The Empire District Electric Company

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The Empire District Electric Company

602 Joplin Street
Joplin, Missouri 64801
U.S.A.
Telephone: (417) 625-5100
Toll Free: (800) 206-2800
Fax: (417) 625-5146
Web site: http://www.empiredistrict.com

Public Company
Incorporated: 1909
Employees: 855
Sales: $325.5 million (2004)
Stock Exchanges: New York
Ticker Symbol: EDE
NAIC: 221121 Electric Bulk Power Transmission and Control

The Empire District Electric Company is a small Joplin, Missouri-based utility company that supplies electricity to more than 155,000 customers located in a 10,000-square-mile territory that includes southwestern Missouri and neighboring parts of northeast Arkansas, southeast Kansas, and northeast Oklahoma. It also provides water service to three Missouri communities. In addition, Empire invests in nonregulated businesses through subsidiary EDE Holdings, Inc., including fiber optic and Internet services, customer information software services, and close-tolerance custom manufacturing. Empire is a public company and has been listed on the New York Stock Exchange since 1946.

COMPANY HERITAGE DATING TO THE 1800S

The demand for electricity in the area served by Empire grew out of the zinc and lead mines that operated in the tri-state area of Missouri, Kansas, and Oklahoma. In 1870 "black jack" (sphalerite, the chief ore of zinc) was discovered in Galena, Kansas, which set off a flurry of mining activity and the birth of what became known as the "Empire District" or "Little Empire," a name applied by investors alluding to New York's nickname as the Empire State. The Empire name stuck and would be forever linked to the region, even after mining activity eventually petered out in 1970.

Around 1890 electric power was introduced to the larger mining operations, which until then had been mostly small affairs that relied on the brute force of men and mules. With the dawn of the 20th century it became increasingly apparent that the generation and distribution of electricity to the mines had to be better organized and that there needed to be a combination among smaller power companies to create a larger, more cohesive unit. Papers were filed in Topeka, Kansas, in 1909 and The Empire District Electric Company was born. The utilities brought together under the Empire rubric were Consolidated Light, Power and Ice Company (which had previously acquired Missouri Ice & Cold Storage Company and Southwest Missouri Light Company); the Spring River Power Company; The Galena Light, Heat and Power Company; and the Joplin Light, Power, and Water Company. All told, the combination owned 109 miles of transmission line and was able to produce eight megawatts of power, a far cry from the company's 1,100 megawatts of capacity a century later, serving 2,400 customers. Much of the power was provided by two facilities: the Lowell Dam, built at the junction where Shoal Creek flows into Spring River near Baxter Springs, Kansas; and a 5,000-horsepower, Westinghouse steam generator called "Old Kate," which Spring River had acquired in 1906. "Old Kate" had gained fame by supplying the power needs of the 1904 St. Louis World's Fair.

In 1910 Empire became part of the Cities Service Company, now known as CITGO Petroleum Corporation. It was established by Henry Latham Doherty, whose life was a typically 19th-century rags-to-riches tale. Despite growing up poor and going to work as an office boy at the age of 12, he taught himself engineering science and by the age of 20 had become the chief engineer of Columbus Gas Company in Ohio. In 1905 he launched his own company, Henry L. Doherty & Son, offering technical and financial advice to utilities, and also serving as an investment vehicle. He quickly amassed a fortune, but was far from satisfied. Doherty envisioned a huge company that could provide utility services to the fast-growing cities of the western portion of the United States. In 1910 he formed Cities Service, a holding company composed of three main subsidiaries: Denver Gas and Electric, Spokane Gas and Fuel, and Empire District Electric. It later changed its name to Cities Service Power & Light Co.

Far more generating capacity would be needed to meet the demand of the Empire District mines, and so even as Empire was being organized in the summer of 1909 work was begun on the Riverton Generating Station, which became operational in July 1910. In addition to "Old Kate," it included two 7,500-kilowatt Westinghouse turbines and 16 boilers. It was likely that the two units were rebladed several years later, increasing their capacity to 10,000 kilowatts. In 1913 "Old Kate" was supplemented by a 2,000-kilowatt low-pressure turbine that used the steam exhaust of the larger unit, creating one of the first combination engine turbo installations in the United States. Also in 1913, work was completed on the Ozark Beach Dam. The additional capacity gained through these installations was not great enough, however, to meet the demand for electricity created by the nation's entry into World War I in 1917, when the company began constructing a 10,000-kilowatt turbine generator and soon added another 12,500-kilowatt unit, supplied with steam from 16 boilers. Neither worked particularly well, so that after the war the smaller unit was replaced by another 10,000-kilowatt unit and the larger was returned to the factory and rebuilt.

