MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF THE BOARD OF DIRECTORS JULY 21, 1:30 P.M. HEADQUARTERS BOARD ROOM

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1 MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF THE BOARD OF DIRECTORS JULY 21, 1:30 P.M. HEADQUARTERS BOARD ROOM PRESENT: STAFF: GUEST(S): Frank W. Bacon (Chairman) Earl C. Currin, Jr. (Vice Chairman) Paul S. Bennett (Secretary) Herbert E. Winn (Treasurer) Charles J. Friedl Brenda H. Johnson Michael A. Lobue Kristie Martin-Wallace William T. White Frank F. Rennie, IV (General Counsel) Christine Marston (Minute Taker) Jeffrey S. Edwards, President/CEO George A. Felts, VP of Engineering & Operations Services Danny J. Hammond, VP of Finance & Corporate Services Jean H. Morris, VP of Human Resources Allan A. Sharrett, VP of Public & Member Relations Keith Harkins, SVCC VP of Workforce & Continuing Education Mary Jane Elkins, Executive Director SVCC Foundation Dr. Frank Bacon presided. Dr. Earl Currin gave the invocation. PREVIOUS MINUTES On motion made and seconded: The Minutes of the June 16, 2016 Board Meeting are approved as presented. MOTION CARRIED Update on Power Line Workers Program was moved up to this point in the Agenda. Update of Southside Virginia Community College (SVCC) Power Line Workers Program (given by Keith Harkins and Mary Jane Elkins): a. Jeff Edwards was instrumental in getting this program started. b. Started the Power Line Workers (PLW) program with $325,000. Received $200,000 from the Talents Solution Grant through the Governor s office. The Virginia, Maryland, Delaware Association of Electric Cooperatives (VMDAEC) assisted with the startup of the program. Pledges and 1

2 equipment donations from cooperatives statewide have been received; approximately $1.3 million. c. An integral part of the success in the PLW program is SEC s Day in the Life of a Lineman Program attended by high school students throughout the Cooperative s service territory. d. SVCC will be hosting a Day in the Life of a Lineman session at their campus in the future in order to reach a wider range of students. e. The 11-week PLW program provides power line work certification (Level I), CDL licensing, OSHA certification and CPR & First Aid training and certification. f. Potential employers can access information on students who have completed the program. g. Of the 11 students from the first class, 10 have accepted positions with cooperatives or contractors. The 11 th student has turned down a couple of job offers due to location. h. Graduation was another jumpstart to the PLW program. Demos were given during graduation with a number of employers from around the area in attendance. i. Second class of 19 students began July 11 th. The third class is already at capacity and will begin in October j. Starting tuition for the program for the initial class was $9,950 but has been increased slightly due to students being provided their tools through the program. A Workforce Credentials Grant has been set aside to assist applicants with tuition. Students are responsible for 33% of the cost of the program with the grant picking up the remainder of the tuition if they successfully obtain all credentials. k. Nottoway County will be renovating one of the barracks at Fort Pickett in Blackstone, and the PLW students will have first right of refusal. The rooms will cost $15 per night. Nottoway County will be responsible for upkeep and maintenance. l. Very little marketing has been done through SVCC, but the program has been marketed through the VMDAEC Cooperative Living magazine, and the National Rural Electric Cooperative Association (NRECA) will be publishing an article regarding the program in their September 2016 RE Magazine. m. There are scholarships available through the VMDAEC and other cooperatives, including SEC. n. An informational meeting will be held on August 25 th at 6 p.m. at the Occupational Technology Center in Blackstone for anyone who is interested in the program. 2

3 ODEC REPORT The ODEC report was given by Earl Currin and Jeff Edwards. PRESIDENT/CEO S REPORT 1. The Financial and Statistical report for June 2016 was reviewed and is attached to and made a part of the Minutes. 2. The Board was provided information regarding cybersecurity events during the month of June The Institute of Electrical & Electronics Engineers (IEEE) outage data and safety report for June 2016 were reviewed in detail: IEEE Outage Data a. System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) were slightly above historical fiveyear values. System Customer Average Interruption Duration Index (CAIDI) was below historical values for the month. b. There were no power supply outages during the month. c. There were no major event days during the month. d. System performance was driven by significant storms on June 16 th & 23 rd. e. Two, two-man crews were sent to Rappahannock Electric Cooperative on June 17 th to assist with power restoration efforts following the June 16 th storms. Safety Report a. There were no lost-time injuries in June. b. Total lost-time accumulated in June was 0 days. c. As of June 30 th, employees have worked 58 days without a lost time injury. 4. Circuit Reconditioning and Automation update: a. Based on 2009 historical data. b. 60% of outage time driven by 20 worst performing circuits. c. System comprised of 8,200 miles of line; approximately 1,350 miles of 3- phase line. d. Average cost to rebuild 1 mile of 3-phase $75,600. e. Estimated cost to recondition 1 mile of 3-phase $12,200. f. Reconditioning specifications: Replace all lightning arrestors and ensure a minimum of four sets of three-phase arrestors per mile. 3

