The February EMP 3 Meeting was held in Neodesha. Along with the normal agenda items, EMP 3 member cities listened to a presentation by William Hiller, Maurice Moss and Aiden Smith from the Southwestern Power Administration providing information on 15 year contract renewals.
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In the history of the natural gas industry, 2016 will be remembered as an eventful and record setting year.
Excess natural gas at the end of 2015 and warm winter temperatures kept prices low at the start of 2016. The summer of 2016 reversed the trend as natural gas-generated electricity hit record levels and by summer’s end, expectations for a colder winter drove natural gas prices up.
Mid-continent daily index prices posted a low of $1.28/MMBtu on March 5th and a high of $3.73/MMBtu on December 17th. US natural gas active futures hit $3.99/MMBtu on December 28, 2016. This was the highest level since December 2014.
Storage levels ended the winter withdrawal season (03/31/2016) at the highest end-of-season on record. Storage inventory reached an all-time record high level of 4,047 Billion Cubic Feet (Bcf) for the week ending Nov 11th. Much colder weather in December led to back-to-back weekly withdrawals greater than 200 Bcf; dropping storage levels below the five-year average for the first time all year last.
In August the active natural gas rig count fell to 81. This is the first time in 29 years natural gas rig count fell below 100. A year prior the active rig count was 233. The rig count peaked at 1,606 rigs on September 12, 2008,
2016 was the first year the U.S. became an exporter of natural gas. This came about with exports of Liquefied Natural Gas (LNG) and more cross-the-border pipelines being built to take gas into Mexico.
Looking ahead, the EIA (U.S. Energy Information Administration) estimates natural gas prices averaging $3.27 per MMBtu in 2017. Prices averaged $2.49 per MMBtu in 2016 and $2.63 per MMBtu in 2015.
Dixie Riedel was the target of K.C. Wolf on Valentines Day! Dixie’s husband Phil had a little something to do with K.C. Wolf delivering Flowers and Chocolates to her at the KMEA offices. Of course, the entire staff knew about the surprise and anxiously awaited his arrival.
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KMEA Staff met with SEGA Engineering and Dogwood Energy Staff on February 9th, 2017. Steven Hilger, P.E. (NAES), Plant Manager provided a tour of the facility and gave an in depth report on operations. The meeting took place as part of the “Due Diligence” process prior to KMEA entering into an agreement with Dogwood Energy.
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KMEA Staff Visited the Cities of Humboldt and Altamont on February 9th 2017
 Alan Schweitzer, Johnson City, City Superintendent |
 Tyce McMillan, Johnson City Assistant Superintendent |
 David Rohrenback, Johnson City Power Plant Superintendent |
KMEA Staff met with employees of the City of Johnson City on January 31st. Alan Schweitzer, Tyce McMillan and David Rohrenback took time out of their morning to visit with us about how the City is moving forward and replacing the aged power plant with two new CAT powered generators. Tyce McMillan is set to take over as the City Superintended later this year as Alan intends to retire.
 Bob Arellano |
 Keo Bopunpaseuth and Sam Mills |
KMEA Staff visited the Jameson Energy Center on January 30th. Sam Mills, Managing Director, Electric Operation and Gerry Bieker, Manager, Member Services visited with Bob Arellano and Keo Boundpaseuth and toured the facilities.
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Staff visited the cities of Cimarron, Garden City, Lakin, Johnson City, Hugoton and Montezuma on January 30th and 31st.
In 2007 Gas Generation was on margin, meaning setting the price of energy, 75% of the time. Today Gas Generation sets the marginal price for energy just under 50% of the time. This has been driven primarily by an increase in wind technology in the marketplace. Wind Generation now makes up greater than 15% of all installed generation in Southwest Power Pool. Wind Generation only sets the market price when there is an excess of energy and units are priced to come off line … in other words when, prices are very low. What does all this mean to you?
The past two years the difference between a gas vs. coal unit on margin has been irrelevant because gas prices have been low. This has translated to real time energy prices being proportionally very low.
Currently we have opposing market conditions, rising gas prices with a decrease in gas units on margin. Coal and Gas unit’s prices are starting to diverge creating a condition where we could see more swings in the real time energy price. Hopefully, overall average prices will stay proportionally low but we could see a lower correlation between on peak and off peak prices.
KMEA member cities invested in a 24/7 operations staff that is positioned to respond to the real time market. KMEA staff monitors the market and is able adjust schedules and instruct dispatch to meet potential increase in price volatility.
2016 was an eventful year for your agencies and I wanted to hit on a couple highlights. We continue to grow in both agencies – 3 new members began taking natural gas supply from KMGA – the City of Burrton, the City of Russell’s power plant, and finally the City of Wellington’s power plant and Fire station. On the KMEA side, the City of Kiowa joined the EMP3 group and the City of Anthony joined the EMP2 group. We now have 33 cities under our three EMP groups including the City of Eudora where we manage the cities energy supply and interaction with the Southwest Power Pool energy markets.
After a thorough process managed by the EMP joint advisory committee, the Agency transitioned to an in-house 24/7 operations. In addition to the benefits of managing these services in-house (control, confidentiality, sustainability, etc.), the Agency saved over $350,000 per year from the prior third party contractor costs. The 24/7 Operations started up without a hitch on September 29. I want to personally thank the KMEA staff (Tom, Sam, Paula, David, Kent, D.J., Garrett, Neil, John and Jennifer) for their outstanding efforts to make this transition as easy and as smooth as possible.
2017 will also be a busy year as we continue to work on power supply opportunities regarding potential renewable resources (wind and solar) and the Dogwood Energy Facility. In addition, we will continue to be heavily involved in the Southwest Power Pool activities this year as SPP continues to evolve and make changes regarding the Integrated Marketplace and the regional transmission system.
Finally, we are looking to improve our communication stream with all our members and this e-newsletter is just one of the ways that we will reach out. In addition to your existing staff, your new Manager of Member Services, Gerry Bieker, has hit the road running (literally) since coming on board in August. We value these face-to-face meetings with the membership and hope you do as well.
The entire KMEA staff looks forward to working with all of you this upcoming year!