During this period, Empire District added capacity through the acquisition of small utilities. Columbus Electric Company was added in 1910, followed a year later by Empire Electric Power & Supply Company. The company also acquired Neosho Electric Light Company in 1916 and Baxter Springs Electric Company in 1919. Empire continued to act as a consolidator in the region in the 1920s and 1930s. In 1922, an Oklahoma cousin that took the Empire District Electric Company was brought into the fold. Ozark Power & Water Company was added in 1927, as was Taney Light & Water Company, Electric Utilities Company, and Joplin Municipal System in 1929. Then, in 1936, Empire acquired Mid-West Development Company.

During the 1920s mining production soared in the area, and Empire extended its service to many new communities and added a 25,000-kilowatt turbine generator in 1925, and because there was an increasing demand for the more efficient 60-cycle current, three years later a 25,000-kilowatt frequency changer was installed, allowing the company to provide either 25- or 60-cycle current. A year later, in 1929, the need for extra capacity would wane, as the stock market crashed and the United States was cast into the Great Depression of the 1930s. Only with the United States' entry into World War II in December 1941 did the country's industry begin to truly rebound. Most of the readily accessible deposits of lead and zinc in the Empire District had long since been extracted, leaving only low-grade ore, which was only profitable if the prices were high enough. During World War II and for two years afterward, the U.S. government subsidized the production of lead and zinc, greatly needed in the war effort. As a result of price supports, mining activities picked up during this period and Empire benefited.

COMPANY PERSPECTIVES

From the early mining camps to the diverse array of industry found across the four-state region today, the "Empire District" is alive and thriving, in no small part, due to the leadership, courage, and spirit of The Empire District Electric Company.

GAINING INDEPENDENCE IN THE 1940S

In 1935 the United States enacted the Public Utility Act, part of which allowed holding companies like Cities Service to own only one of the public utilities: electric light, power, or gas. By this time, Cities Service had become heavily involved in gas and oil exploration and production, and elected to remain involved in this business and divest its other utility assets, including Empire. Although holding companies were given until 1940 to complete the disposition, Cities Service did not spin off Empire as an independent public company until 1944. As part of the plan, Cities Service added other subsidiaries it owned: Ozark Utilities Company; Lawrence County Water, Light & Cold Storage Company; and Benton County Utilities Corporation. Two years later, in 1946, Empire received a listing on the New York Stock Exchange.

After the government removed price supports for lead and zinc production, mining activity fell off somewhat in the Empire District but picked up again in 1950 when lead and zinc increased in price on their own and production was spurred without the need of a subsidy. Although Empire welcomed the extra business from mines and lead smelting and processing, since the end of the war it had pursued a diversification effort, placing more emphasis on residential customers and farmers. By the early 1950s, Empire served about 124 communities in its four-state territory with a combined population of 300,000. The primary communities served included Joplin and Webb City, Missouri; Galena, Kansas; and Picher, Oklahoma. The company served 8,000 farms directly as well as the area's REA (Rural Electrification Act of 1936) cooperatives. As dairy and poultry farming played a more prominent role in the area's economy, these rural customers became an increasingly important part of Empire's customer base.

In addition, after the war Empire launched a campaign to attract other industries to the area as a way to bring stability to its business, which had long been subject to the cyclical nature of the mining industry. By 1950 the effort succeeded in bringing nearly 100 new manufacturing plants, employing 2,400 people, to the Empire District. Moreover, a pair of Shell Pipe Line pumping stations were constructed in the area and a U.S. Army camp reopened.

With the expansion of its customer base came the need for further generating capacity. In 1950 a new 30,000-kilowatt turbo-generator went on line at the Riverton facility. A year later construction began on a 40,000-kilowatt steam turbine, which went into service in 1954. The cooling system of the generator was later improved, boosting its output to 54,000 kilowatts. From 1959 to 1966 Empire pursued another period of significant expansion because of increased demand for electricity, due in part to promotional programs touting electric space heat and electrical appliances, spending about $25 million during this period on new transmission and distribution facilities. One of the generators was reengineered to add 7,000 kilowatts and a new 12,000-kilowatt combined-cycle gas turbine generator was put in operation in 1964. In addition, Empire built new substations and high-voltage transmission lines, which not only strengthened the system internally but allowed Empire to link up with the greater electrical grid of the Midwest. Also in 1964, Empire opened a state-of-the-industry operations and communications center in Joplin.

