MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF THE BOARD OF DIRECTORS DECEMBER 17, 1:30 P.M. HEADQUARTERS BOARD ROOM

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1 MINUTES SOUTHSIDE ELECTRIC COOPERATIVE MEETING OF THE BOARD OF DIRECTORS DECEMBER 17, 1:30 P.M. HEADQUARTERS BOARD ROOM PRESENT: STAFF: GUEST: Frank W. Bacon (Chairman) Earl C. Currin, Jr. (Vice Chairman) Herbert E. Winn (Treasurer) Dorsey L. Drawhorn Charles J. Friedl Michael A. Lobue Kristie Martin-Wallace William T. White 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 Frank F. Rennie, IV of CowanGates Dr. Frank Bacon presided and Dorsey Drawhorn gave the invocation. PREVIOUS MINUTES On motion made and seconded: The Minutes of the November 19, 2015 Board Meeting are approved as presented. ODEC REPORT The ODEC report was given by Earl Currin and Jeff Edwards. PRESIDENT/CEO S REPORT MOTION CARRIED 1. The SEC Financial and Statistical report for November 2015 was reviewed and is attached to and made a part of the Minutes. 2. The Cooperative s accounts receivable write-offs were reviewed: a. Accounts receivable write-offs from May 2015 through August 2015 equal $133, b. Year-to-date 2015 percent of write-offs is 0.34% 1

2 On motion made and seconded: The accounts receivable write-offs in the amount of $133, are approved as presented. MOTION CARRIED 3. The Institute of Electrical & Electronics Engineers (IEEE) outage data and safety report for November 2015 were reviewed in detail: IEEE Outage Data a. System Average Interruption Duration Index (SAIDI), System Average Interruption Frequency Index (SAIFI) and System Customer Average Interruption Duration Index (CAIDI) were below historical five-year values. b. There were no power supply outages during the month. Safety Report a. No lost-time injuries reported in November. b. Total lost-time accumulated in November was 0 days c. As of November 30 th, employees have worked 873 days without a lost time injury. 4. Safety Incentive Bonus: a. Tool used within safety program to encourage safe work practices b. Incident rate has increased slightly due to three recordable incidents during the year c. DART rate has remained the same with only one restricted duty incident d. Employees have worked 890 days without a lost-time injury e. Employees are to receive a.55% bonus at the end of 2015, this award is reflected in the 2016 proposed Forecast f. Up to 1% of base payroll may be awarded in 2017 if all safety goals are met in 2016 ($110,000) g. Target goal for 2016 will remain the same as the 2015 goal with a continued focus on a zero lost-time environment h. Based on current data from NRECA s Balanced Scorecard, SEC is in the 1 st quartile performance for incident rate and 2 nd quartile performance for DART 5. A Right-of-Way satisfaction analysis was completed in October. SEC will start putting efforts into increasing member contact through mailings and member visits in an effort to increase the SEC ACSI score. 6. SEC has started using an aerial tree trimming service for clearing some rights-ofway that are difficult to reach from the ground. In these cases, aerial tree trimming cost is $1,200 per mile compared $2,300 per mile by SEC ground crews. The tree trimming is much faster; 3½ days with the helicopter instead of 3 months for ground crews when clearing the same distance. 2

3 7. The Board was provided information regarding cybersecurity events during the month of November NISC system has been used at SEC for over three years. An audit of the system is currently being done to see where the program can be utilized to be more effective for employees. 9. Day in the Life of a Lineman program had 250 students attend from high schools throughout SEC s service territory. A request has been made by CFC for SEC to present the program at one of their meetings. NEW BUSINESS 1. Proposed 2016 Annual Forecast: Proposed 2016 Annual Forecast is based on normal weather patterns and typical energy use and addresses strategic initiatives set by the Board. Items of importance: - Third year with restructured rates - Meets all requirements of lenders - Built around current version of Strategic Plan - Cost of power based upon ODEC 2015 actual cost - Employee bonus based upon ACSI scores Functional variances from previous years: - High of 176 employees in 2007, low of 134 in No additional employees necessary to meet strategic goals; possibility of adding an apprentice line position mid- year - Strategic vision in adding employees Electric revenues and KWh sales forecasted to decrease in 2016; $124.5 million projected revenues and million projected kwh sales Total projected kwh purchase of million ODEC cost of power rates per kwh (8.07 cents) No margin stabilization credit from ODEC budgeted Continued focus on reliability and continued emphasis on improvement of customer service Decrease in Customer Accounting and Administrative & General expenses by 1.0%, and Operations & Maintenance expenses by 10% (vegetation management) Increase in Customer Service expenses by 1.0% and Depreciation & Interest expenses by 3.6% (additional $20 million borrowing from existing loan) Capital credit retirement of $3.0 million Projected kwh sales per rate class: - Residential million (81%) - Small Commercial 54.5 million (6%) - Large Commercial 72.7 million (8%) - Public Buildings 45.5 million (5%) 3

