midwest energy 20 annual 20 report
TRANSCRIPT
MIDWEST ENERGY
ANNUAL REPORT
20202020
EXECUTIVE REPORT 3
STATEMENT OF OPERATIONS 4
SELECTED COMPARATIVE STATISTICS 4
BALANCE SHEET 5
PATRON’S EQUITY 5
CHARTS 6
BOARD OF DIRECTORS / MANAGEMENT TEAM 7
Kyle Keezer, Datacenter Systems Engineer, configures a bank of computer workstations that employees could use to work from home when Midwest Energy shut down its walk-in offices for COVID-19 in March 2019. Walk-in offices re-opened in May, but shut down intermittently through February 2021 when COVID cases in their respective counties spiked.
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Our members trust us to lead Midwest Energy forward within a transforming utility industry. We balance the challenge of maintaining traditional energy delivery systems while addressing new technologies, increasing customer expectations and changing regulations. But in 2020, our strategic initiatives and daily routines ran headlong into a once-in-a-century pandemic. Midwest Energy’s response encompassed (1) protection of employee health while delivering reliable service, (2) adjustments to operational practices and capital investment to maintain the company’s financial health, and (3) provision of targeted customer assistance.
Nationwide travel restrictions greatly diminished the demand for aircraft and vehicle fuel. Impacts rippled through the oil and gas industry, reducing Midwest Energy’s sales to oil pumping and large pipeline loads. An unrelated load reduction on a major natural gas pipeline combined with the pandemic to reduce year-ending net margins $3.7 million below budget. But after cost reduction efforts and deferral of $17.3 million of capital investments, equity as a percentage of total assets exceeded budget projections, indicating improved financial health for your cooperative. However, such actions cannot be sustained over a long period without harm to service quality. Midwest Energy also obtained an SBA Paycheck Protection Program loan, which did not impact 2020 financial results.
Midwest Energy stood with its customers during the pandemic. A planned $1.4 million natural gas rate increase proposal was deferred; a 3-month moratorium was placed on service disconnections for nonpayment; late payment penalties were waived for a year; 40 area food banks received grants totaling $10,000; a corporate donation of $35,000 was made to the Midwest Customers
Care bill assistance fund, and $15,000 of corporate funds were leveraged to make grants totaling $50,000 to three regional mental health agencies.
Important work continued through the pandemic, including completion of a resource-intensive audit under the North American Electric Reliability Corporation’s reliability compliance authority. The audit scrutinized compliance in the areas of operations, planning, and critical infrastructure protection. The review concluded with good results, comparing the company favorably with benchmarked peer audit performances within the Midwest Reliability Organization, which covers 16 states and two Canadian provinces. In a related area, Midwest Energy progressed on its multiyear plan to strengthen cybersecurity based on the Center for Internet Security’s 20 globally recognized best practices for securing computer systems and data.
Other technology projects laid groundwork for new capabilities and service offerings in coming years. These include upgrades to mission critical software systems, conversion of SCADA and Land Mobile Radio networks to the microwave backhaul system, and upgraded software used for in-field design of construction projects. Automated Metering Infrastructure software and related systems were prepared for 2021 capability deployments including a customer portal, remote electric meter connection and disconnection, and automation of customer account changes. The latter two processes will eliminate truck rolls to complete the required tasks.
2020 saw the conclusion of several engineering and construction projects years in the making. In the
far western reaches of the service area, we replaced a key but aging and problem-prone line between the towns of Winona and Wallace. A new skid-mounted substation was installed in Atwood, bringing improved reliability and simpler maintenance. Other new substations were placed into service in Winona and Lyons. The latter project included the first use of our new “substation on wheels,” purchased to continue reliable service when replacing or upgrading an existing substation.
Four substations were substantially expanded or constructed to supply large pump stations on crude oil and natural gas liquids pipelines. The addition of new load helps control rates for all customers. Risks inherent in serving large loads are mitigated with requirements for customer contributions to construction costs and revenue deferral from such load additions.
Employee training and development continued an important role in 2020, including revisions to electric and natural gas apprentice programs, a new source for natural gas Operator Qualification training materials and adoption of a leading platform for delivery of virtual training, testing and documentation.
Through all the challenges of 2020, the dedication, work ethic, and expertise of our 270 employees and their commitment to our customers and communities remained
strong. On their behalf, we thank you for your confidence in Midwest Energy
and the opportunity to serve you.
Gary Moss, Board ChairPatrick Parke, CEO
EXECUTIVE REPORT
Pat Schumacker, Facilities Maintenance Coordinator at Hays, assembles plexiglass barriers at the Hays office to protect customers and employees from COVID-19.
