Live LinesWoodbury County Rural Electric Cooperative

2016 Annual Meeting

OFFICIAL NOTICE OF THE 78th ANNUAL MEETINGTO THE MEMBERS OF WOODBURY COUNTY RURAL ELECTRIC COOPERATIVE:

You are hereby Notified that the Annual Meeting of the members of Woodbury County Rural Electric Cooperative will be held at the Cooperatives headquarters building, 1495 Humbolt Avenue, Moville, Woodbury County, Iowa on August 24, 2016, at 6:30 PM.

This meeting is the regular Annual Meeting for the year 2016 as provided in the Articles and By-Laws. At said meeting, action will be taken upon the following matters:1. Reading of the notice of the meeting and of unapproved minutes of previous meetings of the members and the taking of necessary action thereon.2. Presentation and consideration of, and acting upon,reports of officers, directors and committees.3. Election of Directors of the Cooperative as follows:Two(2) Directors to be elected for a term of three(3) years ending at the 2019 Annual Meeting, or when their

successors have been duly elected, to succeed Wayne Rieckmann, and Ronald Steinhoff whose terms will expire at this meeting.4. All other business which may properly come before the meeting.

In connection with the election of Directors of the Cooper-ative, a Committee on Nominations has been appointed and has filed its report. The ballot to be used at this meeting is attached hereto. Please have return address on mail in ballot.

Dated: August 9, 2016 /s/Chris Countryman, Secretary

It’s that time of year again – annual meeting time! On behalf of the Woodbury County REC, we’d like to personally invite you to join us on Wednesday, August 24th at our Moville headquarters building. We look forward to gathering with you- the members of the Co-op community – to enjoy some good food and fellowship. The meal starts at 5:00 p.m. and the business meeting will start at 6:30 p.m.

This event is not only a chance to visit with members of our coop community – it’s also a great opportunity to learn about programs offered by the cooperative and get to know your coop board of directors and staff. Our annual meeting is one way we can inform you about important operational and industry issues that face the cooperative. However, our phone is always on and you can walk in any time during office hours to sit and visit about issues that matter to you, your family, business and local communities.

Woodbury County REC is not owned by far away investors, and it is not run by an appointed board of directors. We are run by a democratically elected board of directors – a board who is given the privilege to serve because of your vote. We encourage you to fill out your ballot found in this annual meeting packet and mail it to us in the provided envelope. Our directors are members of the cooperative and members of your community. They are concerned with the issues you face every day because they face them too.

Come join the meeting, this year’s handout includes an ice-cream scoop for the kitchen. We hope to see you on August 24th.

WELCOME MEMBERS

Mail-in Ballot Prize $250 Bill Credit

Those members who vote by mail will be eligible for a $250 credit on their next electric bill. The name will be drawn at the Annual Meeting on August 26th. You do not need to be present to win.

Director Candidates for 2016The Board of Directors of your electric cooperative are a very important part of the cooperative way of doing business.Directors are the ones who are elected by the membership to oversee the finances and operation of the cooperative. They meet monthly to review the past months financial records and to set any needed policy.

Woodbury County RECs Board is made up of seven members whose term on the Board is for three years. At the 2016 Annual Meeting, to be held on August 24th, the term of two of those directors will have expired and two new directors will need to be elected. Pictured here are those Woodbury County REC members who have been nominated to run for election to the two vacant seats. Beside the picture of each is a short biography so that you may get to know them better.

The Nominating Committee also nominated Kurt Nash but Mr. Nash declined to serve at the present time.

Enclosed with this Annual Report is a ballot where you may vote for the persons you would like to represent your interest on the Board of Directors. Please take a few minutes to review each candidate and voice your opinion by voting.

Dylan Bogenrief Ronald Steinhoff

Wayne Rieckmann

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Door Prizes Free Food Free Gifts for All Business Meeting Director Election

The Annual Meeting will feature:Where: Woodbury County REC office buildingWhen: Wednesday, August 24, 2016 Supper served from 5:00 PM to 6:30 PM Business meeting at 6:30 PMPrize drawing at the end of meeting. The names of 50 lucky members, who register at the meeting, will be drawn for $20 worth of free electricity. Each registered member will receive $5 worth of free electricity.

Mr. Bogenrief is employed at United Bank of Iowa in Holstein IA. He has a degree in Agricultural Business and Minor in Agronomy from Iowa State University. Dylan currently resides nearCorrectionville, IA and in his spare time he enjoys golfing, fishing, helping out on the family farm and cheering for the Green Bay Packers and Iowa State Cyclones.

Mr. Ricekmann is currently serving on the Board of Directors of Woodbury County REC. He is a farmer by trade and also serves as Rutland Township Clerk. Any spare time will find Wayne spending time with his children, Karla and Derek, grand children, entertaining people at parades as captain of the Abu Bekr Shrine Rat Patrol, and barbecue grilling for various events around the area.