4 Projected revenue dollars per rate class: Residential $105.3 million (85%) Small Commercial $6.9 million (6%) Large Commercial $6.2 million (5%) Public Buildings $5.0 million (4%) Forecasted revenue from all sources $124.5 million Forecasted cost of power $77.6 million Customer Service expenses forecasted at $3.4 million Operations & Maintenance expenses forecasted at $16.0 million Administrative & General expenses forecasted at $5.9 million Customer Accounts expenses forecasted at $2.6 million Line loss of 5.2% Number of accounts 55,576 OTIER of 1.46 Operating margins $2.7 million; total margins $4.0 million Forecast breakdown: - Cost of Power $77.6 million - Fixed Expenses $16.6 million - Manageable Expenses $27.6 million - Operating Margins $2.7 million Addition of new Western District office: Land purchase agreement in place and contingent on rezoning Conceptual plan complete, rezoning activity for property underway Construction completion by June 2017 Estimated project cost of $12.7 million Hurt & Proffitt providing civil engineering designs and support MCA Architects providing architectural and construction oversight General contractor will be determined through competitive bid process Engineering & Operations goals: - Focus on safety: o Continued focus on a zero-injury culture o Continued utilization of a safety incentive bonus o Internal Safety Achievement Inspection o Improve communications from Safety Committee - Reorganization of Engineering & Operations tasks among existing supervision - Focus on improving right-of-way activity and member engagement - Focus on improving Operations efficiency for new construction and work plan construction 4

5 - Reliability improvement projects: o Monitor Reliability Improvement Plan ( ) o Complete Construction Work Plan o Amelia Powhatan 115kV construction o Center Star 115kV right-of-way o Completion of voltage conversion on Gladys, Red House and Stoddart substation o Utilize new OMS package including system automation - Contract Maintenance activities: o Right-of-Way maintenance Continued in-house management of contract resources Continuation of side-trimming program Herbicide program will be idle for 2016 (except retreatments) Continued danger tree and yard tree removals (reduced activity) Improved member contacts o Oversight and administration of Construction Work Plan contractors - Fleet Equipment o 10-pieces of replacement equipment and an addition of a UTV and trailer o Continuation of aggressive danger tree and yard tree removal program - Continued focus on improving maintenance related activities - Continued proactive approach at controlling tree-related damage to the distribution system - Continued implementation of utility best practices for substation, distribution and maintenance activities - Reliance on reliability data to validate system maintenance and construction Financial goals: - Maintain strong financial condition; by meeting RUS mortgage requirements and goals established by the Board of Directors - Provide useful financial reports for management and Board - Grow new prepay, load management and meter data management programs - Increase kiosk participation - Decrease inbound phone calls and increase outbound calls - Increase participation in existing programs Information Technology (IT) goals: - Provide and support technology applications that bring value to employees and members 5

6 - Improve use of Technology Plan and Disaster Recovery Plan - Complete Cybersecurity policies - Continue monitoring facilities through security applications - Improve microwave - Continued use of virtual servers - Improved WiFi throughout Headquarters Human Resources goals: - Attract, select and retain a strong, dedicated employee team o Competitive compensation and benefits plan o Job recruitment o Interviewing/hiring process - Promote employee learning, growth, development and education o Strengthen workforce capabilities o Offer training, education assistance, coaching and mentoring opportunities o Effective and efficient Cooperative to provide excellence in customer service o Employees may receive ¼ of 1% (up to 1.25%) of their salary for each point above the ACSI national average up to a maximum of 5% - Maintain compliance with all applicable employment laws and regulations o Remain up-to-date on employment laws/changes and revise Cooperative policies and procedures as needed o Provide supervisory training o Protection of Cooperative and employees Public & Member Relations goals: - Improve communication and satisfaction by advancing SEC s profile and image throughout the communities served, expanding social media and web presence, expanding member satisfaction surveys (four per year) and increase ACSI scores - Continued involvement in a variety of events and sponsorships throughout service territory - Strengthen connection with membership - Continued use of social media, website and video production - Advertising through brochures, flyers and billing inserts - Use of SEC-customized promotional products for events - Improve community outreach throughout service territory - Annual meeting improvements through installation of permanent outdoor sound system and replacement of incandescent bulbs with LEDs - Improve member outreach through new Member Advocacy Committee and advancement of SEC s scholarship fund 6

