A Moment with the CEO

BY SUZANNE LANE

2023 Highlights

In November, KEPCo conducted its 49th annual meeting of the G&T cooperative, signifying the conclusion of KEPCo’s 48th year of existence. During the business meeting, I provided a “state of the cooperative” address, which acts as the CEO article for this winter’s edition of the Newsmaker.

Annual meetings are a great time to take a moment to celebrate accomplishments and milestones from the past year, to look forward to the coming year, and to appreciate and value the opportunity we have been blessed with to provide affordable, reliable power and a meaningful experience for our members and the thousands of rural Kansans we all proudly serve. Afterall, the longevity, viability, and sustainability of rural Kansas is the ultimate guiding light for all of us associated with Kansas electric cooperatives.

If I had to give this past year a theme, it would be one that borrows from the nuclear power industry: continuous improvement. As we see directly as an owner of Wolf Creek, the plant never stops focusing on improving—even in areas where they have been rated exemplary in their performance. This is inspiring, as everyone has room to grow, learn, and improve for the betterment of the organization. As seen in this address, KEPCo is exemplary in many areas, and we are continuously looking to grow and improve.

As I reflect on this past year, KEPCo has a lot to celebrate and be proud of:

1. We finished 2022 with zero safety and cyber security incidents, and are on-track to do the same in 2023;
2. Our employee team is experienced, engaged, dedicated, and member-focused;
3. We are financially strong and our average member electric rate remains stable;
4. Our generation resources are operating safely, cost-effectively and reliably overall;
5. About 65% of our annual energy needs continue to be supplied from carbon-free resources, thanks to our diverse portfolio;
6. Our regulatory, government, and legislative engagements and advocacy continue to pay dividends—and we additionally engaged with the EPA to ensure KEPCo’s voice was heard with regard to the proposed GHG rule;
7. Overall transmission and distribution reliability remains strong—as do our relationships with the five transmission owners with whom we work closely; and
8. We applied for federal funding opportunities, demonstrating our innovative, forward-thinking, cost-savings values—these funds, if received, will greatly assist us with upgrading existing solar assets, adding new solar, wind, and energy storage facilities, and investing in infrastructure related to green hydrogen production.

These highlights represent a few of the many responsibilities we proudly take on as our members’ power supplier—it’s the core of the G&T model and the values that model brings to our member-owners and the members “at the end of the line.”

Another focus of celebration is that we have a new strategic plan underway—and we are working to finalize a long-term vision for KEPCo, which will challenge the staff and board, will focus on our desire to continuously improve, will encourage innovation and getting outside of our comfort zones, and will provide the additional guidance needed to ensure rural Kansans’ bright future.

Regarding KEPCo’s 2023-2027 strategic plan, this plan provides actionable, clear guidance of the priorities for KEPCo in the near term. Specifically, the plan focuses on safety and cyber security, power supply, financial strength, member engagement, board effectiveness, and employee succession planning. I can directly attest to the fact KEPCo’s Board of Trustees and staff have accomplished a tremendous amount of work on this plan since it was finalized in January. Noting that work on some of the initiatives hasn’t commenced yet, here are some highlights of work completed to date:

1. We have initiated a cost of service study, which will be completed in early 2024—KEPCo’s first such study in over 12 years;
2. The board has completed a self-assessment and is in the process of developing goals focused on continuous improvement—similarly, I have been working on goals to enhance my leadership skills—again, with continuous improvement for me and our organization in mind; none of us are at the end of our growth journeys;
3. We have established a Power Supply Committee, which has held educational sessions on key industry topics, has discussed long-term power supply goals and potential modifications to our power supply, and is supporting staff’s recommendation to conduct a robust integrated resource plan in 2024;
4. We are close to finalizing a succession plan for the entire employee team; and
5. We have tremendously updated our long-range financial forecast, sharpening this valuable tool as we head into a timeframe where we will likely be making large investment decisions and determining our financial strategies for the future.

I look forward to reporting on the additional progress of implementing our strategic plan this time next year.

