WEC 2012 Annual Meeting - Report

Together We Achieve...

2012 Annual Report

Together We Achieve

Your Board of Trustees Seated, left to right: Donald Ray Wilks, President - District 7 Debra E. Baxley, Secretary - District 1 Donna Parrish - District 2 Nolan Laird - District 9 Standing, left to right: Danny McNeil – District 4 Tracy Reeder - District 5 Greg McCullough - District 8 Kip Justice, Vice President - District 6 John Clark, Jr. - District 3

“We” is a powerful word. In most instances in life, it is much stronger than the word “I.” When “we” do something, it is often much better, more effective and more successful than when we try to do things on our own.

At Wiregrass Electric Cooperative, we believe in the power of “we.” For the past several years, we have operated internally under the standard of “Together W.E. Achieve.” That slogan has a double meaning, with the W.E. standing as an abbreviation of Wiregrass Excellence. That commitment to excellence is at the core of everything we do for you. Everything.

We decided to title this year’s annual report “Together We Achieve” because at no time in our history has unity and partnership been more important. The electric utility industry is facing changes in federal regulations, national policy shifts and market force transitions, all of which could have a significant impact on what we pay for electricity in the future.

To weather these challenges, we cannot stand alone. That is why Wiregrass Electric values the partnerships we have built over time, and why we consistently look to forge new partnerships that will benefit all of our members.

On the following pages, please take a moment to read about our many partners, those who help make Wiregrass Electric the reliable, progressive cooperative it is today. It takes that same commitment to excellence from everyone involved to ultimately deliver superior service. Thank you for being part of the “we” that helps WEC achieve so much.

Michael S. McWaters, CEO

Achieving Through Partnerships The electric cooperative concept began as a partnership between the Rural Electrification Administration and the men and women of rural America who were living without the conveniences of electricity. REA’s low-interest loans and technical assistance, combined with the hard work and community spirit of rural residents, brought lifechanging electricity to the homes and farms outside of the more populated cities.

That sense of partnership continues to today. The graphic at right shows how PowerSouth and Wiregrass Electric Cooperative partner to generate, transmit and distribute power to you and your fellow cooperative members.

The electric cooperatives across the state also partner with one another through the Alabama Rural Electric Association. As a trade group, AREA helps cooperatives control costs through joint purchasing agreements. AREA coordinates disaster recovery assistance among utilities. The group also

distributes Alabama Living magazine, a central part of each cooperative’s efforts to keep their members informed.

So where do members fit into the picture? Remember, you are more than just a customer of WEC — you have a very important role to play in this partnership as well.

• Spend time reading your annual meeting voting packet, then vote in the board elections for the people you believe should lead WEC. • Take advantage of payment options such as bank draft or online bill pay, which cost less to process and reduce WEC’s operating expenses.

• Enroll in H2O Plus to help WEC control the system’s peak energy demand.

• Schedule an energy audit for your home or business to identify and repair problems that are wasting electricity.

As you see, operating a reliable, efficient electric cooperative is only possible when we work together. It is a goal we achieve only through our partnerships.

From our power plant to your front door The partnership that delivers electricity to your home or business

Your ability to cook dinner or watch TV begins with PowerSouth Energy Cooperative.

Before you ever flip a switch to light your nights, the generation facilities owned and operated by PowerSouth must do the complicated work of converting natural resources into electricity. PowerSouth then transmits that electricity to the distribution companies which own PowerSouth. This includes Wiregrass Electric Cooperative. Our job is to receive that power and deliver it to the homes and businesses across our service area. Finally, it’s you, the members, who own the cooperative and do your part to control your energy use in order to help ensure a reliable, affordable power system for generations to come.

Achieving Through Operations

“

We can see a significant difference... this cycle-based approach to right-ofway maintenance has worked.

“

Jerry Sorrells WEC Manager of Operations Jerry Sorells works with crews in the field to maintain our system’s power lines and more.