4 Measure ground resistance on all grounds and ensure a minimum of 4 grounds per mile at 25 ohms or less. Install a minimum of four manual switches per mile. Remove all mechanical jumper connections and replace with compression connections. Replace all flipper-fuse units with cut-out mounted fuse and new lightning arrestor. Replace any damaged pole-top hardware (insulators, cross-arms, braces) g. Addressed 28 circuits since 2011, reconditioned approximately 460 miles of line. Average cost per mile of line $17,877. h. Another 329 miles of line reconditioning to be completed. i. Average annual SAIDI reduction of 12.3 minutes for 16 of the reconditioned circuits. j. Amelia 3 circuit experienced repetitive tree outages in June k. Installed 115 down-line reclosers for remote SCADA capability; 57 circuits completed. l. All of the 2009 worst performing circuits have been deployed with automation. Total investment as of June 30, 2016 approximately $4.0 million. m. Automation has saved the Cooperative outage minutes (SAIDI) year-to-date Western District Office Construction: a. This topic will be a standing agenda item until the construction is complete. b. Partners: MCA Architecture from Greenville, SC handling project design, construction documents (building) and construction administration. Jamerson-Lewis Construction from Lynchburg, VA is the general contractor and is handling site and building construction and Hurt & Profitt from Lynchburg, VA is the civil engineer handling the site design, VDOT, storm water, environmental design and permitting, and soil and construction testing. c. Work completed: Property purchased May 5 th General contractor selection May 10 th Contract with civil engineer May 24 th 4

5 Contract with Multivista (photo site documentation) June 7 th Contract with general contractor June 13 th d. Continued work: Working with FCC on tower permitting e. Architect activity: Warehouse and truck storage designs are complete with construction drawings Office design complete; construction drawings due July 22 nd f. Civil Engineering activity: Site design package submitted and approved VDOT entrance design completed and permit approved Soil borings and report completed Site environmental review and erosion stream review completed; awaiting permit g. General Contractor activity: Preliminary budget completed Pre-engineered metal building bid completed Site excavation bid released and due July 22 nd Site work anticipated early August 2016 h. Bid activity: Pre-engineered metal buildings Bid released on June 6 th and received June 22 nd Bid released to WA Stratton on June 20 th and received July 7 th Bid includes metal shell and erection of buildings for the warehouse and truck storage building Bid awarded to CECO Building Systems, Inc. out of Rocky Mount, NC for $508,063 i. Schedule moving forward: Construction start August 1, 2016 Construction completion August 31, 2017 Ribbon-cutting ceremony August 2017 Open for business October 2, Idle services will be addressed in the next Construction Work Plan. 5

6 7. Scholarship Foundation Committee report: a. The Southside Opportunity Fund, Inc. became an official Virginia corporation on July 12, b. The Board of Directors for the Southside Opportunity Fund will be made up of seven directors: three from the SEC Board, three at-large directors and the SEC President/CEO. c. To date, approximately $31,500 has been raised and $11,000 in scholarships have been awarded. d. Two major fundraising events to be held each year: a golf tournament and a sporting clays event if a location can be obtained. e. The Committee was provided a draft of the IRS 501(c)(3) nonprofit application. Committee members will review the draft and any changes are to be submitted to Frank Rennie by Friday, July 29th with a copy to Jeff Edwards. Mr. Edwards will sign the application and submit it to the IRS. 8. Waiting on RUS to release the report from the Dinwiddie transmission line. NEW BUSINESS 1. In preparation for the NRECA Regional meeting, selection of voting delegates is needed: a. Voting Delegate: Michael A. Lobue b. Alternate: Jeffrey S. Edwards On motion made and seconded: The selection of voting delegates to the NRECA board is approved. MOTION CARRIED 2. In preparation for the National Rural Utilities Cooperative Finance Corporation (CFC) District meeting, selection of voting delegates is needed: c. Voting Delegate: Michael A. Lobue d. Alternate: Jeffrey S. Edwards On motion made and seconded: The selection of voting delegates to the CFC board is approved. 4. SEC Annual Meeting Official Notice: a. Same format as last year for the Annual Meeting Notice MOTION CARRIED 6