Even these additions failed to keep pace with demand for electricity in the area, prompting yet another capital project, the $26 million, coal-fired, 200-megawatt Asbury Generating Station, which was begun near Asbury, Missouri, in 1967 and went on line in June 1970. It was a "mine-mouth" plant, which burned coal from the nearby Empire Mine. The new capacity also helped to replace the loss of the Lowell Dam, which went out of service in 1969. Then, in 1975, the twin 10,000-kilowatt Westinghouse turbines that entered service in 1910 were retired. To make up for some of this loss in capacity, Empire added a 90-megawatt combustion turbine peaking unit near LaRussell, Missouri, in 1978. A second unit of the same size was put on hold when the company was able to procure 80 megawatts of power from a 650-megawatt Kansas City-area plant, but was eventually added in 1981. Both generators relied on oil but were converted to natural gas in 1994.

KEY DATES

1909:: The Empire District Electric Company is formed.
1910:: Empire becomes part of Cities Service Company.
1944:: Cities Service spins off Empire.
1946:: Empire gains a listing on the New York Stock Exchange.
1970:: Asbury Generating Station becomes operational.
1995:: State Line Power Plant opens.
2001:: EDE Holdings, Inc. is formed for nonregulated businesses.

Further changes in the 1980s included the addition of a second generator at Asbury, a 20-megawatt unit that drew on the excess boiler capacity of the original unit. The "mine-mouth" facility would switch to a cleaner-burning blend of low-sulfur Wyoming coal and native coal in 1990 in order to meet more stringent air quality control regulations. Furthermore, in the 1980s, Empire installed a pair of refurbished 16,000-kilowatt Westinghouse generators capable of using either natural gas or diesel fuel. They were put in operation at the close of 1988.

The need for more capacity continued in the 1990s and into the new century. The State Line Power Plant with a 98-megawatt combustion turbine was opened west of Joplin in 1995, and two years later the facility added a 150-megawatt combustion turbine. In 1998 work began on a project to add another 350 megawatts of power: a second 150-megawatt combustion turbine was added to State Line, and the waste heat produced by the two units was used to generate another 200 megawatts of steam-powered combined-cycle energy. The work was completed in 2001 and the electricity entered the Empire system.

DEREGULATION LOOMING IN THE 1990S

The 1990s also brought the possibility of deregulation, as was occurring throughout the country, especially in California. A number of states held off on deregulation, waiting to see what transpired with the "California experiment." Empire, straddling four states, began to prepare for the effects of deregulation in all four states, and participated in the shaping of legislation and regulations that would replace the current system. While deregulation lingered, Empire took steps to diversify and become involved in nonregulated businesses, positioning the company as a regional supplier of choice for energy and energy-related products, including monitored security systems, electrical system surge protection, fiber optic cable leasing, and the sale of natural gas to industrial customers. As part of this effort, Empire launched a branding effort, introducing a new logo and a marketing slogan, "Services You Count On," in 1997.

Empire closed the century by agreeing to merge with Kansas City-based UtiliCorp United, Inc., a deal that would leave UtiliCorp the surviving entity. But in early 2001, at the 11th hour, UtiliCorp pulled out of the deal, which it was allowed to do without penalty, according to the merger agreement, if regulatory approvals were not received by the end of 2000. Although Missouri and Oklahoma had approved the combination, Arkansas rejected it and Kansas had yet to issue a ruling. Hence Empire remained an independent utility, but because a number of people left the company, uncertain of what would happen following the merger, Empire had to fill the gaps that had been created in the workforce by the proposed merger.

By this time, the California experiment had turned into the California disaster and later played a major role in the Enron scandal, making the four states Empire served reluctant to enact deregulation legislation. Empire continued to pursue nonregulated businesses, and in 2001 created EDE Holdings, Inc. to house those assets. The subsidiary made some minor acquisitions in 2002 and 2003, but set an ambitious goal of EDE contributing as much as 10 percent of Empire's earnings within five years. Nevertheless, the delivery of electricity remained the core of the company. To ready itself for the district's future power needs, Empire began work in 2005 on a new 155-kilowatt combustion turbine addition at Riverton, scheduled to become operational in the spring of 2007.

PRINCIPAL SUBSIDIARIES

EDE Holdings, Inc.; Empire District Industries, Inc.; Fast Freedom, Inc.; Conversant, Inc.; Mid-America Precision Products, L.L.C.; Utility Intelligence, Inc.; EDE Property Transfer Corporation.