The operations department is perhaps the most visible among all the WEC departments. Its employees can be seen installing new services, building new lines and putting poles in the ground. During outages, they are the ones working all hours in all weather conditions to restore power to members as quickly — and safely — as possible.

They are also the ones behind the scenes, dispatching crews, working service orders and taking care of the unique needs of corporate members.

One right-of-way cycle complete Trees, limbs and undergrowth are the worst enemies of electric service in rural America. A few years ago, WEC developed an aggressive plan to reduce outages caused by these enemies. That plan recently hit a milestone.

“We divided our service area in to six sections, with plans to thoroughly control vegetation near our power lines in one section each year,” says Jerry Sorrells, manager of operations. “We also have a crew on

a half cycle, revisiting each section every three years to take care of any major growth that has developed.”

This year WEC made its first complete rotation through the six sections. The results have been impressive. “We can see a significant difference in the severity of our outages when storms pass through,” says Sorrells. “This cycle-based approach to rightof-way maintenance has worked. It’s had one of the most significant impacts on system reliability of anything we’ve done since I’ve been at WEC.”

Four-year work plan Building an electric distribution system is a timely process, one that involves a great deal of planning. Every four years, WEC develops a work plan to guide its crews through the various stages of construction.

“If you wait until a section of your service area has no more capacity, you are behind,” says Danny Ealum, director of system operations for WEC. “When we develop our work plan, we study the capacity of our system as well as the growth trends to determine where to build new plant.”

The cooperative is currently in the first year of a new four-year work plan.

Achieving safety Electric utility workers face many hazards on the job, which is why a great emphasis is placed on safety across the industry. WEC enhanced its focus on safety in 2011 when it named Nathan Worsham its safety and compliance coordinator.

“We’re pleased to report that 20 months into our renewed focus on safety, our employees have suffered no injuries resulting in a loss of work time,” says Worsham.

This summer, WEC joined forces with other electric cooperatives across the state to promote employee safety even further. Through the Alabama Rural Electric Association, cooperatives developed the “100% Safe” program, whose tag line reads “Every Day, Every Life.” WEC and other cooperatives are using the logo as a visual reminder to employees to make safety their top priority.

The Operations Team Danny Ealum Director of Operations

Tim Granger Working ROW Foreman

Jerry Sorrells Manager of Operations

Larry Galloway Manager of Service Department -Tammie Byrd -Clint Hatcher -Bill Cobb -David Lamb -Ben Miller -Mark Croom -Amber Jones -Julie Wood

Robbie Daniels Working Foreman -Ryan Stewart -Chad Sorrells -Mark Dillard Joey Brown Working Foreman -Billy Tingle -Mitchie Bass -Jason Grooms Billy Watson Working Foreman -Dexter Tolbert -Greg Bradley -Anthony Glover Bobby Shelley Working Foreman -Johnny Hudson -Jeff Harper -Tim Sanders

Tommy Fondren Manager of Corporate Services -Alan Hollis -Wayne Ford -Tony Gilbert Nathan Worsham Safety and Compliance Director

Achieving Through Engineering

“

Our SCADA system will become more valuable with time.

In conjunction with our other tools, it will greatly improve our operation.

“

(Left to right) Jason Thrash, Danny Adams, Kevin Forsten and Chris Jones help design the infrastructure that delivers electricity to our members.

The electric distribution system is a complicated network of mechanical and electronic equipment, and it is the job of the engineering department to design this ever-expanding network. This year, WEC added an important tool that will help reduce time, save money and enhance safety.

Taking control and gathering data WEC has made a number of improvements to its engineering department in the past few years, most

recently the completion of its outage management system, or OMS. This year, after months of research, WEC installed its most significant addition to date — a SCADA system.

SCADA stands for supervisory control and data acquisition. “In simple terms,” explains Jason Thrash, system engineer, “ it allows us to remotely control several components of our distribution system, while giving us the ability to gather and analyze information about our system from several different sources.”

