Issuu

• Local. Loyal. Leading. •

2016 ANNUAL REPORT

HIGHLINE

notes April 2017

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April 2017 Highline Notes

â€˘ Cass County Electric Cooperative Annual Report â€˘

Dear member-owners, Cass County Electric Cooperativeâ€™s focus for 2016 was to serve our members' energy needs with affordable and reliable electricity. We live and work by our values of safety, integrity, innovation, accountability and commitment to community. As a cooperative, we are motivated by our vision to be an industry leader in safety, service, reliability, data security, financial management and employee engagement, with an end goal of building member loyalty. Your cooperative ended the year with strong growth and solid financials. In 2016 we added 2,252 new accounts totaling 47,605 active accounts by year-end. Revenue was at $121 million and operating margins ended the year at $5.88 million.

April 2017 Highline Notes

Local On March 27, 1937, Cass County Electric Cooperative was incorporated in Kindred, N.D. Eighty years later, our principles of local control have not changed. As a cooperative, being locally owned, operated, and controlled is one of our greatest strengths as your energy supplier. As an owner, you have a voice to be heard. Our dedicated employees are here to help answer your questions or concerns by phone, email, in person, or on social media. Management is held accountable by a nine-member board of directors to ensure we are fulfilling our mission, living our values and vision, and operating under the conditions set forth by our bylaws and cooperative policies approved by the board of directors. www.kwh.com

Your power supply from Minnkota Power Cooperative is generated from local energy sources in North Dakota. About 55 percent of your generation capacity comes from coal-fired generation near Center, N.D. About 34 percent of your generation capacity comes from wind farms near the cities of Langdon, Valley City, and Center. We also receive about eight percent of our power from the Garrison hydroelectric power plant and a small portion from market purchases. Local and ample power supply keeps our costs stable. We support our local communities by playing an active role in area chambers, economic development, and the home builders association. Our Operation Round Up program,

• Local. Loyal. Leading. •

contents 2

funded by our members, gave back more than $166,000 to communities in need. CCEC donated $13,000 to Dollars for Scholars, providing scholarships to students at thirteen area high schools. Our local communities are paramount to CCEC, and we will continue to give back in the future. Loyal Our strategic focus is to provide great value for the electricity you purchase. To ensure our strategic goals are top of mind, we have developed a strategy map to help guide us in providing the service you expect. In today's connected world, we work diligently to keep the power on and have plans to enhance reliability to meet the needs of our diverse, ever-changing membership. We carefully manage the money you give us each month when you pay your electric bill to provide you the best value for your dollar. As your cooperative, we are committed to providing a safe work environment for our employees and also to educating our membership on electrical safety. To protect your data, your cooperative is focused on enhancing our data security. Leading Cass County Electric is an industry leader in innovation. We use technology more than ever to run an efficient business and provide the service you expect. In 2016 we completed the installation of an

advanced metering infrastructure (AMI), now consisting of more than 56,000 meters that every day collect over 1,600,000 data points. Members can access their meter data through our online mobile access app called SmartHub. The SmartHub app allows members to view their past energy use by the hour to help them manage their consumption. We also use the meter data to validate performance of our demand response program. Our engineering department uses the meter data to determine line loading, outage verification, and transformer loading to enhance service. In 2017 CCEC will be implementing a drone to view overhead power lines in hardto-access locations without having to use a bucket truck or climb a pole to inspect devices, again to enhance the service to our members. During the Christmas ice storm near Valley City we used some of our newest line equipment like the Prinoth (a digger derrick truck on tracks) and our 4x4 aerial trucks — they proved to be invaluable in the outage restoration process and likely shaved off hours of outage time. CCEC takes great pride in being your local electricity supplier. We have a plan to enhance service for our members to increase value and build loyalty. In the future we will continue to be a leader in our industry to make sure you receive the service you expect.