7 b. No special mailing to be sent to the membership, the Notice will be in the form of a dust cover on the September issue of the Cooperative Living magazine. c. Proxy prize will be $500. Those proxies received before 5 p.m. on Friday, September 23, 2016, will be eligible for the drawing. d. All Member Nomination Petition forms are due by July 26 th at 5 p.m. Upon motion made and seconded: The Annual Meeting Official Notice is approved subject to no other Member Nomination Petitions being received. 5. Power Requirements Study (PRS) update: MOTION CARRIED a. PRS is an annual projection of members, peak loads and energy sales; forecasts 15 years into the future and is required by Rural Utilities Service (RUS). b. Old Dominion Electric Cooperative (ODEC) and Cooperative Staff prepare the study based on the Form 7 and other load data on industrial and commercial consumers. ODEC uses economic and weather models to forecast future loads based on historical data. c. Used for load projections in the Long Range Plan and Two-Year Work Plan. Also used for financial forecasts, loan applications and annual budgets. At the State level, it is used for input for future transmission and generation project justification. d. Projected minimal residential growth. e. Total kwh projections have been increased indicating growth in consumption as compared to previous projections. f. System demand is forecasted to increase steadily but at a lower rate. g. Engineering must build capacity into the system that can be used during extreme temperature swings. On motion made and seconded: The Power Requirements Study is approved as presented, along with the Resolution for the same, which will be attached to and made a part of the minutes. UNFINISHED BUSINESS MOTION CARRIED 1. SEC Resolution of Appreciation for the Gaff n Go Rodeo participants was presented to the Board for review. On motion made and seconded: 7

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9 STATEMENT OF GENERAL FUNDS AND OTHER ASSETS June 30, 2016 General Fund Cash in Banks 4,915, General Funds Invested CFC - CTC's 2,170, CFC - Patronage Capital 2,163, Federated Insurance Corporation 358, TEC Trading Incorporated 622, Town of Hurt 1, Notes and Accounts Receivable Electric Consumer 6,246, Other Accounts Receivable 3,536, ,015, Material and Supplies in Stock 789, Construction Work in Progress to be Paid from Construction Funds TOTAL 20,804, Construction Funds Available First Citizens Bank 4,881, NOTES STATISTICS CFC RUS & FFB COBANK CFC, COBANK & FIRST CITIZENS BANK Balance Available for Advance 22,000, Gross Obligations 55,340, ,064, ,902, ,000, Interest Paid This Year 1,351, ,111, , , Page 1 of 6

10 Southside Electric Cooperative For the Month Ending June 2016 Comparative Operating Statistics Y-T-D 2015 Y-T-D 2016 June 2016 New Services Connected Meters Removed Meters Reinstalled Services Idle, Excluding Seasonal Number of Services Retired Total Consumers Receiving Service Total Miles Energized ,270 1, ,069 1, ,348 4,546 4, ,220 55,554 55,554 8,229 8,253 8,253 Meters Installed - New Services January February March April May June July August September October November December Total Page 2 of 6