Jason Thrash WEC System Engineer

SCADA can alert dispatchers of potential problems in real time, allowing them to react quickly before problems lead to blinking lights or power outages. It also allows for remote operation of various pieces of field equipment, saving travel time and reducing risks to the health and safety of employees and the public.

Historical information is also gathered and recorded by SCADA. This includes amperages, voltages, faults and more. Such information will equip

WEC to make educated decisions when it comes to system planning and operations.

The SCADA system integrates with the OMS, as well as WEC’s auto-meter network and phonebased interactive voice response (IVR) system.

“By pulling information from so many different sources, SCADA can quickly give us the data we need to respond to problems on our system, reducing the length of an outage.” says Thrash.

Beyond such analysis, SCADA will allow WEC to reduce the demand for energy when demand is the highest, typically very hot and very cold days every year. It will also help reduce system losses, which leads to a more efficient electric distribution system, lower wholesale energy costs and lower operating costs.

What benefits will members see?

Members will ultimately reap the rewards of these system benefits. They will also see direct benefits from SCADA, including: • Outages originating at a substation can be detected within seconds rather than minutes,

without relying on affected members to be the first line of notification. With earlier detection, WEC can mobilize its personnel to diagnose problems much faster than is currently possible.

• Outages that originate at places other than substations can be evaluated with information gathered from the smart breaker relays at the substations. This allows for better coordination between mechanical and electrical devices. Gathering and evaluating information such as this can lead to changes in the way electronics are programmed to prevent such outages in the future.

• Other devices not currently operated by the SCADA system could be added. This can result in a smarter, more responsive electrical system that provides even greater reliability to members.

“Our SCADA system will become more valuable with time,” says Thrash. “In conjunction with our other tools, it will greatly improve our operation.”

The Engineering Team Danny Ealum Director of Operations

Jason Thrash System Engineer

-Lorrie Hatcher

-Chris Jones

-Danny Adams

-Marritt Dorriety

-Kevin Fortson

-Zane Fowler

Kevin Forston (left) and Jason Thrash monitor the newly installed SCADA system.

Achieving Through Energy Services

“

We can help homeowners identify practical steps that can save them a substantial amount of money on their power costs.

“

Jessie Ingram WEC Manager of Energy Services

(Left to right) Deanna Albritton and Jessie Ingram work directly with members to improve the energy efficiency of their homes.

When Wiregrass Electric Cooperative formed its energy services department two years ago, the message was clear: WEC is serious about partnering with members to help make their homes more efficient.

Since then, the energy services department has helped families, businesses and churches save money by giving them the tools to control their energy use.

Over the past year, the energy services department has introduced new programs to help make that partnership even stronger. WEC now offers a

comprehensive four-step program to help members identify problems, find a trusted contractor and pay for the needed repairs.

Energy Audits For most members, the first step toward a more efficient home starts with a free energy audit. An energy audit from WEC identifies areas in your home where air from the outside is sneaking in, and where your conditioned air is escaping.

“We can help homeowners identify practical steps that can save them a substantial amount of money on their power costs,” says Jessie Ingram, energy services manager for WEC.

The Certified Contractor Network After receiving suggestions from their energy audit, many members did not know where to turn for help in making the needed improvements to their homes. To address this issue, WEC’s wholesale power

partner, PowerSouth, developed a network of certified contractors.

“These contractors are local companies who are already doing quality work in our communities,” says Brad Kimbro, director of member services for WEC. “Now, instead of simply telling our members what improvements are needed, we can also provide them a list of contractors who can help them implement those changes.”

Helping Pay the Way Through a new partnership with PowerSouth and Regions Bank, WEC recently began offering members access to low-interest loans to help make the improvements that will ultimately increase the efficiency of their homes and lower their power bills.

“We have several members who want to improve their homes and use less electricity,” says Kimbro, “but they do not have the extra cash on hand to pay in one lump sum.” Through this partnership, WEC takes one more step toward its goal of helping members reduce their energy consumption.