LETTER

NOTICE OF ANNUALMEETING

LOYAL

LOCAL

10 LEADING

12 FINANCIAL REPORTS Highline Notes • Volume 75, Number 4 •

Writer: Peter Koepp, pkoepp@kwh.com

• Designer: Jocelyn Hovland, jhovland@

kwh.com • Printer: Forum Communications

Printing, West Fargo • Highline Notes (USPS 244-740) is published monthly by Cass County Electric Cooperative Inc., 3312 42nd St. S., Suite 200, Fargo, ND 58104.

• Periodicals postage paid at Fargo, ND

58104. • Subscription Rate: 28¢/month.

• Postmaster: Send address changes to Highline Notes, 3312 42nd St. S., Suite

bylaws and more can be found at www. kwh.com. • This institution is an equal opportunity provider and employer.

ON THE COVER:

Transmission line enhancements continue to bring reliable power to the growing number of members in the Cass County Electric Cooperative service territory.

Marshal Albright, President/CEO

Wendy Loucks, Chairman of the Board www.kwh.com

April 2017 Highline Notes

• Cass County Electric Cooperative Annual Report •

notice of

ANNUAL MEETING The annual meeting of the members of Cass County Electric Cooperative Inc., will be held at the Delta by Marriott, formerly known as Ramada Plaza Suites, 1635 42nd St S, Fargo, ND at 6:30 p.m. on Tuesday, April 18, 2017, to act upon the following matters: 1. The reports of officers, directors and committees 2. The election of three directors

3. All other business which may come before the meeting, or any adjournments thereof

Pursuant to the bylaws, the following members have filed petitions for directorship of the Cooperative: District 4

Jeff Triebold (I)

Fargo, ND

District 5(2)

Thomas Seymour

West Fargo, ND

District 4

District At Large

Joseph Brandt

Marcy Svenningsen (I)

Argusville, ND

Valley City, ND

Program 5:30 - 6:30 p.m. Registration, meal and entertainment 6:30 - 8:30 p.m. Call to order and welcome Establish quorum Review minutes of previous meeting Election of directors Board chairman’s and president’s report Financial report Old and new business Open discussion Adjournment Marcy Svenningsen, Secretary Dated this 28 day of March, 2017

April 2017 Highline Notes

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• Local. Loyal. Leading. •

About Us

• local. loyal. leading. •

ACSI Score The American Customer Satisfaction Index measures overall satisfaction on a scale of 1-100. The national co-op average score was 77.

99.9817%

RELIABILITY The average CCEC member was out of power for 96 minutes in all of 2016.

5,521 Miles of line

103

Stretched straight out, our lines could reach from Fargo to Istanbul and would cover one-fifth of the circumference of Earth.

605 METERS PER EMPLOYEE

total employees

93 full-time • 4 regular part-time • 6 seasonal

93 full-time employees and 56,285 meters

CORE VALUES

Safety, Integrity, Innovation, Accountability, and Commitment to Community www.kwh.com

April 2017 Highline Notes

• Cass County Electric Cooperative Annual Report •

We think local companies are pretty cool. Sure, big national or multinational companies are neat too, but when you call those guys, who picks up the phone? Do you know them? Have you met them before? Do you know their extended family members or their kids’ names? Maybe. But when you call a local company, you might be calling your neighbor. Could be, you’re calling someone whose grandparents were friends with yours or whose kids go to school with yours. Maybe you even called their personal number, because you’ve known them for years.

LOCAL.

During a big storm, a local utility co-op doesn’t keep an eye on the weather report from afar, we just look out the window. When the roads are thick with ice and power lines are laying on the ground, our CEO isn’t relaxing somewhere, wondering how to deal with shareholders. He’s out driving those roads, sending information to the technicians and engineers working with line crews to get things fixed. After all, the power is out at his house, too. We have “Cass County” in our name, so you know we’re close to home. We actually serve electricity to folks in 10 counties, but we pride ourselves on providing the reliable service that those communities need to grow and prosper.

