From mines to wind, Empire District still diversifying

It was 1909, and a ramped-up mining industry was commanding electric generation like never before, spawning several regional electrical generating companies. The growth in southwest Missouri caught the eye of New York City investors, prompting them to dub the area Little Empire or the Empire District.

So when Consolidated Light, Power and Ice Co., Spring River Power Co., Galena Light and Power Co. and Joplin Light, Power, and Water Co. consolidated in October 1909, the new name was a cinch for the Empire State investors: Empire District Electric Co.

Now approaching its 100-year anniversary, Joplin-based Empire District Electric Co. continues to develop its vision “to be the respected supplier of energy and related services,” according to Bill Gipson, president and chief executive officer.

Gipson has been with Empire for 25 years in the areas of information technology, economic development and commercial operations.

“When I became president, we embarked on a series of key business strategies to continue to improve the financial strength of the organization,” he said. “These included regulatory changes, plant building, system mapping, continued customer service and balancing the company's earnings perspectives.”

Full implementation one year ago of an outage management plan and an electronic mapping of its system has resulted in benefits to Empire and to customers, according to Mike Palmer, vice president of commercial operations.

“Outage management and electronic mapping enable us to quickly identify outage problems, where the common problem is, and to dispatch crews more quickly so that service can be restored sooner,” Palmer said. “Technology has improved how we all operate and has helped keep costs down to customers. Twenty years ago, we served about 170 customers per employee. Today, we serve about 250 customers per employee.”

Palmer said population growth brings pressures on the utility to extend services. “Our planning engineers continually monitor the system for needs, and we try to plan five years ahead. We've been seeing a growth rate in our system almost twice the national average of investor-owned utilities,” he said.

New energy

Empire operates two coal-fired plants, two gas-fired plants, one coal-and-gas-combined plant, and one hydroelectric plant, all of which provide approximately 75 percent of customer needs. The company purchases its remaining needs from other suppliers.

Empire has completed several new generating projects in recent years to serve the growing needs of customers and to replace some purchase-power contracts that dissolved in the late 1990s, according to Brad Beecher, vice president of energy supply.

“We completed the State Line combined-cycle in Jasper County, Missouri, in 2001 at a cost of $240 million, the largest project Empire has ever undertaken,” he said, adding that the gas-and-steam combine cycle turbine project more than doubled generation capacity.

In 2003, Empire expanded its Energy Center plant north of Sarcoxie at a cost of $55 million, adding 100 megawatts of capacity and bringing plant capacity to 280 megawatts. Currently under construction is a gas-turbine unit at Riverton, Kan., that will come on line in 2007.

Old energy

As with other utility companies, Empire is challenged by aging generation plants, especially coal-fired units. Empire's coal-fired unit at Riverton is 55 years old, and its coal-fired plant at Asbury is 35 years old.

“In 2005, our Asbury plant had its longest continuous run in its history - 192 days without coming offline for an unscheduled maintenance,” Beecher said. “That's quite an achievement for a plant that's 35 years old. At this point, the plan is to continue to run them and run them and run them. The challenge to keeping them, which is the right thing to do to keep customers' rates low, is continuing to make the air quality control investments needed to meet the new (Energy Protection Agency) requirements. At some point, Empire and our industry are going to have to figure out how to replace the aging coal-fired plants.”

Diversification

To its portfolio of gas, coal and hydroelectric generating resources, Empire last month added wind-generated electricity, purchased from PPM Energy's Butler County, Kan., facility.

“Wind energy will account for about 10 percent of the annual energy we deliver to our customers and savings to customers can be measured in millions of dollars,” Gipson said, estimating that wind energy is two-thirds cheaper than natural gas.

High on diversification, Empire officials last spring bought the Missouri gas distribution properties of Kansas City-based Aquila Inc. for $84 million, plus working capital adjustments. If all the regulatory approvals are received, the deal may close by midyear, giving Empire an entry into the natural gas market.

“This acquisition gives us an opportunity to balance our earnings perspective between the summer months and the non-summer months,” Gipson said. “Historically, we would derive 70 percent to 80 percent of our earnings out of the third quarter. So, if we had a cool summer we could end up with a really lousy year. The gas-distribution business is one of the things we can do to help balance our earnings across the seasons.”

Power Up

Empire District Electric in 1909:

o 109 miles of transmission line

o 8 megawatts of generating capacity

o 2,400 customers

Empire District Electric in 2006:

o 1,200 miles oftransmission line

o 1,000 megawatts of generating capacity

o 157,000 customers

Empire District Electric Co.

Founded: Oct. 16, 1909

Owner: Investors

Address: 602 Joplin Ave., Joplin, MO 64801

Phone: (417) 625-5100

Fax: (417) 625-6198

Services: Energy supplier

Service Area: Southwest Missouri, southeast Kansas, northeast Oklahoma, northwest Arkansas

Operating Revenues: $366,635,373 (for 12 months ended Sept. 30, 2005)

Outstanding Shares: 26,030,457 (as ofNov. 1)

Number of Shareholders: About 30,000 (as of Nov. 1)

Number of Customers: 157,571 (as of Dec. 31, 2004)

Number of Employees: 650

Ticker symbol:NYSE: EDE

Stock quote: $21.16 a share (as of Jan. 18)