WEC has also introduced a rebate program for members who install a heat pump or replace their existing heat pump. “A new, high-efficiency heat pump can make a real difference in your power bill,” says Deanna Albritton, energy services consultant for WEC. “Our rebate and loan programs help people afford the equipment and installation, and to start enjoying a more efficient home.”

Habitat for Humanity With its continued partnership with Wiregrass Habitat for Humanity, WEC is able to expand energy efficiency efforts to even more members. Through this alliance, eligible members are able to make much needed home repairs through Habitat’s network of contractors and volunteers.

“So far,” says Ingram, “dozens of our members have improved their energy efficiency through our partnership with Habitat.”

Our Building Blocks of Energy Efficiency STEP 1 Energy Audit Sign up for a FREE home energy audit. For absolutely no charge, WEC’s professional Energy Services Department will come to your home and perform a series of tests designed to find exactly where your home is wasting energy. Our team will then provide you with a customized plan for ways to save you money on your power bill!

STEP 2 Certified Contractor Call one of our certified contractors to make improvements to your home. WEC will provide you with a list of certified contractors who know how to make the improvements recommended by our Energy Services Department. These are trusted local companies with a reputation for doing quality work.

STEP 3

STEP 4

Loan Program

Heat Pump Rebate

Most improvements can be made with little to no cost. For the more significant modifications, WEC announces the new Energy Efficient Loan Program. We now offer access* to low-interest loans to pay for making home improvements. You will be billed

by Regions Bank through a loan program made possible by WEC and PowerSouth.

Save money on a new heat pump. WEC will give you a significant rebate if you purchase a new heat pump to increase your home’s energy efficiency. Combined with the loan program from Step 3, the Heat Pump Rebate Program can help you make the investment to increase your home’s energy efficiency and save you money!

Achieving Through Member Services

“

Our website now allows people to look at how they’re using electricity almost instantly.

“

(Left to right) Sonya Nichols, Jennifer Ward and Bethany Retherford help members get the most out of their cooperative.

Wiregrass Electric Cooperative’s overall goal is to meet the energy needs of its members. While other departments provide the infrastructure needed for reliable electric service, the member services department works directly with member-owners to provide the best member service experience possible.

InControl launches In 2012, WEC achieved a major long-term goal with the launch of its prepay program, InControl.

Jennifer Ward WEC Manager of Member Care Team

Since March, hundreds of members have started prepaying for their electric service instead of receiving a monthly bill. Like its name implies, this program puts members in control of how and when they pay for electricity.

“Through InControl, members can be proactive about their electric usage,” says Rhonda Webb, manager of member services at WEC. “We are able to partner with our members to help them take charge of how they use electricity.”

Excelling at service During May, WEC conducted a survey to gauge perceptions about its service. Ninety percent of members were either satisfied or very satisfied with their personal contact with WEC. That’s well above the national average for utilities across the country.

Almost 50 percent of members said they had contacted WEC for reasons other than paying their electric bill. Of those members, nine out of 10 were happy with the service they recieved — ­ WEC’s

highest score ever. Specifically, members said that they were happy with WEC’s employees, who were described as courteous, knowledgeable and professional.

On your smartphone In February, WEC announced its new app that allows members to manage their account from their iPhone or iPad. In addition to viewing and paying their bill, members can see past bills, update basic account information and report an outage.

“Our new mobile app gives our members the power to manage several aspects of their account at any time,” says Cary Hatcher, manager of member relations for WEC. “You can now manage your account from anywhere you have mobile service or a Wi-Fi connection.”

Improving our website WEC continues to improve and update the online experience of its members. The cooperative’s website, which has earned awards at the state

and national levels, introduced new tools in recent months to help members see their electric use nearly in real time.