With affordability being a top priority for KEPCo and all of its members—as is reliability—I want to take a minute to further expand on not only the success of keeping our members’ average electric rates stable, but the strength of our financial position. KEPCo is in a strong cash position, continues to meet our lender requirements for key metrics, and has the highest equity-to-asset ratio in our organization’s history. Because of this financial success and strength, KEPCo is in a position new to us—nearing the pivotal equity ratio that per our mortgage, allows us to consider capital credit retirements on a regular basis. Per our strategic plan, we will be conducting a financial planning study in the next two years to determine our ultimate financial strategies and policies—again, a new opportunity and frankly, a reward for hard work, as KEPCo and its members have overcome many challenges through the years to get to this point.

Now on to the success of keeping our average rates stable. As everyone can attest, the cost of nearly everything in this inflationary, post-pandemic environment has increased. The average interest rates for 30-year mortgages have more than doubled in the past few years. When looking at the year-over-year CPI for products and services in recent years, new car prices, the price of gasoline, and the price of groceries all increased significantly, and were often in short supply.

On the energy front, when looking at the past few years, the price of natural gas has remained volatile, with the highest year-over-year average U.S. consumer price increase occurring in 2022 at over 38%. As for the average consumer price of electricity, on a year-over-year basis, the highest increase was also in 2022 with it being just under 16%–not surprising it would mirror the timing of extreme natural gas pricing. Add in the increased pricing of electric industry supplies, equipment, labor, and the many other cost pressures we’ve all been facing, inflation has been evident in Kansas and in the co-op space.

While these are tough realities and very impactful to rural Kansans, the silver lining and aspect to be proud of is that throughout all of these pricing pressures and challenges, KEPCo was able to keep electric rates to members stable. Over the past decade, which includes the extremes from the past few years that I’ve just described, KEPCo’s member rate has stayed right around $0.075/kWh on average. To further put this into perspective, in 2012, among the G&Ts who responded to a rates survey, KEPCo had the HIGHEST average member rate in the country. In 2022 (latest data), I’m proud to say that we were in the 3rd quartile. And I believe we can get to the 2nd and eventually top quartile in years to come. Considering all of the cost pressures I’ve mentioned, maintaining stable rates over this period is something our staff, our board, and our entire membership should be proud of and should celebrate—together, the challenge we now face is to not only sustain this success, but find innovative ways to challenge ourselves to lower that average rate. And I’m confident we have the right employee team and board of trustees to do just that, to continuously improve.

None of the achievements I’ve highlighted could have been possible without the hard work of our staff, industry partners, and Board of Trustees. While our 49th annual membership meeting was definitely a time to take a moment to reflect and celebrate, after that celebration, we got right back to continuously improving and working hard on behalf of our members. I’m truly honored to be part of this cooperative family, and to serve our Board, our entire membership, and our employees.

Thank you to the Board members for their service this past year and thank you to our employee team for doing all that they do each and every day to serve our Members. Here’s to a peaceful holiday season for all, and a prosperous 49th year for the entire KEPCo family. 

Generating Safety:

Time to Prepare Your Vehicle for Winter

This winter, we can count on the temperature to be cold, and we will see rain, sleet, and snow.

If caught unprepared, the consequences can be more than inconvenient – they can be dangerous. Take note of the tips below to keep safe on the roads this winter.

• Have your battery tested. Battery power drops as the temperature drops.
• Make sure the cooling system is in good working order.
• Check the tire tread and replace if less than 3/32 of an inch.
• Check the tire pressure. Tire pressure drops as the temperature drops.
• Check your wiper blades and replace if needed.
• Use wiper fluid rated for -30 degrees.
• Keep your gas tank at least half full to mitigate moisture in your gas line.

Additionally, before you start out on the roads, take the following precautions:

•  Clean your vehicle’s external camera lenses and side mirrors.
• Remove dirt, ice, and snow from sensors to allow the assistive-driving features, like automatic emergency braking, to work.
• In frigid weather, you may want to warm up the car before you drive.
• To prevent carbon monoxide poisoning, never leave a vehicle running in your garage – even with the garage door up.
• If the forecast looks iffy, wait out the storm. If you must travel, share your travel plans and route with someone before you leave.

KEPCo Volunteers at Harvesters

Seven KEPCo staff members, along with eight staff members from KEC, volunteered their time in October at Harvesters Community Food Network (Harvesters). Harvesters provides food and related household products to more than 760 nonprofit agencies including emergency food pantries, community kitchens, homeless shelters, children’s homes, and others.

 The organization also offers education programs to increase community awareness of hunger and teach about good nutrition.