Amy Mahlum Cable Locator

April 2017 Highline Notes

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• Local. Loyal. Leading. •

Volunteerism

Parades, food and supply drives, holiday gift collection, Christmas tree decoration, Meals on Wheels, you name it. CCEC employees are encouraged to volunteer time and effort in the community. Most of our departments do one or two volunteer events as a group each year, too. We’re proud to serve our communities with electricity, but we’re proud to serve them in all other ways as well.

Operation Round Up

Since organizing our Operation Round Up program in 1993, Cass County Electric Cooperative members and employees have raised over $2.5 million which has gone back into the community to help individuals and nonprofit organizations in need. It’s all done by rounding members’ bills up to the nearest dollar and employees’ paychecks down to the nearest dollar.

Power Mix

The majority of the electricity used by CCEC members is generated in North Dakota. In fact, except for a small percentage that comes from a wider energy market, the electricity you rely on all comes from North Dakota wind turbines, coal power plants, and a hydroelectric dam.

In 2016 $166,570 dollars were given back to 63 local nonprofits!

Access to Employees

The 93 employees of your co-op are also your friends and neighbors. Many of us grew up around here, most of us live nearby, and a lot of us are even members of CCEC. We rely on the same service we work hard to provide, so we understand your expectations and do everything we can to meet them.

Power Mix 55% Coal 34% Wind 8% Hydro 3% Other

Governance

Service Centers

Our executive staff is overseen by a nine-member board of directors. These people must run for a spot on the board – they’re voted in by members each year at the annual meeting — and they represent geographical districts that cover our entire service territory. Once voted in, a board member serves a three-year term, making sure your cooperative is meeting the needs of all members efficiently and accountably.

We’re ready to go, wherever the action may be. With service centers in Fargo, Kindred, Lisbon, Arthur, and Valley City, no matter where you are in our service territory, you can rest assured that we’ve got you covered. Our crews are on call around the clock and pride themselves on quick and safe power restoration. Equipment may fail and weather may strike, but CCEC is ready to respond.

www.kwh.com

April 2017 Highline Notes

Bill Casey

Power Control Technician

• Cass County Electric Cooperative Annual Report •

LOYAL.

We answer to you. As a not-forprofit cooperative, our members are our only shareholders. You’re our bosses; you elect the board of directors. You own this company, and we exist to serve you. Ultimately, everything we do is to improve service, increase safety, and maintain affordability for you. Being our shareholders, we return our margins to you in the form of capital credits. Last year, a total of just over $1 million in capital credit refunds was issued to members, and we’re planning to increase that sum each year over the next several years. Since 2000, our number of active accounts has doubled, yet the number of employees remains the same. We’ve improved our workflow efficiency with technology and continuous employee training to ensure that you get the most out of every penny you invest in the cooperative.

April 2017 Highline Notes

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• Local. Loyal. Leading. •

Member Accounts

Our member accounts team is dedicated to serving members, both in person and over the phone. In 2016, the member accounts team helped facilitate more than 15,000 service transfers, including setting up accounts for more than 6,000 brand new members.

40,350

Restoration Efforts

When storms strike and knock the power out, CCEC’s line crews work around the clock to get it restored. If the outages are widespread and numerous, our crews are determined to work until the job is done or conditions become too dangerous to continue. They’re loyal to the members to the core and won’t leave a job unfinished.

incoming calls answered in 2016.

SmartHub

Power Control

24/7, 365 days per year, our power control center is staffed. Our technicians keep a constant eye on CCEC’s entire electric grid and are ready at the first sign of trouble. If an outage occurs, they’ll summon a crew and begin coordinating restoration efforts to get power back on as safely and quickly as possible.

Here’s a simple concept: the less paper we use, the less money we spend, and as a non-for-profit co-op, those savings are passed on to you. We promote paperless billing, giving members a shot at winning prizes like gift cards. With the SmartHub web and mobile app, you can manage your account from your computer or phone instead of from an envelope. We like it, you like it, and the trees don’t mind either.