“Our website now allows people to look at how they’re using electricity almost instantly,” says Jennifer Ward, manager of the member care team for WEC. “Studies have shown that people who can view this type of information are more likely to control the amount of electricity they use and thereby reduce their bill.”

(Left to right) Rhonda Webb and Gene Brannon helped WEC earn excellent member satisfaction ratings this year.

Always communicating WEC is committed to keeping our members informed. Through our Alabama Living magazine, My Hometown Power and our e-newsletter, we are able to tell our members what their cooperative is achieving every month.

Through our website, Twitter and Facebook, we can directly reach members with important updates about storms, outages and other news as well.

“Communications is a team effort,” says Kimbro, “and I believe our members can see the benefit.”

The Member Services Team Brad Kimbro Director of Member Services Cary Hatcher Manager of Member Relations

Rhonda Webb Manager of Member Services -Gene Brannon -LaRita Creech -Carole Nowling

-Lynn Stewart -Nichole McCollough -Jeri Wiggins -Ashley Gardner

Jennifer Ward Manager of Member Care Team -Sonya Nichols -Bethany Retherford

Jessie Ingram Manager of Energy Services -Deanna Albritton

Achieving Through Management

Your Management Team Foreground: Michael S. McWaters, Chief Executive Officer

Seated, left to right: Danny Ealum, Director of System Operations Jason Thrash, System Engineer Les Moreland, Chief Financial Officer Tiffany Howell, Executive Assistant to the CEO Brad Kimbro, Director of Member Services Administration Janet Henderson, Assistant to the Executive Staff

The role of the Chief Executive Officer and his staff is to carry out the daily management of Wiregrass Electric Cooperative. While this involves attention to detail at a very focused level, it starts with a strategic look at the utility’s overall goals.

“We are committed to providing excellent service to our members,” says Michael S. McWaters, CEO. “We must also control our operating costs and maintain a strong financial position in order to meet the

needs of all our members well into the future. We must stay ahead of the curve and be ready to meet the growing demands of our service area.”

Strategic planning and the adoption of useful new technologies are the keys to achieving these goals.

The WEC management team spends countless hours with our board developing a strategic plan every two years, then maintaining that plan as new developments arise. This plan serves as a road map to guide

the daily activities of each department, moving the entire operation toward a unified goal.

The achievements covered in this annual report are the result of intentional, well-researched longrange planning. From the implementation of an outage management system to the launch of a prepay program, every management decision at WEC is made with the goal of controlling costs while delivering the best service possible to our members.

Wholesale Power Cost as a Percentage of Revenue

(Left to right) Les Moreland, Rebecca Waters and Barbara Berry help manage the finances of the cooperative.

The cost of wholesale power is by far the largest line item among WEC’s expenses. However, WEC has little control over the cost of wholesale power, which is impacted by market conditions and the availability of energy resources such as coal, natural gas and renewables.

Cost of Wholesale Power - 69% Distribution-Operation - 4% Distribution-Maintenance - 4% Consumer Accounts/Cust. Serv. & Info. - 5% Administrative and General - 4% Depreciation - 5% Taxes - 1% Interest Expense - 4% Margins - 4%

The Finance Team Les Moreland Chief Financial Officer

Distribution Expense as a Percentage of Revenue The number of meters and the amount of power WEC sells has continued to grow over the years. However, as a percentage of its total revenue, WEC’s distribution expense (the number WEC directly controls) has remained relatively even for several years.

17.3%

Lisa LeNoir Manager of Accounting -Barbara Berry -Wanda Broxson -Rebecca Waters Tammy Price Manager of Member Accounts -Kay Sullivan Larry Smith Manager of Special Projects

Balance Sheet Assets

liabilities and equities

Utility plant: Utility plant Construction work in progress

Less: accumulated depreciation Net utility plant Other assets and investments: Investments in associated organizations Economic development notes receivable Total other assets and investments

Current assets: Cash and cash equivalents Accounts receivable:

Customers, less provision for doubtful accounts of $67,575 in 2012 and $132,850 in 2011