7 Upon motion made and seconded: The proposed 2016 Forecast is approved as presented. MOTION CARRIED 2. In preparation for the NRECA Annual meeting a selection of a voting delegate and alternate are needed: Voting Delegate: Charles J. Friedl Alternate: William T. White On motion made and seconded: The NRECA nominated. voting delegate and alternate are approved as MOTION CARRIED 3. In preparation for the NRTC member meeting a selection of a voting delegate and alternate are needed: Voting Delegate: William T. White Alternate: Charles J. Friedl On motion made and seconded: The NRTC voting delegate and alternate are approved as nominated. MOTION CARRIED 4. In preparation for the Tarheel Electric Membership Association (TEMA) Annual meeting, a voting delegate and alternate need to be appointed: Voting Delegate: Earl C. Currin, Jr. Alternate: Jeffrey S. Edwards On motion made and seconded: The TEMA voting delegate and alternate are approved as appointed. DIRECTOR EDUCATION Discussion was tabled until next month. LEGAL REPORT month. MOTION CARRIED Due to a death in Jack Boswell s family, the legal report was tabled until next EXECUTIVE SESSION AND ADJOURNMENT Recognition of five years of dedicated service as a director of the Board was presented to Michael A. Lobue. 7

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9 STATEMENT OF GENERAL FUNDS AND OTHER ASSETS November 2015 General Fund Cash in Banks 10,821, General Funds Invested CFC - CTC's 2,186, CFC - Patronage Capital 2,079, Federated Insurance Corporation 309, TEC Trading Incorporated 622, Town of Hurt 1, Notes and Accounts Receivable Electric Consumer 6,676, Other Accounts Receivable 3,660, ,357, Material and Supplies in Stock 721, Construction Work in Progress to be Paid from Construction Funds 0.00 TOTAL 27,079, Construction Funds Available First Citizens Bank 0.00 NOTES STATISTICS CFC & FIRST CITIZENS BANK CFC RUS & FFB LINE OF CREDIT Allocation Under Notes 56,969, ,337, ,000, Advance to Date 56,969, ,337, ,000, Balance Available for Advance 26,000, Gross Obligations 58,242, ,365, ,000, Interest Paid This Year 2,213, ,071, , Page 1 of 6

10 Southside Electric Cooperative For the Month Ending November 2015 Comparative Operating Statistics Y-T-D 2014 Y-T-D 2015 Nov New Services Connected Meters Removed Meters Reinstalled Services Idle, Excluding Seasonal Number of Services Retired Total Consumers Receiving Service Total Miles Energized ,460 2, ,185 2, ,176 4,459 4, ,076 55,348 55,348 8,213 8,240 8,240 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: /10/2015 8:07:10 am General Ledger Financial And Operating Report Electric Distribution Page: 1 INCOME STATEMENT FOR NOV Year - To - Date Period - To - Date Item Last Year This Year Budget Current Budget 1. Operating Revenue and Patronage Capital 109,632, ,897, ,626, ,233, ,463, Power Production Expense 3. Cost of Purchased Power 65,266, ,959, ,044, ,602, ,322, Transmission Expense 14, , , Regional Market Expense 6. Distribution Expense - Operation 2,747, ,230, ,456, , , Distribution Expense - Maintenance 10,120, ,556, ,408, , ,330, Customer Accounts Expense 2,097, ,009, ,014, , , Customer Service and Informational Expense 2,109, ,366, ,639, , , Sales Expense 373, , , , , Administrative and General Expense 5,267, ,560, ,411, , , Total Operation & Maintenance Expense (2 thru 11) 87,997, ,260, ,448, ,569, ,913, 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) 8,580, ,585, ,782, , , ,300, ,364, ,364, , , ,691, ,372, ,862, , , , , , , , , , ,798, ,653, ,486, ,127, ,371, ,833, ,243, ,139, , , , , , , , , , , , , , , , , , , , ,168, ,767, ,186, , , Operating - Margin Non Operating - Margin Times Interest Earned Ratio - Operating Times Interest Earned Ratio - Net Times Interest Earned Ratio - Modified 7,168, ,767, ,186, , , Page 3 of /pro/rpttemplate/acct/2.34.1/gl/gl_standard_financial.xml.rpt Lynn