7,919

Safety Safety is a top priority at CCEC. Our line crews attend 10 to 12 in-house safety training sessions each year. Topics range from personal protective equipment training to arc flash safety and pole-top rescue practice. Additionally, crews attend off-site specialty training sessions that focus on more specific equipment. All employees also attend regular safety training on topics such as CPR, first aid, and defensive driving.

993,404

hours worked since last OSHA lost time incident by the end of 2016.

CCEC members are enrolled in paperless billing, 16 percent of our total membership.

Rebates

We’re looking out for you. CCEC strives to educate members about energy efficiency to enable wise use of electricity and discourage waste. We’ll offer advice on heating and cooling systems to help you get the most for your hardearned cash. We’ll even give you some money back when you buy qualifying new equipment and put it on the off-peak program.

$ 35,809

saved by members on heating and water heating equipment purchases in 2016!

www.kwh.com

April 2017 Highline Notes

• Cass County Electric Cooperative Annual Report •

LEADING.

Some people might associate electric co-ops with old fashioned methods and technology. While we were formed in 1937, we’re certainly not outdated. In fact, being at the forefront of innovation is in our nature. We strive to provide a safer, more reliable, and always affordable service. To do that, we are always on the lookout for the next thing that can make your experience better. In 2016 we added a community solar array to our mix of renewable energy. We finalized plans to welcome another 100 megawatts of wind energy. We also made sure to stay ahead of a new and growing electric load – vehicles. We’re jumping on the drone bandwagon and are keeping our own vehicle fleet fresh with new digger-derricks and tracked utility vehicles. We wrapped up a massive meter upgrade project and saw solid growth in the use of SmartHub, our web and mobile app. SmartHub uses the data collected from the advanced meters to show users their own energy use and put the power of knowledge in your hand. We aim to continue our leading ways well into the future to meet your expectations.

Greg Depee

April 2017 Highline Notes

www.kwh.com

IT Security Administrator

• Local. Loyal. Leading. •

EV Chargers

In 2016, CCEC partnered with West Acres Mall to install a 240V Clipper Creek electric vehicle charging station in the mall parking lot. As the popularity of electric vehicles (EV) continues to grow, CCEC is excited to work with businesses and EV owners to accommodate the next era of personal transportation.

Drone Technology

The sky is the limit – literally. In 2016, CCEC purchased an unmanned aerial vehicle (UAV), commonly known as a drone, to add to its arsenal of tools. Two CCEC employees worked to obtain Federal Aviation Administration (FAA) certification and flight training for the robotic device. Soon the drone will be used to examine power lines and equipment in hard-to-access locations.

Solar

Prairie Sun Community Solar became the first active community solar project in North Dakota in 2016. The array’s 324 photovoltaic solar panels began generating electricity in September. Participating members began seeing a solar credit on their monthly electric bills not long after.

Forbes reports that electric vehicle sales increased by 37 percent in the United States in 2016.

IT Security

These days, cyber security is more important than ever. As we become more reliant on digital tools and the internet, we must become more aware of the threats that exist. CCEC has made cyber security a high priority, taking every caution to ensure that members’ data and information is safe and secure.

Veterans Substation

To continue to provide reliable service to the growing Fargo and West Fargo areas, Minnkota Power and CCEC commissioned the new Veterans substation. The substation served as the first phase of a $30 million project by Minnkota Power to upgrade power transmission equipment in the region.

Since coming online in September 2016, Prairie Sun Community Solar has generated more than 44 megawatts of electricity – enough to power a TV for nearly 13,000 days, 342 computers for an entire year, and has offset the amount of pollution an average car would generate over 13 years.

AMI Conversion

In 2016, CCEC completed a $6.4 million meter conversion project. Since 2012, nearly 26,000 old meters were swapped out with updated ones capable of two-way automated communications. Upgrading to an advanced metering infrastructure (AMI) provides a wealth of energy use data that CCEC can use to quickly diagnose problems and help members use energy more efficiently.

www.kwh.com

1.6 million pieces of usage data collected EACH DAY!