During the two-hour period, KEPCo and KEC employees boxed nine pallets of food (360 individual, multi-item boxes) to be distributed to senior adults in a multi-county region. “It’s rewarding to give back to Topeka and the surrounding communities by collaborating with co-workers and colleagues in assisting an agency that impacts the lives of so many individuals and families,” said Susan Cunningham, KEPCo SVP & General Counsel. “Additionally, it was a great activity to demonstrate the cooperative principle of concern for community,” said Cunningham.

Lane Participates on Interim Legislative Committee Panel

The 2023 Special Committee on Energy and Utilities met for two days in October and one day in November. The committee discussed a wide variety of topics throughout the three-day session including an overview of the jurisdiction of and the Kansas Corporation Commission’s role at the Southwest Power Pool (SPP), an overview and the jurisdiction of the Federal Energy Regulatory Commission, the Department of Energy transmission needs study, SPP interconnection que, SPP resource adequacy, transmission builds and SPP cost allocation, Evergy’s integrated resource plan, transmission siting process, eminent domain, an examination of state energy plans, and a review of the State Energy Office and the federal funds administered by that office.

 During the second day of the meetings in October, Suzanne Lane, KEPCo EVP & CEO, participated on a panel with Patrick Parke – Midwest Energy, Corey Linville – Sunflower, Paul Mahlberg – KMEA, Colin Hansen – KPP Energy, and Jeremy Ash – KCBPU, to discuss updates, perspectives, integrated resource plans, load forecasts, and forward-looking plans for each entity, among others.

 “The three-day interim committee provided the committee members an opportunity to take a deep dive into utility issues, time that is not available during the legislative session. Resource adequacy and the impact renewable energy and carbon reduction initiatives have on reliability, as well as equitable transmission cost allocation, are topics that the electric cooperatives have been advocating for and were important topics for the committee members to get a greater understanding of,” said Suzanne Lane, KEPCo EVP & CEO.

KEPCo Participates in Co-ops Vote Events

KEPCo staff participated in seven Co-ops Vote events during October and November. The meetings were held in Girard, Shawnee, Cheney, Dodge City, Hays, Topeka, and Clay Center and were attended by legislators that have electric cooperative service territories within their respective legislative districts.

 Co-ops Vote is a non-partisan campaign by America’s Electric Cooperatives focused on enhancing the political strength of electric cooperatives through relationship building and voter engagement. Working in collaboration with our member cooperatives, this effort educates and engages legislators and co-op staff on critical issues such as ensuring continued access to reliable and affordable electricity and promoting the work of co-ops within the rural communities they serve.

 “The Co-ops Vote events are an integral part of the electric cooperatives’ state-level advocacy efforts regarding legislative and regulatory issues affecting the electric utility industry. The meetings provide an opportunity for cooperatives to communicate openly and freely with area legislators regarding industry concerns and opportunities, which is invaluable as we approach the upcoming legislative session,” said Phil Wages, KEPCo Director, Member Services, Government Affairs, and Business Development.

KEPCo Attends Legislator Trip to SPP

KEPCo’s Phil Wages, along with representatives from Evergy, KEC, Midwest Energy, Kansas Municipal Utilities, Liberty, and ITC, escorted 24 Kansas legislators and two legislative staff members on a two-day bus trip to the Southwest Power Pool in Little Rock, Arkansas. SPP senior staff briefed the legislators on a variety of topics, which included an overview of the SPP, SPP governance and hot topics, SPP operations, reliability coordination, FERC dockets related to transmission cost allocation, the integrated market, western service expansion, transmission planning, and a resource adequacy overview.

“The material presented by senior SPP staff was centered around reliability and resource adequacy. In today’s environment, these topics are particularly important for legislators to understand. As the electric industry continues to transition to renewable energy and reducing carbon emissions, the transition must be done in a sustainable fashion that does not jeopardize reliability, and the legislature needs to be mindful of legislation that impacts such a transition,” said Phil Wages, KEPCo Director, Member Services, Government Affairs, and Business Development.

KEPCo Conducts Annual Meeting

KEPCo’s 49th Annual Membership Meeting was held November 15 in Mayetta, Kansas.

At the meeting, KEPCo EVP & CEO Suzanne Lane addressed the accomplishments and milestones from the past year, opportunities for the coming year, and the value of providing affordable, reliable power to KEPCo’s Members and the rural Kansans they serve.