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Electric 2020 2019
Number of Meters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49,665 49,664 Peak Load, MW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351 376 Retail Energy Sales, kWh . . . . . . . . . . . . . . . . . . .1,392,007,575 1,500,184,186 Wholesale Energy Sales . . . . . . . . . . . . . . . . . . . . . 141,016,561 141,440,908 Total Energy Sales, kWh . . . . . . . . . . . . . . . . . . . .1,533,024,136 1,641,625,094 Natural Gas
Number of Meters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42,003 41,952 Total Sales, MMBtu . . . . . . . . . . . . . . . . . . . . . . . . . 12,643,424 11,638,609 Financial
Capital Credit Retirements . . . . . . . . . . . . . . . . . . . . $7,404,912 $6,996,851 Modified Debt Service Coverage (MDSC) . . . . . . . . . . . . . .1.80 1.89 Average Retail Price Per kWh (Electric) . . . . . . . . . . . . .$0.1029 $0.1005
Average Retail Price Per MMBtu (Gas). . . . . . . . . . . . . . . .$6.34 $7.16
2020 2019Operating Revenues:
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $153,891,297 $169,453,763 Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,933,098 39,708,709 Total Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $191,824,395 $209,162,472
Operating Expenses: Purchased Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $77,373,734 $90,364,771 Production & Delivery of Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,397,491 16,555,575 Purchased Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,061,537 17,832,828 Delivery of Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,505,021 7,256,202 Customer Accounts, Service & Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,265,143 5,139,395 Administration & General Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,144,689 13,709,074 Depreciation & Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,338,390 19,104,655 Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,228,178 8,663,560 Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,164,773 14,162,275 Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $178,478,956 $192,788,335
Operating Margins (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,345,439 $16,374,137
Non-operating Margins:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $251,316 $259,915 Capital Credits From Other Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,162,433 2,311,600 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,309) 8,300 Total Non-operating Margins (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,409,440 $2,579,815
Net Margins (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,754,879 $18,953,952
STATEMENT OF OPERATIONSYEARS ENDED — DECEMBER 31, 2020 AND 2019
SELECTED COMPARATIVE
STATISTICSYEARS ENDED — DECEMBER 31, 2020 AND 2019
Patronage Patronage Total Capital Capital Other Patrons’ Assigned Unassigned Equities Equity
Balance at December 31, 2019 $205,765,891 $18,953,952 $15,451,688 $240,171,531 Net margins 15,754,879 15,754,879 Patronage capital assignment 18,949,209 (18,953,955) 4,746 0 Retirement of capital credits (7,404,912) (7,404,912)Other 1,274,759 1,274,759
Balance at December 31, 2020 $217,310,188 $15,754,876 $16,731,193 $249,796,257
PATRON’S EQUITY
Electric Plant in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $709,367,611 $681,165,999 Construction Work in Progress-Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,069,923 34,936,319 Total Electric Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 724,437,534 716,102,318 Accumulative Depreciation-Electric . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,453,878 250,335,078 Net Electric Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $461,983,656 $465,767,240
Gas Plant in Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,405,675 100,761,600 Construction Work in Progress-Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 922,094 819,801 Total Gas Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,327,769 101,581,401 Accumulative Depreciation-Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,350,953 37,136,493 Net Gas Utility Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$66,976,816 $64,444,908
Net Utility Plant-Combined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $528,960,472 $530,212,148 Investment Patronage Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,767,222 13,047,068 Investment Non-General Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,541,951 5,546,266 Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,538,441 2,791,406
Total Other Property & Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$21,847,614 $21,384,740
Cash-General Funds/Temporary Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,826,759 895,661 Notes Receivable-Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,597,463 7,635,613 Accounts Receivable-Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,332,851 33,249,525 Materials & Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,592,201 7,239,220 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020,158 642,105 Other Current & Accrued Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,119,652 1,084,073 Total Current & Accrued Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$72,489,084 $50,746,197
Deferred Debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$14,965,307 $17,071,002
Total Assets & Other Debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $638,262,477 $619,414,087
LIABILITIES AND OTHER CREDITS 2020 2019
Patronage Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $217,393,394 $205,765,891 Operating Margins-Current Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,345,439 16,374,137 Non-Operating Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,409,440 2,579,815 Other Margins & Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,647,984 15,451,688 Total Margins & Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $249,796,257 $240,171,531
Total Long Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $327,556,653 $337,401,618
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,301,471 12,815,780 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,049,721 12,785,672 Consumer Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,005,534 3,900,004 Other Current & Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,642,806 12,020,109 Total Current & Accrued Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$40,999,532 $41,521,565
Deferred Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$19,910,035 $319,373
Total Liabilities & Other Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $638,262,477 $619,414,087
Margins & Equities As % of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39.14% 38.77% Long Term Debt As % of Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39.43% 41.26%
Y E A R S E N D E D — D E C E M B E R 3 1 , 2 0 2 0 A N D 2 0 1 9
2020 2019ASSETS AND OTHER DEBITS
BALANCE SHEET
5
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
0% 5 10 15 20 25 30 35 40 45 50
WIND ENERGY
2017 2018 2019 2020
P E R C E N T O F R E TA I L S A L E SMONTHLY PEAK DEMAND
R E TA I L L O A D ( k W h )
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
0 50 100 150 200 250 300 350 400
2017 2018 2019 2020
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2017
2018
2019
2020
COMMUNITY SOLARE L E C T R I C I T Y G E N E R AT E D ( k W h )
6
John BlackwellTreasurer
Louise Berning Lon Frahm
Ed PrattVice Chair
Keith Miller
Gary MossChair
Chuck Moore
Dale UnruhSecretary
Juanita Stecklein
BOARD OF DIRECTORS
Bill Dowling Vice President,
Engineering & Energy Supply
Schamra Detherage Vice President,
Human Resources
Tim Flax Vice President,
Information Technology
Justin MacDonaldDirector, Reliability
Compliance & Project Management
Don Hoffman General Counsel
Brenda HutchisonExecutive 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
MANAGEMENT TEAM
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OFFICES1330 Canterbury Drive | Hays, KS 67601
303 Main Street | Atwood, KS 677301125 S. Range | Colby, KS 67701
1025 Patton Road | Great Bend, KS 67530916 Sheridan | Hoxie, KS 67740
719 3rd Street | Phillipsburg, KS 676611301 S. Main | Scott City, KS 67871415 Barclay | WaKeeney, KS 67672
MIDWEST ENERGY800 .222 .3121 MWENERGY .COM
A skid-mounted substation is lifted off a trailer and onto its new foundation in May 2020, replacing a 70 year-old wooden substation in Atwood, Kan. This was Midwest Energy’s first installation of a skid-mount substation. Similar to a pre-fabricated home, skid-mount substations are shipped fully assembled on a single steel frame, compared to assembled on site, saving money and on-site construction time.