American Oil and Gas Reporter - September 2016 - 108

ConventionCoverage: Kansas Independent Oil & Gas Association

From left, Earnest Lehman, president and general manager of Midwest Energy; Gary
Aksamit, president of Aksamit Resources; Stuart Lowry, president and chief executive
officer of Sunflower Electric Power Corporation; and KIOGA Electric Committee Chairman
Adam Beren, president of Berexco LLC, comprised a panel on electricity costs at KIOGA's
annual meeting.

More specific to Midwest Energy,
Lehman said a large part of the company's
26 percent rate increase during the past
10 years was driven by making up for
"20-30 years of underinvestment in our
transmission and distribution system."
"Going forward, I don't see our rates
going up 2.6 percent a year," he predicted.
"The investments we have made are going
to provide benefits for the next 30-60
years."
Lowry projected Sunflower's rates
would remain flat in 2017-18, and then,
thanks to a supply contract that expires
in 2018, "we will see a pretty noticeable
rate reduction in 2019."
Likewise, Lehman offered, "Beginning
next summer, reduced wholesale power
costs will bring bills down 6.0 percent. I
think the message is that you have seen
the worst. It gets better from here."
Broaching the topic of retail wheeling,
Beren noted that Texas' deregulated electric
rates had dropped over the past 10 years
and now were less than Kansas' rates
eight years ago.
Gary Aksamit, president of Aksamit
Resources, asserted that Kansas customers
were paying $800 million a year more
than they would if the state had a deregulated marketplace.
Oil Field Riders
KIOGA has proposed what it considers
win/win proposals to a task force of the
industry's power providers that it believes

will allow the most marginal oil loads to
continue running as long as possible
while preserving load for utilities. Beren
emphasized KIOGA's belief the proposals
would benefit all utility customers by
preserving load in the face of rising operating costs.
Those proposals, Beren outlined, are:
* A marginal well rider that would
provide a lower rate for very marginal
loads;
* A low oil price rider that would reduce rates when oil prices were down in
exchange for a surcharge when prices
rose;
* Load control that would provide
producers a lower rate in exchange for
allowing the utility to turn off power
during peak demand; and
* An economic development rider to
offer producers incentives to place new
demand in service.
Lowry said Sunflower was in the early
stages of discussing KIOGA's proposals.
"Our members value the oil load they
serve," he assured. "At the same time,
they have to balance the interests of multiple groups of rate payers. Every time
you make a change to rate design, you
shift costs from one group of customers
to another."
Lehman observed that demand charges
comprised a significant portion of producers' electric bills, and said Midwest
Energy was speeding its review of this
summer's peak demand by three months.

108 THE AMERICAN OIL & GAS REPORTER

"Hopefully, a number of producers will
be able to drop to a lower demand rate,"
he expressed.
He also said Midwest was "committed
to adopting" an oil version of its pumpsmart program for irrigators, under which
the utility could shut off irrigation pumps
for four- or six-hour periods up to 20
times during peak summer usage. "We
rebate back to participating customers
about three-fourths of the cost of capacity
we otherwise would have to buy," he reported.
Midwest also is "looking at reinstituting" a low oil price rider, although Lehman
recalled that during a previous oil industry
downturn, a similar program "didn't get
any takers."
Finally, he said, "I have to withhold
judgment on a marginal well rider, but
we certainly are willing to look at the
data."
Beren argued that oil field load-consistent with national and state statistics-
should be charged less than residential
and irrigation customers. Finally, he observed that utilities' bylaws didn't allow
oil customers to serve on utility boards if
they lived outside a utility's district, even
though they represented a significant portion of the customer base.
Lease Level Actions
Echoing Beren's observation on the
importance of controlling electricity costs,
Leon Rodak, vice president of production
for Murfin Drilling Co. in Wichita, opened
the afternoon survival seminar with several
ideas for reducing power demand at the
lease level.
"Number one is to match pumping
capacity to your production capacity," he
suggested, citing such variables as pump
size, stroke length, time clocks and jack
shafts.
"In addition to reducing your power
cost, properly sized equipment will reduce
rod, tubing, pump and unit wear, and rod
fatigue," he commented.
Size optimization extends to saltwater
pumps, Rodak went on, observing, "It
may not pay to pressurize 2,000 barrels
of water a day to 800 psi if only one of
your injection wells has pressure and the
rest are on vacuum."
Positive displacement saltwater pumps
should run as close to full time as possible,
he advised. "Oversized pumps pressure
higher and pull more electricity injecting
three hours a day versus 20 hours a day,"
he said.



Table of Contents for the Digital Edition of American Oil and Gas Reporter - September 2016

Contents
American Oil and Gas Reporter - September 2016 - Cover1
American Oil and Gas Reporter - September 2016 - Cover2
American Oil and Gas Reporter - September 2016 - Contents
American Oil and Gas Reporter - September 2016 - 4
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American Oil and Gas Reporter - September 2016 - Cover3
American Oil and Gas Reporter - September 2016 - Cover4
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