Mr. Steinhoff is the parent of two daughters. He has a cow/calf herd, is a Realtor, and travels as a rep for Hot Heels. Ron is cur-rently President of the Woodbury County REC Board and rep-resents Woodbury County REC on the Board of Northwest Iowa Power Cooperative. When time allows he enjoys competitive team roping and hunting.

Reduce Energy Use During Peak HoursPeak hours are the busiest times for your local electric cooperative since many people are using electricity at the same time. In addition, it costs your co-op more to generate electricity when demand soars during peak periods – and the cost of your electricity also may rise. Obvi-ously, using less electricity during peak periods can save your co-op – and you – money.

Here’s how you can help during peak hours, which generally are on the coldest winter days between 5 a.m. and 9 a.m. or between 4 p.m. and 9 p.m. in the spring, summer, and fall

* Shift household chores and activities away from peak periods. Wait to run your dishwasher until you go to bed, for instance.* Use the most energy efficient appliances. Your microwave oven, for example, uses considerable less energy than your stove or cook top.* If you’re buying a new appliance, make sure you get the highly efficient one. Look for “Energy Star” labels when you’re evaluating different models.* Be aware of your energy consumption, and try to get in the habit of using energy efficiently year-round.

Use the energy you need, but use it wisely! You’ll help your co-op avoid building expensive new power plants and that, in turn, will help keep your electric rates stable.

4 p.m. to 9 p.m.

Peak Hours

Woodbury County Rural Electric Cooperative Honored with Economic Development Impact AwardIowa’s rural electric cooperatives utilize strategic partnerships to make a significant contribution to community vitality and sustain-able economies throughout the state. Iowa Area Development Group (IADG) annually recognizes their electric utility members for outstanding commitment, contribution, and participation in business development projects and local community initiatives.

At Northwest Iowa Power Cooperative’s annual meeting in Sioux City four, member electric utility systems were recognized for their economic development accomplishments and commit-ment to their local communities. With the success of these de-velopment projects, the rural electric cooperatives and municipal electric systems are positively impacting the quality of life and the economy of Iowa. Woodbury County Rural Electric Cooperative (REC) has been instrumental in numerous development projects and initia-tives in western Iowa for many years. In recognition of their leadership and support, Woodbury Coun-ty REC was presented with an Impact Award for community development. A recent example of their work includes providing technical and financial assistance to support the construction of a new 4,200 sq. ft. City Hall in Bronson. Woodbury REC was able to provide financial assistance because it was awarded a USDA Grant to start and maintain a Rural Economic Development Revolving Loan Program. A loan was provided from this new fund to help the City of Bronson to finance just over half the cost of the new facilities construction. This new facility positively impacts the whole region, providing much needed community infrastructure by way of space for training and meetings, public services, and access to technology.

“I would like to commend Woodbury REC for their ongoing commitment to community and business development,” stated Rand Fisher, president of IADG. “IADG is pleased to recognize their investment and support of development projects that will benefit the whole region.”

About IADGThe Iowa Area Development Group is the marketing and business development office for Iowa’s member-owned rural electric cooperatives, select municipal electric utilities and independent telecommunication companies. IADG has assisted with over 2,000 successful business expansions and start-up projects. This growth represents capital investment of more than $10.15 billion and 51,500 jobs for Iowa. The Iowa Area Development Group was established in 1985 to promote and strengthen rural Iowa development opportunities.

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2015 2014OPERATING REVENUE AND PATRONAGE CAPITAL $8,996,608 $9,431,812 Cost of Power 5,023,362 5,490,596 Operations and Maintenance 1,116,025 1,144,402 Consumer Service and Marketing 372,784 367,399 Administrative and General 656,074 630,595 Depreciation 673,159 643,359 Interest on Long Term Debt 504,925 501,678 Other Expenses 16,017 7,225 TOTAL COST OF SERVICE 8,362,346 8,785,254 NET OPERATING MARGINS 634,262 646,558 OTHER INCOME AND MARGINS 291,634 334,455

TOTAL MARGINS AND PATRONAGE CAPITAL $ 925,896 $ 981,013

ASSETS 2015 2014

Total Utility Plant in Service $29,356,468 $28,805,050 Construction Work in Progress 1,138,908 70,705 Total Utility Plant 30,495,376 28,875,755 Less: Accumulated Depreciation 9,688,208 9,260,519 NET UTILITY PLANT 20,807,168 19,615,236 Investments in Associated Organizations 2,537,394 2,268,000 Other Investments 190,298 298 TOTAL INVESTMENTS 2,727,692 2,268,298 Cash 135,318 149,823 Temporary Investments 457,396 29,546 Accounts Receivable 906,027 993,701 Materials and Supplies 316,039 129,271 Prepayments 38,063 41,513 TOTAL CURRENT ASSETS 1,852,843 1,343,854 DEFERRED DEBITS 336,256 384,293