12 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /10/2015 8:07:30 am General Ledger Financial And Operating Report Electric Distribution Page: 1 BALANCE SHEET FOR NOV 2015 Last Year This Year Variance ASSETS AND OTHER DEBITS 1. Total Utility Plant in Service 307,236, ,062, ,826, Construction Work in Progress 11,579, ,909, , Total Utility Plant (1 + 2) 318,815, ,972, ,156, Accum. Provision for Depreciation and Amort. 86,797, ,823, ,025, Net Utility Plant (3-4) 232,018, ,149, ,130, Non-Utility Property (Net) 38, , , Invest. in Subsidiary Companies Invest. in Assoc. Org. - Patronage Capital 44,077, ,008, , Invest. in Assoc. Org. - Other - General Funds 2,462, ,497, , Invest. in Assoc. Org. - Other - Nongeneral Funds Invest. in Economic Development Projects Other Investments 1,030, , , Special Funds Total Other Property & Investments (6 thru 13) 47,608, ,355, , Cash - General Funds 7,259, ,821, ,562, Cash - Construction Funds - Trustee Special Deposits Temporary Investments Notes Receivable (Net) Accounts Receivable - Sales of Energy (Net) 7,739, ,676, ,062, Accounts Receivable - Other (Net) 3,069, ,660, , Renewable Energy Credits Material and Supplies - Electric & Other 764, , , Prepayments 313, , , Other Current and Accrued Assets 6,170, ,244, , Total Current and Accrued Assets (15 thru 25) 25,317, ,523, ,205, Regulatory Assets 707, , , Other Deferred Debits 6,682, ,321, , Total Assets and Other Debits ( thru 28) 312,334, ,602, ,268, Page 4 of /pro/rpttemplate/acct/2.34.1/gl/gl_standard_financial_bal_sheet.xml.rpt Lynn

13 SOUTHSIDE ELECTRIC COOPERATIVE Revision: /10/2015 8:07:30 am General Ledger Financial And Operating Report Electric Distribution Page: 2 BALANCE SHEET FOR NOV 2015 Last Year This Year Variance LIABILITIES AND OTHER CREDITS 30. Memberships 228, , Patronage Capital 89,192, ,581, ,389, Operating Margins - Prior Years Operating Margins - Current Year 7,168, ,767, ,401, Non-Operating Margins Other Margins and Equities 92, , , Total Margins & Equities (30 thru 35) 96,681, ,663, ,982, Long-Term Debt - RUS (Net) 17,349, ,807, , Long-Term Debt - FFB - RUS Guaranteed 97,022, ,929, ,906, Long-Term Debt - Other - RUS Guaranteed Long-Term Debt - Other (Net) 58,255, ,491, ,764, Long-Term Debt - RUS Econ. Devel. (Net) Payments - Unapplied Total Long-Term Debt (37 thru 41-42) 172,627, ,228, ,601, Obligations Under Capital Leases - Noncurrent Accumulated Operating Provisions 115, , Total Other Noncurrent Liabilities ( ) 115, , Notes Payable 15,800, ,000, ,800, Accounts Payable 9,073, ,735, ,337, Consumers Deposits 2,704, ,500, , Current Maturities Long-Term Debt 6,483, ,378, , Current Maturities Long-Term Debt - Econ. Devel Current Maturities Capital Leases Other Current and Accrued Liabilities 7,180, ,596, ,583, Total Current & Accrued Liabilities (47 thru 53) 41,241, ,211, ,030, Regulatory Liabilities Other Deferred Credits 1,667, ,383, ,715, Total Liab. & Other Credits ( thru 56) 312,334, ,602, ,268, Current Assets To Current Liabilities 0.61 to to 1 Margins and Equities To Total Assets % % Long-Term Debt To Total Utility Plant % % Page 5 of /pro/rpttemplate/acct/2.34.1/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.) 53,124 45,263,386 7,518, , ,496,260 97,760, Residential Sales Seasonal 3. Irrigation Sales 4. Comm. & Ind 1000 KVA or Less 1,863 4,576, , ,848 54,441,486 6,885, Comm. & Ind Over 1000 KVA 15 7,294, , ,693,328 6,306, Public St. & Highway Lighting 7. Other Sales to Public Authority 346 3,213, , ,561,297 4,834, Sales for Resale - REA Borr. 9. Sales for Resale - Other PART D. CONSUMER SALES AND REVENUE DATA November 2015 THIS MONTH YEAR-TO-DATE kwh Sold b. Amount c. 10. (1 thru 9) 55,348 60,347,709 9,151, , ,192, ,787, Other Electric Revenue xxxxxxxxxxxx xxxxxxxxxxxx 81,626 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 1,110, Total ( ) xxxxxxxxxxxx xxxxxxxxxxxx 9,233,123 xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 116,897,816 ITEM PART D. CONSUMER SALES AND REVENUE DATA THIS MONTH YEAR-TO-DATE a. ITEM b. THIS MONTH a. YEAR-TO-DATE b. 1. Net kwh Generated Office Use ,212 1,988, kwh Purchased ,030, ,101, Total unaccounted For 3. Interchange kwh - Net (4 less 5 & 6), ,535,032 31,921, Total kwh (1 thru 3) ,030, ,101, Percent System Loss (7/4)x Total kwh - Sold ,347, Maximum Demand (kw) ,192, Month When Maximum Demand Occurred , ,271 February 2015 Page 6 of 6