PRESIDENT'S MESSAGE

By Todd Ware, President & Chief Executive Officer

Every year during our Director Elections, we request and gather your questions about the cooperative that you would like us to answer. We receive quite a few, including common themes reflecting what is on your mind for that year. As I worked through what we received this year, I realized how many great questions we've been asked over the years! It occurred to me that sharing the answer with more than just the member who asked could be valuable to you.

Below are some of our members' most commonly asked questions with answers.

What makes up the monthly bill for our members?

Natural gas bill consists of two components:

1. Gas Cost (GCR): GCR is a direct pass-through of the purchase price of gas, including transmission pipeline charges to deliver gas to our system.

2. Distribution: These are charges for our costs to maintain, improve and operate the system to deliver gas from the interstate pipeline interconnect to your home. This includes the infrastructure rider, which provides for the replacement of aging infrastructure.

Electric bill consists of three components:

1. Generation: This cost has increased slightly over the past few years and is a complete pass-through from Buckeye Power.

2. Transmission: AEP transmission lines deliver the power to our system. This cost has increased significantly over the past several years and is a direct pass-through from what AEP charges us. We have no control over those costs.

3. Distribution: These are charges for our costs to maintain, improve and operate the system that delivers the electric from our interconnections with the transmission grid to your home.

How does the cooperative determine member rates?

We use several methods to determine how and when we make rate changes for our members. Below are some examples of what we do to ensure we are charging all of our members appropriately:

1. The first and most effective process is a cost-of-service study. This is completed by an outside party, who looks at all expenses and revenues for a certain test year (usually the year prior to when we do the study). They look at the overall rate structure and each consumer class to ensure that each class pays the appropriate portion of the costs. As you might expect, this process is costly, so we only do one every four years.

2. The other method completed each year is an MDSC review after the initial budget. We review the modified debt service coverage ratio (MDSC) to ensure it meets our bank's minimum requirement to avoid defaulting on our mortgage. If this shows we need additional rate changes, we review it with the board to make other changes.

How are cooperatives regulated?

Cooperatives are not regulated in Ohio because they are specifically excluded from regulation via the Ohio Revised Code. After all, we are owned by our members. The regulating body of a cooperative is the Board of Directors, which the members elect. When retail choice was introduced in Ohio many years ago, cooperatives were excluded from this law because the cooperatives owned their generation in Ohio, which is to serve their members. Members still reap significant benefits from this generation today via Buckeye Power's daily generation baseload and its constant price.

Why do Directors run unopposed in some elections?

The cooperative works hard to fulfill the seven cooperative principles daily. Principle #2 reflects that a cooperative is run through democratic member control. Therefore, the members have control over who is elected to the Board of Directors via nominations and ballot votes every year. Next time you receive a ballot with one Director running in a district, remember that means there were no other nominees - your nomination and vote matter!

I hope some of the answers to these commonly asked questions helped you learn more about your cooperative and educate you on why or how we do what we do!