30 million were completed, extending service to new loads and replacing aging infrastructure. Natural gas and electric crews provided excellent service restoration efforts, both in the aftermath of major weather events and individual service interruptions. Perhaps typical, but also laudable.
Such performance rests on sound planning; an exercise filled with more questions than clear answers. Midwest Energy’s Board of Directors and Executive Staff completed a corporate risk assessment and strategic planning exercise early in 2019. From that emerged five strategic priorities on which we build annual business plans and budgets. Our priorities are (1) aged asset replacement, (2) growth, (3) technology applications, (4) regulatory and legislative involvement and (5) change and project management.
Prior planning and persistence resulted in more customer benefits in 2019. When Midwest Energy purchased retail natural gas facilities from KN Energy in April 1998, it undertook a $24 million obligation to buy out a long-term natural gas supply contract that had above-market prices. Buying out of the above-market contract in 1998 was less expensive from the outset than continuing to take the gas. With the 2019 payoff of the obligation, our K-System natural gas customers saw further rate reductions. Electric planning in prior years resulted in substation improvements or replacements in or near Lyons, Victoria, Hays and Winona.
Midwest Energy customers continue to benefit from a fleet management program now in its eleventh year. Truck mounted equipment remains in service longer and vehicles have less downtime during demanding service restoration efforts. A more recent “fleet” direction promises cost savings and service improvements into the future with the use of drones. Midwest Energy purchased its first drone in 2018 and for the first time inspected a damaged electric transmission line in 2019. The new technology enabled assessment while flooding made the line inaccessible from the ground. Two more drones will be added in 2020 as mapping and inspection demands increase.
The right equipment and technology are essential for good service. But results rest on good people…employees with training, experience and a “get it done” work ethic. Our search for employees with the all-important work ethic and training points right back to the service area and graduates of nearby trade schools and universities when possible. If necessary, we bring recent high school graduates into a six-month student lineman program before formal apprenticeship begins. Summer interns are often used in both craft and professional positions.
Advancing technology brings experienced employees back to the classroom or computer to learn new techniques and features of product and software updates. An example is the 2019 metering school for linemen, servicemen and meter technicians. Training techniques are equally important as subject matter. Much progress was made in natural gas operations training including the Operator Qualification, Apprenticeship and Peer-to-Peer programs. Finally, Midwest Energy expects a wave of retirements in the next three years, particularly among technical and professional groups. Thus, knowledge transfer to other employees supports service and business continuity.
As 2019 came to an end, no thought had been given to the coming personal and economic tragedy to be wrought by a world-wide pandemic. As this report is written, the nation, Midwest Energy and our communities are taking initial steps back from economic and social disruption of a scale most have never experienced. We are confident Midwest Energy will emerge strong and continue to deliver the service our member-owners expect.
Juanita Stecklein, Board ChairPatrick Parke, CEO
E X E C U T I V E
REPORT
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Electric 2019 2018 Number of Meters . . . . . . . . . . . . . . . . . . . . . .49,664 49,759 Peak Load, MW . . . . . . . . . . . . . . . . . . . . . . . . . . 376 363 Retail Energy Sales, kWh . . . . . . . . . . .1,500,184,186 1,518,990,507 Wholesale Energy Sales . . . . . . . . . . . . . 141,440,908 127,435,417 Total Energy Sales, kWh . . . . . . . . . . . .1,641,625,094 1,646,425,924 Natural Gas 2019 2018 Number of Meters . . . . . . . . . . . . . . . . . . . . . .41,952 42,018 Total Sales, MMBtu . . . . . . . . . . . . . . . . . . 11,638,609 11,825,522 Financial 2019 2018 Capital Credit Retirements . . . . . . . . . . . . . . 6,996,851 6,343,942 Modified Debt Service Coverage (MDSC) . . . . . . . .1 .89 1 .85 Average Retail Price Per kWh (Electric) . . . . . . .$0 .1005 $0 .0983 Average Retail Price Per MMBtu (Gas) . . . . . . . . .$7 .16 $7 .88
2019 2018Operating Revenues: Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $169,453,763 $173,599,058 Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,708,709 46,026,089 Total Operating Revenues . . . . . . . . . . . . . . . . . . . . . . .$209,162,472 $219,625,147
Operating Expenses: Purchased Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $90,364,771 $92,143,595 Production & Delivery of Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . 16,555,575 18,092,306 Purchased Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,832,828 24,524,819 Delivery of Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,256,202 7,147,293 Customer Accounts, Service & Information . . . . . . . . . . . . . . . . . . . . . . 5,139,395 5,987,201 Administration & General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . 13,709,074 13,506,163 Depreciation & Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,104,655 20,434,680 Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,663,560 8,234,111 Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,162,275 14,667,259 Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . .$192,788,335 $204,737,427
Operating Margins (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,374,137 $14,887,720