April 2017 Highline Notes

• Cass County Electric Cooperative Annual Report •

Comparative Statistics

(excluding subsidiary)

Member accounts served Total kWh sold Revenues *Avg. selling price per kWh sold ** Power cost per kWh sold ***Operating cost per kWh sold Employees (full-time)

2016

2015

% Change

47,605 1,161,113,165 $121,241,584 10.44¢ 7.65¢ 2.29¢ 93

45,353 1,144,971,497 $115,783,792 10.11¢ 7.43¢ 2.16¢ 94

5.0% 1.4% 4.7% 3.3% 2.9% 5.9% -1.1%

*2015 U.S. median 11.08¢, **2015 U.S. median 7.15¢, ***2015 U.S. median 3.75¢

kWh Sales Growth

(rounded)

(millions)

Directors’ Expenses

2016 director expenses totaled $148,579. Per member cost equals $3.12. Directors’ expenses include fees paid for attendance at regular monthly board meetings, other industry-related meetings, including training, and reimbursable travel expenses.

Wendy Loucks Board Chair District 5(1), Fargo

2012

Avg. Selling Price/kWh

2013

2014

2015

2.29¢

2.16¢

3.66¢

3.75¢

CCEC

2.02¢

2016

3.62¢

2015

2.03¢

2014

591

1995 2000 2005 2010 2016

Member Accounts Served

3.48¢

2013

2.23¢

10.44¢

484

board of directors

11.08¢ 10.11¢

21,100

April 2017 Highline Notes

2012

764

16,900

11.10¢ 9.40¢

949

29,300

10.84¢ 9.48¢

1,161 35,200

U.S. Co-ops

CCEC

10.70¢ 9.90¢

U.S. Co-ops 47,600

2016

Operating Costs/kWh (excluding power costs)

Auditor’s Statement

The financial statements for Cass County Electric Cooperative Inc. and subsidiary as of and for the years ended December 31, 2016 and 2015, have been audited by an independent accounting firm, Eide Bailly. An unmodified opinion was issued for each year. Copies of the complete audited financial statements are on file at the cooperative’s office.

Russell Berg Vice Chair District 6, Horace www.kwh.com

Marcy Svenningsen Secretary District AL, Valley City

Jeff Triebold Treasurer District 4, Fargo

• Local. Loyal. Leading. •

CONSOLIDATED STATEMENTS OF OPERATIONS OPERATING REVENUES Electric Electric - deferred revenue Other electric Total operating revenues OPERATING EXPENSES Cost of power Operations and maintenance Member accounting Member service, informational and sales Administrative and general Depreciation Taxes Interest on long-term debt Other electric Total operating expenses OPERATING MARGINS BEFORE CAPITAL CREDITS Other cooperative capital credits Net operating margin NON-OPERATING MARGIN Interest income Other Lease income, net Income tax loss Loss on dissolution of subsidiary Net gain on sale of investments Total non-operating margins NET MARGIN

Douglas Anderson District 2, Arthur

Sid Berg District 3, Colfax

John Froelich District 1, Valley City www.kwh.com

2016 $120,838,575 0 403,009 121,241,584

2015 $114,575,602 700,000 508,190 115,783,792

88,808,104 7,478,956 1,970,143 953,593 3,687,022 6,925,817 845,213 4,467,919 221,781 115,358,548

85,045,036 6,560,403 1,910,613 931,633 3,423,348 6,404,259 834,999 4,638,476 29,219 109,777,986

5,883,036 299,391 6,182,427

6,005,806 304,151 6,309,957

635,853 19,552 257,756 0 -128,883 7,733 792,011

625,142 17,189 232,577 -345 0 0 874,563

$6,974,438

$7,184,520

Glenn Mitzel District 5(3), West Fargo

Steve Swiontek District 5(2), Fargo April 2017 Highline Notes

• Cass County Electric Cooperative Annual Report •

CONSOLIDATED BALANCE SHEETS ASSETS ELECTRIC PLANT In service Electric plant under construction Total electric plant Less accumulated depreciation Net electric plant

