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CEO MESSAGE TO MEMBERS NEW CHALLENGES, TRADITIONAL VALUES.


C


oncern for community is one of Tri-County Electric Cooperative’s seven traditional values. Even in these times


of new challenges, we stand by our values and continue to deliver on our mission to improve the quality of life for those we serve.


When our cooperative was founded 67 years ago, improving the quality of life for our members meant bringing electricity to their locations in rural areas where other utilities wouldn’t go. Today, it additionally means we give back to the communities in which we operate, not just as a company but as individual employees. For example, in 2011 our employees served their communities in more than 50 ways, and when an employee joins a civic club, the cooperative pays the dues.


Some of those same employees you see in your community were featured in a 2011 national television commercial produced by Touchstone Energy Cooperatives, of which Tri-County Electric is a member. Touchstone Energy Cooperatives has more than 700 member cooperatives, so we were honored our cooperative was chosen as one of a select few filming locations. The cover photo of this report was actually taken by the film crew.


The commercial describes our evolution from bringing electricity to people in rural areas to helping those same members learn how to conserve electricity today. It may seem strange that your electric service provider is urging conservation of the product it sells. However, as a cooperative, we have the best interests of our members at heart.


We’re looking out for our members by staying abreast of government regulations that are detrimental to utilities and will raise your rates. We still have no clear national energy policy and as a nation we need a clear and concise energy policy. We want a clean environment but it needs to be done in such a way that the financial impact of providing a clean environment is lessened over time. The move away from a carbon-based generation system requires considerable effort and expense and can’t be done overnight. Some of the recent proposed government rules have unreasonable timelines and expectations. We must protest those proposed rules.


These detrimental regulations are being proposed at a time when our cooperative is experiencing considerable growth in demand for electricity from the oil and gas sector. In 2011, the Cooperative experienced a 9.74 percent increase in kilowatt-hour sales, while the system coincident peak demand increased from 144 MW to 160 MW. Additionally, line loss was reduced from 8.20 percent in 2010 to 6.58 percent in 2011. The increased demand for electricity has necessitated costly upgrades to our system.


Between the system upgrades due to growth and the 2006 acquisition of territory from Xcel Energy, our equity is slightly lower than ideal. However, we grew the equity considerably in 2011 as we had a very good financial year.


As members, you have equity in Tri-County Electric Cooperative. However, that equity is tied up in the system infrastructure, things like poles, wires and equipment. The cooperative doesn’t keep a lot of cash on hand because it is needed to invest in the system.


That being said, members accrue patronage capital in years where revenues exceed costs (i.e., margins). In 2008 and 2009, this didn’t happen and in 2010 we were still recovering financially. Since 2011 was a significantly better year financially, primarily due to no major outlays of cash for weather-related incidents, the cooperative’s Board of Trustees decided to retire $5 million of patronage capital.


Now, the cooperative does not retire patronage capital every year and there is a delay between its accrual and its retirement. For example, 2012 is the first year we’ve retired patronage capital since 2007. The cooperative’s Board of Trustees decided to retire patronage capital from 1977, which was the last year not fully retired, through 1992.


As I mentioned earlier, the cooperative does not keep large sums of cash on hand so it will borrow the money to retire the capital credits. We’re borrowing the money and retiring the capital credits because we owe the patronage capital to our members. It’s part of the cooperative difference. Investor owned utilities are accountable to distant shareholders; we’re accountable to you, our members.


Another way we’re looking out for our members is by moving the annual meeting from a Friday in May to a Thursday in September. We hope this will avoid conflicts with school activities and community events so more members can attend. Again, your Board of Trustees voted for and approved this change. The annual meeting this year will be the evening of Thursday, September 20, at the Texas County Activity Center in Guymon, Oklahoma.


At the annual meeting, we will have votes on several important cooperative matters. The Board of Trustees has proposed changes to the cooperative’s bylaws that will bring us into full compliance with Financial Accounting Standards Board Statement 150. The proposed changes will allow us to retire patronage capital to estates in future years without violating federal rules. In 2012 we will not retire patronage capital to estates as it would cause the cooperative to be in violation of this federal accounting standard. Other proposed changes to the bylaws are minor language clarifications.


Another matter members will vote on is a change in the cooperative’s name from Tri-County Electric Cooperative to No Man’s Land Electric Cooperative. Changing the name will distinguish us from other cooperatives where our current one doesn’t. Currently, 13 other Tri-County Electric Cooperatives are in existence. Members frequently contact or even pay the wrong cooperative and we want to eliminate this confusion. There would only be one No Man’s Land Electric. Look for more on the proposed name change from the president of the cooperative’s Board of Trustees on page 6.


As I look toward the future, I see continued growth in demand for electricity. That means we will need to continue to upgrade and grow our electrical system to serve these demands. I also see our cooperative continuing to be active in the communities we serve, both through charitable contributions and the volunteer hours of our employees. As a cooperative, we will continue to look out for our members by being affordable, innovative and member focused.


Sincerely,


Jack L. Perkins Chief Executive Officer


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