11 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /14/ :07:03 am General Ledger Financial And Operating Report Electric Distribution Page: 1 INCOME STATEMENT FOR JUN Year - To - Date Period - To - Date Item Last Year This Year Budget Current Budget 1. Operating Revenue and Patronage Capital 67,737, ,223, ,249, ,847, ,311, Power Production Expense Cost of Purchased Power 42,327, ,096, ,655, ,202, ,565, Transmission Expense , Regional Market Expense Distribution Expense - Operation 1,664, ,093, ,859, , , Distribution Expense - Maintenance 5,807, ,283, ,433, , , Customer Accounts Expense 1,123, ,068, ,055, , , Customer Service and Informational Expense 1,323, ,296, ,412, , , Sales Expense 255, , , , , Administrative and General Expense 2,996, ,253, ,903, , , Total Operation & Maintenance Expense (2 thru 11) 55,499, ,371, ,601, ,445, ,673, Depreciation & Amortization Expense 14. Tax Expense - Property & Gross Receipts 15. Tax Expense - Other 16. Interest on Long-Term Debt 17. Interest Charged to Construction - Credit 18. Interest Expense - Other 19. Other Deductions 20. Total Cost of Electric Service (12 thru 19) 21. Patronage Capital & Operating Margins (1 minus 20) 22. Non Operating Margins - Interest 23. Allowance for Funds Used During Construction 24. Income (Loss) from Equity Investments 25. Non Operating Margins - Other 26. Generation and Transmission Capital Credits 27. Other Capital Credits and Patronage Dividends 28. Extraordinary Items 29. Patronage Capital or Margins (21 thru 28) 4,997, ,265, ,295, , , , , , , , ,857, ,832, ,977, , , , , , , , , , , ,107, ,287, ,671, ,893, ,185, ,630, , ,578, , , , , , , , , , , , , , , , , , , , , ,428, ,529, ,151, , , Operating - Margin Non Operating - Margin Times Interest Earned Ratio - Operating Times Interest Earned Ratio - Net Times Interest Earned Ratio - Modified 4,428, ,529, ,151, , , Page 3 of /pro/rpttemplate/acct/2.35.1/gl/gl_standard_financial.xml.rpt Lynn

12 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /14/ :07:05 am General Ledger Financial And Operating Report Electric Distribution Page: 1 BALANCE SHEET FOR JUN 2016 Last Year This Year Variance ASSETS AND OTHER DEBITS 1. Total Utility Plant in Service 320,609, ,615, ,005, Construction Work in Progress 10,403, ,789, ,385, Total Utility Plant (1 + 2) 331,012, ,404, ,391, Accum. Provision for Depreciation and Amort. 95,731, ,626, ,895, Net Utility Plant (3-4) 235,281, ,777, ,496, Non-Utility Property (Net) 29, , Invest. in Subsidiary Companies Invest. in Assoc. Org. - Patronage Capital 44,564, ,804, ,240, Invest. in Assoc. Org. - Other - General Funds 2,497, ,530, , Invest. in Assoc. Org. - Other - Nongeneral Funds Invest. in Economic Development Projects Other Investments 1,065, , , Special Funds Total Other Property & Investments (6 thru 13) 48,156, ,196, ,039, Cash - General Funds 7,029, ,915, ,113, Cash - Construction Funds - Trustee ,881, ,881, Special Deposits Temporary Investments Notes Receivable (Net) Accounts Receivable - Sales of Energy (Net) 9,079, ,246, ,833, Accounts Receivable - Other (Net) 3,330, ,536, , Renewable Energy Credits Material and Supplies - Electric & Other 655, , , Prepayments 912, ,027, , Other Current and Accrued Assets 7,070, ,966, ,103, Total Current and Accrued Assets (15 thru 25) 28,077, ,363, , Regulatory Assets 396, , , Other Deferred Debits 6,659, ,112, , Total Assets and Other Debits ( thru 28) 318,572, ,573, ,001, Page 4 of /pro/rpttemplate/acct/2.35.1/gl/gl_standard_financial_bal_sheet.xml.rpt Lynn