2016

2015

$247,486,588 7,142,156 254,628,744 61,860,134 192,768,610

$235,679,809 10,167,976 245,847,785 58,761,385 187,086,400

OTHER PROPERTY & INVESTMENTS Investments in available-for-sale securities Investments in associated companies Other investments Special funds Total other property and investments

3,057,380 7,580,967 229,898 5,300,000 16,168,245

2,458,226 7,480,492 235,150 5,300,000 15,473,868

CURRENT ASSETS Cash and cash equivalents Temporary investments Current maturities of avail-for-sale securities Current maturities of ERC loans Accounts receivable, net Material and supplies Prepayments Interest receivable Total current assets

12,126,456 6,000,000 250,078 0 13,573,651 2,322,607 295,243 92,114 34,660,149

9,443,670 0 452,241 763 11,866,620 2,491,733 241,694 67,732 24,564,453

2,106,097

2,457,121

$245,703,101

$229,581,842

DEFERRED DEBITS Retirement security prepayment

Staff

TOTAL ASSETS

April 2017 Highline Notes

Scott Handy President & CEO

Retired May 9, 2016

Marshal Albright President & CEO www.kwh.com

Karen Egeberg Executive Assistant

Brad Schmidt VP of Engineering and Operations Retired August 31, 2016

• Local. Loyal. Leading. •

EQUITIES & LIABILITIES EQUITIES Patronage capital Other equities Accumulated earnings of subsidiary Accumulated other comprehensive loss Total equities

2016

2015

$80,613,718 16,423,724 0 -11,341 97,026,101

$76,075,780 11,440,168 3,514,436 -28,190 91,002,194

LONG-TERM DEBT, LESS CURRENT MATURITIES & CUSHION OF CREDIT

120,428,084

110,855,343

OTHER NONCURRENT LIABILITIES Pension restoration plan Deferred revenue Accumulated provision for pensions and benefits Total noncurrent liabilities

0 5,300,000 2,135,734 7,435,734

401,399 5,300,000 2,131,656 7,833,055

CURRENT LIABILITIES Current maturities of long-term debt Current maturities of post-retirement benefits Accounts payable - general Accounts payable to associated co. - power costs Customer deposits Accrued taxes Accrued interest Other current and accrued liabilities Total current liabilities

5,676,285 200,000 704,341 8,795,339 1,772,900 1,849,763 15,599 1,045,434 20,059,661

5,314,000 325,000 900,669 7,907,459 1,560,666 1,844,806 44,294 1,153,922 19,050,816

400,886 259,958 92,677 753,521

452,915 387,519 0 840,434

$245,703,101

$229,581,842

DEFERRED CREDITS Consumers’ energy prepayments Estimated installation costs - special equipment Consumers' prepayments on community solar garden Total deferred credits TOTAL EQUITIES & LIABILITIES

MISSION

Jodi Bullinger VP of Engineering and Operations

Chad Sapa VP of Corporate Services/ CFO

Tim Sanden VP of Information Technology/ CIO www.kwh.com

Paul Matthys VP of Member and Energy Services

To serve our members' energy needs with affordable and reliable electricity. April 2017 Highline Notes 15

• Cass County Electric Cooperative Annual Report •

3312 42nd St. S., Fargo, North Dakota 58104 800.248.3292 • www.kwh.com

LO CAL.

CCEC

LOYAL.

LEADING.

Annual Meeting

April 18, 2017 | 5:30 Registration & Meal | 6:30 Business Meeting Ramada, soon to be Delta by Marriott - 1635 42 nd St S, Fargo 701.356.4526 for more info Roast beef meal | Entertainment by Tucker'd Out 16

B ri n g t h is page for a chan ce to win priz e s!

April 2017 Highline Notes