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President’sReport Report


The year 2014 marks the 76th anniversary of Harmon Electric Association. Your annual meeting will be held on Friday, April 4, 2014 at the Hollis Civic Center in Hollis, OK. Your board of trustees and management encourage you to attend and take an active part in your association. Financially, 2013 was another


good year for Harmon Electric. We generated $223,843 in margins. We also met all RUS and CFC requirements and ratios in 2013, which means your cooperative remains strong and in good financial condition. The positive margins were generated with an overall


increase in sales by 10% compared to 2012. Most of this increase came from the residential class which had an increase in sales of 53% compared to 2012. This increase was mainly due to the extreme heat we experienced this past summer and the brutal winter temperatures that started in November.


2013 also saw a 16% increase in expenses. Most of this increase continues to be in our operation and maintenance expense. As I am sure you know, the cost of doing business continues to increase. Plus, we continue to rebuild from the 2010 ice storm. This process was fully implemented in 2012 and to date we have rebuilt around 390 miles with around 600 miles left to rebuild.


This alone is the main reason our expenses continue to


increase. We anticipate expenses to remain elevated for the next couple of years as we continue the rebuilding process. With our small staff this process has been a challenge, but one that has been met head on. We continually remind ourselves that you, the member are the reason we push forward. Once the rebuilding is completed, we will have a much improved system and one that will provide improved service reliability for years to come.


Harmon Electric finances have always been tied to the


weather. The more extreme the conditions, the more margins we generate. As a board, we realize during extreme years it can put a financial burden on your household budget as well as affect the cost of doing business. Because of this we take our responsibility of representing the members in our districts very seriously.


When making decisions we always keep in mind how it


will affect you. We weigh the impact it will have on you with what will keep your cooperative in good financial condition. We never forget that you are ultimately the one we all have to answer to. Being locally owned and controlled is just one thing that makes cooperatives different.


Because of the increase in expenses and the anticipated costs in the next few years, your board of trustees has decided not to pay any capital credits on the 1982 rotation at this year’s annual meeting.


Patronage capital for 2013 will be


allocated to your account for the margins of 2013. Your board of trustees is committed to making the rotation of consumers’ capital credits a priority. When financially possible, Harmon Electric will once again be paying back capital credits. This is one more thing that makes cooperatives different from other business models. Our goal continues to be providing safe reliable


electricity at an affordable cost while maintaining excellent service. We know that you the member are the reason for our


existence. We urge you to attend your annual meeting on Friday, April 4, 2014 and take an active role in your cooperative.


Manager’s


I am proud to present to you Harmon Electric Association’s 2013 Annual Report. This report contains the current status of your cooperative. You the member are part owner, so please take an active part and plan to attend the Annual Meeting.


The older I become, the more I realize


there will always be challenges in life. And, just like life, challenges are continual for your cooperative. As noted in the President’s


report, we continue the rebuilding process due to the 2010 ice storm. Although this is a challenge and can be diffi cult at times, we know that in the end it will be worth the effort. We do this for you the member/owner. Another important aspect of expenses is our wholesale power costs. Currently around 50% of your power bill goes to Western Farmers Electric Cooperative (WFEC) for wholesale power costs. We are continually doing all we can to control that expense. A big part of controlling the power costs is our demand side management programs. This year I would like to challenge you to join us and help control


costs. There are a couple of ways you can help in controlling the wholesale expense. One, curtail usage during the peak period from June 20th to September 9th between 3 p.m. to 7 p.m. If every member would sign up for the “Beat the Peak” notifi cation and curtail their usage it could make a huge difference in Harmon Electric’s cost of doing business. This in turn would help to maintain current rates and prolong future rate increases. Signing up is relatively simple. Let us know and you’ll be notifi ed


by noon on a called peak day by text message. We’ll also post peak day notifi cations on Facebook. Once a peak day is called just a few simple steps can make a difference. Raising your thermostat a few degrees and postponing laundry, running the dishwasher, or taking baths are just a few simple steps you can take to lower your demand. Also, the new proposed Environmental Protection Agency (EPA)


rules for new coal and natural gas based power plants are of great concern. The rules set stringent limits on carbon dioxide (CO2) emissions. This rule would effectively eliminate coal as a fuel source for


electricity. This is a shift from the “All-of-the-Above” fuel strategy to an “All-but-One” strategy. Electric cooperatives along with investor owned and municipals strongly oppose this shift. Co-ops support using a diverse fuel mix including renewables, natural gas, nuclear, and coal to generate electricity. We also support using demand response and energy effi ciency to use that energy wisely to keep costs affordable. Historically prices for coal have remained affordable and relatively stable. On the other hand, natural gas prices have shown incredible volatility over time. Since the year 2000, according to the U.S. Energy Information Agency (EIA), the monthly average of natural gas prices has varied from a low of $1.89 per million BTU to a high of $10.79 per million BTU. And that is only the average “wellhead” price, not the fi nal price to households or power plants using that fuel. Even though many co-op members’ bills were higher than normal during the unusually hot summer and the extremely cold winter, it could have been much worse. You were protected from even greater price swings because your power is supplied by a balanced mix of resources. In 2013, WFEC’s fuel mix included 33% coal, 21% renewable, 12% natural gas and 34% purchased on the open market. With coal eliminated, power cost would become very volatile. One estimate has power cost increasing over 30% under this scenario. This is a major concern because it will ultimately have a major impact on your power bill. We do our best to keep the price of electricity at the lowest possible


cost. We do that because we are a cooperative and we look out for our members. This is one issue that we can join together on and let the EPA know that affordability does matter.


This is your cooperative and just like the board of trustees, management and employees, we are all in this together. Please make an effort to join other members and make your voice heard by visiting www.action.coop or www.tellepa.com. Also, encourage your family and friends to voice their opinion as well. When we join together, cooperatively we can make a difference. Join us on Friday, April 4, 2014. We look forward to seeing you.


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