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KEC CEO


Staying course and being prepared


nother year has gone by and what a year it was. We saw the oil and gas industry enter into a serious slump that rivals the mid- eighties to the mid-nineties. We see the result of this at the state level with agencies and services getting prepared to cut their budgets to the bone. Kay Electric Cooperative will certainly feel the ripple effect of low- er oil prices. However, we did learn some lessons from the eighties and we are certainly better prepared this time around. We spend a tremen- dous amount of time forecasting and budgeting so that we are not caught off guard when a downward economy occurs. Consequently, when things do slow down, we are in a better fiscal position. In 2014, KEC saw record revenues topping 44 million dollars. In 2016, we expect revenues to be down approximately 10 million dollars from our peak, two years ago. Obviously, this is very signifi- cant and could have been a serious issue. However, we expected the oil to experience a downward cycle. Although our 2016 budget shows a significant decrease in revenue, our projected margins and key financial ratios are still healthy and should carry us through 2016 without major concerns.


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Cooperatives are not “profit driven” and we do not exist to maxi-


Marland Substation 2


mize stock holder’s returns. We truly exist to do what profit-driven utilities would not, provide the best quality electrical service to the rural areas at reasonable and competi- tive prices. The cooperative busi- ness model places importance on the essential service of providing electricity, not maximizing profits. Having said that, all cooperatives must have consistent and positive returns to keep in operation. Hav- ing excellent margins the past few years has allowed your cooperative to continue to improve our system to insure quality service for decades to come. KEC has converted near- ly all of the system to 14,400 volts over our traditional 7,200. This allows us to carry stronger voltages further, reduce our line loss and serve larger load. KEC has minimal exposure of numerous split feeds coming from different directions or sources, greatly improving safety for linemen and line contractors. We have and will continue to experience the “big brother” effect of the federal government on our industry through the Clean Power Plan that was created by the EPA to control and regulate greenhouse gases. Although insuring that we all have clean air, water and soil is extremely important, weighing the cost versus the benefit must also be considered. Costly regulation for relatively little or no gain on global emissions that would send electric rates much higher is not prudent. Your cooperative will continue to encourage our federal and state elected officials to practice respon- sible governance and oversight of agencies that could dramatically affect our industry.


Mother Nature allowed us a very mild year with very little weather trouble until December 27th. On that date, a significant ice storm slammed our entire system caus-


ing major problems. The longest outage lasted nearly one week. As bad as it was, it could have been much worse. KEC has made major improvements to the strength of the system since the 2002 ice storm and it showed. Although we lost approximately 200 poles and had as many cross-arms damaged, we were able to get most services back up rather quickly under the circum- stances and keep everybody safe. We constantly identify areas where we need system improvements to attempt to lessen the effects of a major storm.


When a major storm hits, the inconvenience of having no power certainly causes some hardships. In 2016, KEC implemented a gener- ator program that allows members to purchase a whole-home genera- tor from the cooperative. These generators are extremely valuable during an extended outage. Mem- bers may also qualify for a credit on their electric bill if we can load control your home during critical peak times of the year. Your board, CEO and employ- ees love representing you, the members, and working to improve and maintain your rural quality of life. We understand what we have in rural Oklahoma. Our traditions run deep and we are dedicated to the members to provide quality electricity to run your homes and businesses. We look forward to a successful and safe 2016.


Sincerely, Tim Rodriguez


Medford Substation


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