President’sReport Report
Burk Bullington President
The year 2017 marks the 79th anniversary of Harmon Electric Association. Your annual meeting will be held on Friday, April 7, 2017 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, 2016 was a good year for Harmon Electric. We generated just under $9 million in revenue and ended the year with $252,470 in margins. We met all RUS and CFC requirements and ratios in 2016, which means your cooperative remains strong and in good financial condition. The positive margins were generated due to a combination of
factors. Revenue remained relatively stable this past year with overall sales increasing only by 2.5% compared to 2015. This is the fourth year in a row that sales have remained flat due to mild temperatures. Residential sales were down slightly again in 2016, but sales were up in our irrigation and industrial classes which helped stabilize overall sales.
The best news from 2016 is the completion of the 2010 ice storm FEMA rebuild project. In April, after 6 long years, the last line was rebuilt and that long difficult chapter came to a close. The much improved system has held up to several ice storms as well as other adverse weather conditions. It’s good to hear from our members about how much better their service reliability has been since the rebuild. Serving the members is the very reason behind each decision we as your board of trustees makes. Your best interest is always at the forefront of these decisions because we are members also. With the completion of the rebuild, now comes the task of dealing
with the financial impact from the increased debt. Two things that impact the bottom line are interest and depreciation. Both have increased because of the ice storm. In 2016, the interest increased by $58,000 and depreciation increased by almost $190,000. Since 2011, depreciation has increased by almost a million dollars. There are several ways to deal with this increase in fixed expenses. Increase revenue by either increased sales or a rate adjustment and/or cut expenses. Unfortunately, your board of trustees determined a minor adjustment was needed due to flat sales. This adjustment was seen in the customer service charge and went into effect in May. We were also able to cut expenses by over $405,000 in 2016.
This was made possible by continuing to operate with fewer employees and less expense from operations and maintenance. Some of the decrease is because the new lines don’t require as much maintenance and upkeep. There is nothing that can be done about the interest and depreciation expense. Both of these items are fixed costs. The only thing we have any control over is the expense from operations and maintenance. These are things we continually keep an eye on and are always looking for ways to control these costs. Your board of trustees, management, and staff are all committed
to do everything we possibly can to continue to provide 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 7, 2017 and take an active role in your cooperative.
Manager’s I am proud to present to you
Harmon Electric Association’s 2016 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.
Charles Paxton General Manager
As noted in the President’s report, your cooperative
remains financially strong. Although we remain financially strong, because of the increase in fixed costs discussed in the President’s report, 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 2016 will be allocated to your account for the margins of 2016. 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. As you know, Western Farmers Electric Cooperative
(WFEC) is also a non-profit electric cooperative, of which Harmon Electric Association is one of the founding member/ owners. WFEC is our Generation & Transmission Cooperative and provides all of our wholesale electricity needs. Around 50% of what you pay on your electricity bill goes directly to WFEC for wholesale power costs.
This relationship has been in existence since 1956. Since
the inception, WFEC’s board of trustees has elected to not pay back any capital credit refunds, until now. In 2016 the board of trustees of WFEC determined they were in a position to return capital credits to its member/owners. The board voted to pay capital credits on the 1956 through 1976 rotation. For Harmon Electric this amounted to $486,312 returned for those years. I am very pleased to inform you that your board of trustees voted to pass this on to our membership. What this means for you is, if you had service from 1956 through 1976, you will be receiving a capital credit check for your percentage of usage during those years. We will be distributing these checks at this year’s annual
meeting. This is just another good reason to attend. We always look forward to the Annual Meeting and we hope you do as well. It gives you an opportunity to visit with your board members and the employees of your cooperative. You will also be brought up to date on the activities of your cooperative.
Once again we will be serving a burger lunch this year. When you register you will receive a ticket for the lunch. The employees will be cooking and as always will do a great job. Also, as noted in the annual report, we will be giving away
a flat screen TV for the grand prize. We will once again be giving away $50 for some lucky winner in each district plus there will be other numerous prizes given away during the meeting.
Make plans to join us on Friday, April 7, 2017. We look forward to seeing you.
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