13 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /14/ :07:05 am General Ledger Financial And Operating Report Electric Distribution Page: 2 BALANCE SHEET FOR JUN 2016 Last Year This Year Variance LIABILITIES AND OTHER CREDITS 30. Memberships 228, , , Patronage Capital 97,729, ,572, , Operating Margins - Prior Years Operating Margins - Current Year 4,428, ,529, ,898, Non-Operating Margins Other Margins and Equities 42, , , Total Margins & Equities (30 thru 35) 102,429, ,904, ,524, Long-Term Debt - RUS (Net) 17,024, , ,019, Long-Term Debt - FFB - RUS Guaranteed 106,479, ,704, ,225, Long-Term Debt - Other - RUS Guaranteed Long-Term Debt - Other (Net) 55,555, ,138, ,583, Long-Term Debt - RUS Econ. Devel. (Net) Payments - Unapplied Total Long-Term Debt (37 thru 41-42) 179,059, ,847, ,788, Obligations Under Capital Leases - Noncurrent Accumulated Operating Provisions 115, , Total Other Noncurrent Liabilities ( ) 115, , Notes Payable 10,550, ,000, ,449, Accounts Payable 7,459, ,330, , Consumers Deposits 2,622, ,392, , Current Maturities Long-Term Debt 7,378, ,459, , Current Maturities Long-Term Debt - Econ. Devel Current Maturities Capital Leases Other Current and Accrued Liabilities 3,104, ,005, , Total Current & Accrued Liabilities (47 thru 53) 31,114, ,187, ,073, Regulatory Liabilities Other Deferred Credits 5,854, ,517, , Total Liab. & Other Credits ( thru 56) 318,572, ,573, ,001, Current Assets To Current Liabilities 0.90 to to 1 Margins and Equities To Total Assets % % Long-Term Debt To Total Utility Plant % % Page 5 of /pro/rpttemplate/acct/2.35.1/gl/gl_standard_financial_bal_sheet.xml.rpt Lynn

14 CLASS OF SERVICE No. Receiving Service a. No. Minimum Bills d. Avg. No. Receiving Service e. kwh Sold Cumulative f. Amount Cumulative g. 1. Residential Sales (excl seas.) 53,305 50,098,384 7,331, , ,388,541 48,109, Residential Sales Seasonal 3. Irrigation Sales 4. Comm. & Ind 1000 KVA or Less 1,881 5,026, , ,868 27,988,111 3,361, Comm. & Ind Over 1000 KVA 14 5,061, , ,786,935 2,822, Public St. & Highway Lighting 7. Other Sales to Public Authority 354 3,530, , ,695,169 2,422, Sales for Resale - REA Borr. 9. Sales for Resale - Other 10. (1 thru 9) 55,554 63,716,778 8,769, , ,858,756 56,716, Other Electric Revenue xxxxxxxxxxxx xxxxxxxxxxxx 78,931 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 506, Total ( ) xxxxxxxxxxxx xxxxxxxxxxxx 8,847,955 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 57,223,346 ITEM THIS MONTH a. YEAR-TO-DATE b. 1. Net kwh Generated Office Use ,367 1,117, kwh Purchased ,132, Interchange kwh - Net PART D. CONSUMER SALES AND REVENUE DATA June 2016 kwh Sold b. Amount c. PART D. CONSUMER SALES AND REVENUE DATA THIS MONTH YEAR-TO-DATE a. ITEM b. 23,153, Total kwh (1 thru 3) ,132, ,129, Percent System Loss (7/4)x Total kwh - Sold ,716,778 THIS MONTH 472,129, Total unaccounted For (4 less 5 & 6), ,262, Maximum Demand (kw) ,858, Month When Maximum Demand Occurred... YEAR-TO-DATE 182, ,598 February 2016 Page 6 of 6

15 Statements of Cash Flows Southside Electric Cooperative Cash flows from operating activities Period ended Period ended June 30, 2016 June 30, 2015 Electric revenue received $ 59,544,302 $ 68,929,001 Power supply paid (35,139,788) (41,637,746) Operating expenses paid (15,392,948) (14,314,129) Interest received 53,067 69,892 Interest paid (2,836,508) (2,858,766) FEMA monies received 93,622 Cash flows provided by operating activities 6,321,747 10,188,252 Cash flows from investing activities Investment in electric plant,net (12,789,646) (5,274,504) Proceeds from disposal of plant 100, ,417 Installment loans issued (849,816) (739,588) Investment in CoBank (1,000) Proceeds from retirement of CTC's 15,952 Cash flows used in investing activities (13,523,676) (5,883,675) Cash flows from financing activities Proceeds from lines of credit 10,000,000 Payments on lines of credit (5,250,000) Proceeds from long term debt 7,200,000 7,000,000 Principal payments on long term debt (3,743,807) (3,861,865) Capital credits paid to members, net (125,030) (126,210) Proceeds from capital credits 69,359 68,958 Deposits collected from customers (84,072) (88,235) Net change in memberships Cash flows provided (used ) by financing activities 13,316,960 (2,256,842) Net change in cash 6,115,031 2,047,735 Cash at December 31, 2015 and ,681,576 4,981,750 Cash at June 30, 2016 and 2015 $ 9,796,607 $ 7,029,485

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