TOTAL ASSETS AND OTHER DEBITS $25,723,959 $23,611,681

LIABILITIES AND EQUITIES 2015 2014 Patronage Capital $ 6,272,825 $5,967,975 Margins and Other Equities 7,933,479 7,430,958 TOTAL MARGINS AND EQUITIES 14,206,304 13,398,933

LONG-TERM DEBT 9,826,253 8,701,187

Notes Payable 450,343 250,000 Accounts Payable 537,546 576,865 Consumer Deposits 20,803 21,234 Other Accrued Liabilities 640,683 615,899 TOTAL CURRENT AND ACCRUED LIABILITIES 1,649,375 1,463,998

DEFERRED CREDITS 42,027 47,563

TOTAL LIABILITIES AND OTHER CREDITS $25,723,959 $23,611,681

Financial Report For Year End 2015As a member/owner of Woodbury County Rural Electric Cooperative, it is important for you to be informed about the financial operation of your electric cooperative. The following is the financial statement for the year 2015, which is the last year available. In addition to the 2015 numbers, 2014’s numbers are also shown for a comparison. This report includes the Balance Sheet which lists the Cooperatives Assets and Liabilities and the Statement of Operations which shows where the dollars were spent.

Balance Sheet

Statement of OperationsThis Light Bulb graph shows where each dollar you pay for electricity is spent. As an example; 56 cents of every dollar is spent to purchase the actual wholesale electric power you use.

Power Cost = 56%

Net Margins = 8%Interest = 6%

Operations and Maintenance = 12%

Administrative and General = 7%

Consumer Information and Accounting = 4%

Depreciation = 7%

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A REPORT FROM BOARD PRESIDENT STEINHOFF AND GENERAL MANAGER KENT AMUNDSONIt just seems like a few months ago we were working on last year’s annual meeting information and its time again. This may be because it has been a very busy year. We will try to get the membership up to date on what we have been doing here at Woodbury REC and give you some background and foresight on wholesale power topics that will potentially have an effect on the Cooperative and you as member-owners.

Power costs aside, Woodbury operations staff have been very busy not only with normal maintenance and required system inspections but with construction activities. Due to contractor delays our planned 2015 construction project to replace nearly 16 miles of existing overhead lines with underground lines were pushed back to the fall and started in early September. This year’s construction activites includes replacing 6.5 miles of underground line due to age and increased faults. In addition to these projects, the State of Iowa and the County requested we relocate lines in several areas because of road or bridge moves. Inside staff have been busy reviewing and updating policies including required regulatorypolicies known as our “tariff.” A “Tariff” is a regulatory policy the State of Iowa requires all utilities to have in place. These policies document how the utility will handle operational, safety, customer service, and other topics. The Tariff because of new requirements have doubled in size over the last few years. Another subject that has taken time from internal staff iskeeping abreast of changes to the wholesale power side of the business. There are various components to wholesale power costs and at the distribution level one must know these components, know their drivers, and how they affect the different classes or types of member-consumers here at Woodbury.

The Wholesale power story has had ups and down throughout the year. Northwest Iowa Power Cooperative (NIPCO) is our direct wholesale provider and provides substation service to 7 distribution cooperatives in Western Iowa including Woodbury REC. NIPCO receives about 20% of their power from the Missouri River dam system operated by the Western Area Power Agency (WAPA) and 80% of its power from Basin Electric Power Cooperative (Basin Electric) with generating resources in Wyoming, North Dakota, South Dakota and Iowa.

A few days before the 2015 annual meet-ing and as we reported to you during the meeting. The Environmental Protection Agency (EPA) released the final ver-sion of what is called the “Clean Power Plan.” This plan is designed to reduce greenhouse gas emissions by reducing electricity generation from coal plants and placing stronger emphasis on more renewable energy like wind and solar. This chart represents EPA stated emis-sions reduction goals by state. Following the release of these final regulation 23 states and utilities across the nation including Basin Electric and the National Rural Electric Cooperative Association (NRECA) filed objections to several areas of the plan through the court system. Basin Electric conducted internal analysis to determine what it would take to meet these goals by the year 2020. The analysis resulted in potentially shutting down some coal generating stations which are not yet paid for and had recently be updated for other emissions controls. The preliminary results also included building or contracting for power from an estimated 900 wind turbines and building several natural gas fired generation stations. The estimated cost of this fundamental change is $5 Billion and would involve approximately 500,000 acres of land mostly effected by wind farms. These changes alone are estimated to increase the cost of wholesale power by as much as 40% throughout a 5 to 15 year implementation period. This is terrible news for rate payers especially for those in the upper Midwest.

