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CEO Straight Talk


It is very important that PRECorp, as a company, and you as a member recognize the changes that we have been seeing over the past several years. Since 2000, PRECorp has focused on dealing with exponential system growth. Between 2000 and 2010, PRECorp’s sales increased nearly 88 percent. However, in 2010, our growth was essentially flat. PRECorp has been refocusing its efforts from dealing with exponential growth to operational efficiencies and strategic alignment. m i k e eas l e y, CEO

The idea behind this is to keep ourselves focused on your expectations and to make sure that we do so in the most efficient way possible. You may recall my January 2011 CEO Straight Talk article where I described some of the steps PRECorp was taking to make sure our collective efforts were focused on responding to your expectations. I summarized these expectations by identifying three important things that our members ask of us. We refer to this as the voice of our customer: 1. My electric bill should be affordable. 2. PRECorp’s services should add value to my quality of life.

3. PRECorp should be a good corporate citizen and lead by example.

During our recent All-Team Meeting, I discussed the voice of the customer and how we will continue to align our

efforts in response to this voice. As part of that alignment process, we emphasize five key areas, which have always been a part of our ongoing mission: 1. PRECorp is a Low-Cost Provider of electric service. 2. PRECorp is a High-Quality Provider of electric service. 3. PRECorp strives to enhance the Quality of Life with Member Services. 4. PRECorp creates Positive Community and Social Impacts. 5. PRECorp maintains a Balanced Regulatory Framework.

Beneath these five themes are a host of objectives and initiatives that departments, work groups, and employees focus on in order to meet your expectations and respond to your voice. It is unfortunate that we don’t have the space to take a deeper look into these various objectives and initiatives; however, I would like to expand on one of the initiatives related to the area of being a low-cost service provider. PRECorp’s wholesale power costs represent about 75 percent of our total annual expenses, so obviously our wholesale power costs are an important part of our ability to be a low-cost service provider. Basin Electric, our power supplier, is facing some unique challenges this year, and we are bracing for some very different wholesale power costs in the next year. It is possible that we could see a slight increase in our wholesale power costs before this year’s end. This is something that is very unusual and is a result of the

many factors in the economy and political/regulatory environment. The PRECorp Board has taken some very important steps to help soften the impact of these unusual wholesale power costs. PRECorp’s efforts to manage costs in 2010 resulted in a higher than expected operating margin. We were able to place a portion of these revenues in a revenue deferral program that allows us to carry forward the benefit of a good year to help offset the expenses in a future year. Cooperatives use this revenue deferral mechanism to help manage financial risk, especially when that risk is driven by unique or one-time events. This is a way to keep rates as low as possible, but, at the same time, spread benefits of a good year to future years. At this point, we do not know how Basin will perform, nor do we know what, if any, changes we may see in our wholesale power costs. However, what we do know is that the PRECorp Board has approved a revenue deferral plan that provides us the ability to absorb a portion of this impact should our wholesale power costs increase in 2011. This is one of the many initiatives that PRECorp is undertaking in response to your voice and expectations. I look forward to sharing more of these initiatives in future articles, and I am always willing sit down with you to discuss them in more detail should you have a special interest.

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3. preCorp should be a good corporate citizen and lead by example. 3. preCorp strives to enhance the Quality of life with Member Services. 1...

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