Centered around the theme of continuous improvement, Ms. Lane highlighted KEPCo’s safety record, experienced staff, financial strength, stable rates, diverse generation portfolio, legislative and regulatory engagement, industry relationships, and federal funding opportunities. Ms. Lane also addressed the priorities and implementation status of KEPCo’s 2023-2027 strategic plan, highlighting KEPCo’s commitment to affordability and reliability, specifically highlighting KEPCo’s stable rates, strong cash position, and highest equity-to-asset ratio in the organization’s history. Ms. Lane concluded with the challenge to not only sustain stable, affordable rates but to find innovative ways to lower KEPCo’s member rates.

 After the meeting, KEPCo hosted a reception and dinner, followed by entertainment from Chris Michael, a magician/illusionist. “It was wonderful to have so many electric cooperative members and staff in attendance, as well as industry partners and suppliers. Our annual meeting is an opportunity to reflect, as well as to look forward, and a time to thank those that have a hand in making KEPCo the cooperative that it is today. We accomplish so much when we work together and the evening is a chance to show KEPCo’s appreciation on working collaboratively throughout the year,” said Lane.

KEPCo Elects Officers

At its monthly meeting on November 16, the KEPCo board of trustees voted on board officer positions for the coming year, unanimously re-electing Mr. Mike Morton, Bluestem General Manager, to a second term as president of the KEPCo board.

The other officers elected were Chuck Goeckel as vice president (Flint Hills), Bryan Coover as secretary (Twin Valley), and Lori Jones as treasurer (Ninnescah). Elected to the Executive Committee were Chris Parr (FreeState), Kirk Thompson (CMS), and Mark Scheibe (Heartland).

Wolf Creek Receives INPO Award

The Institute of Nuclear Power Operators (INPO) annual CEO Conference was held in November and brought together more than 150 chief executive officers, senior executives, and board members representing the World Association of Nuclear Operators (WANO) members from six countries.

Leaders gathered to exchange information and insights on how the nuclear industry is currently performing and what it will take to sustain top performance. INPO also celebrated nuclear generating stations that have attained exemplary assessments in the past year.

The theme of this year’s conference was Achieving a Unified, Resilient Future. Central to each conference session was the term “resilience,” which INPO defines as “the ability to withstand and reduce the impact of disruptive external threats through planning and preparation, which enable the capability to anticipate, absorb and respond, rapidly recover, and adapt from such an event.”

The centerpiece event of INPO’s 2023 CEO Conference was the Excellence Awards ceremony, celebrating 25 stations achieving the highest levels of safety, reliability, and operational performance over the last year, of which the Wolf Creek Nuclear Generating Station – which KEPCo proudly co-owns – was one of this year’s recipients. Bob Willard, INPO President and CEO, opened the Excellence Awards ceremony saying, “To each of you who received tonight’s awards, and to all those onsite in the plants and corporate offices who are part of the teams that keep our industry operating safely and reliably…thank you,” said Willard. “Your leadership, your dedication, and your ongoing efforts and achievements in the nuclear industry’s continued pursuit of excellence are deeply appreciated.”

“It’s an honor to have Wolf Creek in KEPCo’s fleet of generation resources and to receive an award in recognition of the hard work, dedication, and commitment by the owners and employees of Wolf Creek in making the plant one of the most resilient, safe, reliable, and highest performing nuclear plants in the country,” said Suzanne Lane, KEPCo EVP & CEO.

KEPCo Submits REDLG Application

KEPCo submitted a $160,000 USDA Rural Economic Development Loan and Grant (REDLG) application, sponsored by Bluestem Electric Cooperative, for a new medical clinic that will be located in downtown Wamego.

As interest rates remain elevated, KEPCo has seen an increased interest in, and utilization of, the REDLG program, as this is the fifth application KEPCo has submitted this year.

“Access to affordable financing is important for rural business development. The Federal Reserve is making headway in reducing inflation, but interest rates remain elevated when compared to pre-pandemic rates. The REDLG program, which is a zero-interest loan, provides an avenue for affordable financing for rural businesses and KEPCo stands at the ready to assist our member cooperatives in their economic development efforts,” said Susan Cunningham, KEPCo SVP & General Counsel. Funding for this application is anticipated to be considered in January 2024.