Unbilled revenue

Other accounts receivable Prepaid Power Materials and Supplies Other current and accrued assets Total Current Assets Deferred Charges: Deferred charges

Total Assets

2012 $81,767,888 598,527 82,366,415 18,384,107 63,982,308

2 011 $ 76,615,728 815,281 77,431,009 16,858,652 60,572,357

14,666,446 236,628 14,903,074

13,209,500 326,121 13,535,621

2,431,153

3,666,037

1,712,362 2,321,510 139,363 4,340,600 567,060 288,012 11,800,060

1,820,750 2,321,510 236,799 8,014,653 386,757 246,212 16,692,718

39,588

4,116

$ 90,725,030

$ 90,804,812

equities:

Memberships Patronage capital Other equities

Total equities

2012

2 011

$ 82,806 47,993,367 2,226,897 50,303,070

$ 81,461 44,743,796 2,149,694 46,974,951

34,715,729 1,259,721 964,883 35,010,567

38,816,449 1,235,875 825,231 39,227,093

964,883 288,739 2,041,934

825,231 287,671 1,862,225

1,469,323 646,514 5,411,393

1,130,164 497,144 4,602,768

$ 90,725,030

$ 90,804,812

long-term liabilities:

Mortgage notes Capital lease obligations Less: Current maturities

Total long-term debt Current liabilities:

Current maturities on long-term debt Accounts payable Customer deposits Accrued liabilities:

Taxes

Other accrued liabilities

Total current liabilities

Total equities & liabilities

2012 figures are from May 2011 to April 2012. 2011 figures are from May 2010 to April 2011. These figures represent the audited financials of Wiregrass Electric Cooperative.

Income Statement statement of revenue

Operating revenue

Operating Expenses: Cost of Power Distribution - Operations Distribution - Maintenance Accounting and Collections Administrative and General Depreciation Expense Taxes Total Operating Expenses

statement of patronage capital

2012 $ 45,708,083

2011 $ 48,420,537

31,568,067 1,875,584 1,768,357 2,457,496 1,800,281 2,467,516 374,857 42,312,158

33,030,469 2,489,762 1,715,928 2,588,344 1,562,175 2,341,209 428,035 44,155,922

Operating Income

3,395,925

4,264,615

Fixed Charges Interest Expense

1,759,627

1,803,684

Operating margins After Fixed Charges

1,636,298

2,460,931

G&T and Other Capital Credits

1,532,703

1,648,493

Net Operating margins

3,169,001

4,109,424

373,231

254,208

3,542,232

4,363,632

Non-Operating margins: Interest Income

Net Margins for the Year

patronage capital at beginning of year

Retirement of capital credits Utility Tax Refund

2012 44,743,796

PATRONAGE CAPITAL AT END OF YEAR

2011 40,398,140

(351,315) 58,654

(172,636) 154,660

$ 47,993,367

$ 44,743,796

Capital Credit Refunds:

Putting your money back into the local economy In the past four years alone, WEC has refunded more than $1.04 million of capital credits (patronage capital) to our members. This is money being put back into the local economy because your cooperative has the financial strength to refund these capital credits.

YEAR

AMOUNT

FOR THE YEARS OF

2012 $224,774 1980-1981 2011 $351,314 1979 2010 $172,763 1977-1978 2009 $291,786 1975-1976

Total capital credits refunded in the history of the cooperative:

approximately $3.6 million

HEADQUARTERS 509 N. State Highway 167 • P.O. Box 158 • Hartford, AL 36344 (334) 588-2223 • 1-800-239-4602 • FAX: 334-588-0683 DISTRICT OFFICES Dothan, AL – 6167 Fortner Street Ashford, AL – 1066 Ashford Road Samson, AL – 13148 W. State Highway 52 Follow us on Twitter: @WEC2 • Like us on Facebook: Wiregrass Electric Co-op

Scan this QR code on your mobile device to access your WEC Account!