Non-operating Margins:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $259,915 $234,463 Capital Credits From Other Organizations . . . . . . . . . . . . . . . . . . . . . . 2,311,600 2,451,634 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,300 38,381 Total Non-operating Margins (Loss) . . . . . . . . . . . . . . . . . . . .$2,579,815 $2,724,478
Net Margins (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$18,953,952 $17,612,198
S T A T E M E N T OF
O P E R A T I O N SYEARS ENDED — DECEMBER 31, 2019 AND 2018
SELECTED
COMPARATIVESTATISTICSY E A R S E N D E DDECEMBER 31, 2019 AND 2018
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B A L A N C E S H E E T
Patronage Patronage Total Capital Capital Other Patrons’ Assigned Unassigned Equities Equity
Balance at December 31, 2018 $195,158,464 $17,612,198 $14,363,646 $227,134,308 Net margins 18,953,960 18,953,960 Patronage capital assignment 17,604,278 (17,612,206) 7,928 0 Retirement of capital credits (6,996,851) (6,996,851)Other 1,080,114 1,080,114 Balance at December 31, 2019 $205,765,891 $18,953,952 $15,451,688 $240,171,531
P A T R O N ’ S E Q U I T Y
Electric Plant in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $681,165,999 $658,557,595 Construction Work in Progress-Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,936,319 40,192,803 Total Electric Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716,102,318 698,750,398 Accumulative Depreciation-Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,335,078 242,593,348 Net Electric Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . $465,767,240 $456,157,050Gas Plant in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,761,600 92,135,289 Construction Work in Progress-Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819,801 5,902,371 Total Gas Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,581,401 98,037,660 Accumulative Depreciation-Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,136,493 35,354,216 Net Gas Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $64,444,908 $62,683,444Net Utility Plant-Combined . . . . . . . . . . . . . . . . . . . . . . . . . . $530,212,148 $518,840,494 Investment Patronage Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,047,068 12,240,098 Investment Non-General Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,546,266 5,550,309 Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,791,406 4,091,719 Total Other Property & Investments . . . . . . . . . . . . . . . . . . . . $21,384,740 $21,882,126 Cash-General Funds/Temporary Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 895,661 1,539,818 Notes Receivable-Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,635,613 7,641,935 Accounts Receivable-Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,249,525 30,997,275 Materials & Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,239,220 7,207,840 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642,105 641,610 Other Current & Accrued Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,084,073 929,371 Total Current & Accrued Assets . . . . . . . . . . . . . . . . . . . . . . . $50,746,197 $48,957,849 Deferred Debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $17,071,002 $16,373,156 Total Assets & Other Debits . . . . . . . . . . . . . . . . . . . . . . . . . $619,414,087 $606,053,625
LIABILITIES AND OTHER CREDITS 2019 2018Patronage Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $205,765,891 $195,158,464 Operating Margins-Current Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,374,137 14,887,720 Non-Operating Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,579,815 2,724,478 Other Margins & Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,451,688 14,363,646 Total Margins & Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $240,171,531 $227,134,308 Long Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,401,618 326,320,266 Total Long Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $337,401,618 $326,320,266 Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,815,780 21,644,633 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,785,672 14,651,318 Consumer Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,900,004 3,799,430 Other Current & Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,020,109 11,760,372 Total Current & Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . $41,521,565 $51,855,753 Deferred Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$319,373 $743,298 Total Liabilities & Other Credits . . . . . . . . . . . . . . . . . . . . . . $619,414,087 $606,053,625 Margins & Equities As % of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 .77 37 .48 Long Term Debt As % of Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 .26 40 .95
YEARS ENDED — DECEMBER 31, 2019 AND 2018
2019 2018ASSETS AND OTHER DEBITS
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WIND ENERGY% OF RETAIL SALES
COMMUNITY S O L A RE L E C T R I C I T Y GENERATED kWh
MONTHLY P E A K DEMANDRETAIL LOAD
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Community Solar - Electricity Generated (kWh)
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0%5%
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Wind Energy - % of Retail Sales
2016 2017 2018 20190
50,000
100,000
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Bill Dowling Vice President,
Engineering & Energy Supply
Schamra Detherage Vice President,
Human Resources
Tim Flax Vice President,
Information Technology
Justin MacDonaldDirector, Reliability
Compliance
Don Hoffman General Counsel
Brenda Hutchison
Executive Assistant
Tom Meis Vice President,
Finance and CFO
Mike Morley Director, Corporate
Communications and Government Affairs
Pat Parke Chief Executive
Officer
Fred Taylor Vice President,
Operations
Bob Muirhead Vice President,
Customer Service
Gary MossTreasurer
Louise Berning
John Blackwell
Ed PrattVice Chair
Lon Frahm
Juanita SteckleinChair
Keith Miller
Dale UnruhSecretary
Chuck Moore
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B O A R D O F D I R E C T O R S
MANAGEMENT TEAM
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800-222-3121WWW.MWENERGY.COM
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