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Basin Electric long acknowledged that we are moving to a carbon-constrained future. Over the last decade, Basin Electric and our membership have taken a leadership role in the development of renewable generation. We’ve added close to 1,000 megawatts of wind generation to its system, invested more than $1 billion in natural gas resources and have invested more than $1.5 billion in emissions control technology to make our already clean generation fleet even cleaner. Even more, our Dakota Gasification Company’s Great Plains Synfuels Plant is home to the world’s largest carbon capture and sequestration project - capturing more than 30 million tons of CO2. Unfortunately, the EPA’s new regulations does not give credit to anything done prior to 2012.

The good news regarding the Clean Power Plan is the US Supreme Court granted a Stay on February 9th of 2016 halting the rules implementation. The review by a partial Supreme Court panel was originally set for June of 2016 until it was again postponed to be reviewed by the full court around September of 2016. It is anyone’s guess as to whether the rule stands, is struck down, or if certain areas will need further clarification or reworked by the EPA. However, for now at least the timeline for implementation has been extended.

We do have positive news coming from NIPCO. NIPCO Board took action to enter the Southwest Power Pool (SPP) on October 1, 2015. SPP is a Regional Transmission Organization (RTO). NIPCO handed over functional control to approximately 80% of its transmission facilities in western Iowa. NIPCO retains ownership, physical control and operational/maintenanceresponsibilities for the power lines. NIPCO will now receive a new revenue stream from SPP for use of the NIPCO facilities which was the driving force in lowering NIPCO’s wholesale power rate to Woodbury REC in 2016. It was projected Woodbury member’s will benefit by this arrangement by roughly $200,000 per year.

Yet another turn, on June 14th Basin Electric notified NIPCO of an approved mid-year rate increase for wholesale power affective August 1st 2016. Basin Electric attributes its mid-year rate increase to lower than anticipated member sales, due to milder weather, and low commodity prices for fossil fuels such as oil and natural gas. In addition, Dakota Gasification Company, a for-profit subsidiary wholly owned by Basin Electric Power Cooperative, which usually produces a benefit to Basin’s members of $ 78 million a year has incurred substantial financial losses as a result of significant, across-the-board reduction in oil and natural gas commodity prices.

These factors have placed negative pressure on Basin Electric Power Cooperative’s operational costs. In the spring of 2016, Basin Electric cut cost across their facility operations in order to lessen the financial implications to its members. Despite these efforts, there remains a revenue shortfall resulting in the need for the rate increase.

As a result, NIPCO is assessing the impact of the Basin Electric’s mid-year rate increase against the 2016 NIPCO projected Year-End financial statements. The encouraging news for Woodbury REC is that NIPCO is financially strong and is well positioned to deal with the initial impact of the Basin Electric mid-year rate increase. In addition, NIPCO’s October 1, 2015, entry into Southwest Power Pool will enable NIPCO to further absorb some of the effects of the rate increase. Studies continue regarding the net effect and timing of a wholesale rate change from NIPCO to Woodbury REC, at this time.

Woodbury REC is in the process for updating our budgets and financial forecasts. Once wholesale power numbers are received from NIPCO we will have a better idea as to how it may affect Woodbury’s ability to cover costs and manage operations. The next process is to have an outside consultant conduct a cost-of-service and rate study to determine if a rate change is needed and to what extent. Your Cooperative Board and Staff remains dedicated to providing you our member-owners with safe, reliable and affordable electric service and we will hold these principals close in hand while working through these difficult issues.

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IS SOLAR RIGHT FOR WOODBURY REC AND ITS MEMBERS?As a member-owner of the Cooperative Woodbury REC, Board members are required to stay informed about changes to the electric power industry and technologies that have may have an effect on end consumers. One area our local Board has been discussing has been solar energy. Our local Board is conservative and some have had experience with solar themselves in years past. In the 1980’s and 90’s we watched wind energy come and go, come back again with lots of interest at the small residential level then go away. However, large scale wind appears to be here to stay. The Solar industry on the other hand has not yet matured. When thinking about solar there are several options for both an individual consumer and also for utilities or consumer groups like our Cooperative.

We have watched solar technologies advance and have watched policies implemented and tweaked across the nation, with most states taking different approaches and enforcing different poli-cies. Cooperatives across Iowa have taken different approaches to solar energy, some taking a firm hold and going all in to sell ground mounted systems to members, some Cooperatives are adding solar energy to their generation mix so all members share in the costs and benefits, yet some Cooperatives have provided solar options through direct contributions on a subscription basis (usually called community solar). Community solar consists of a larger array being developed and operated by the Cooperative with either credits or special rates for members contributing to the project or purchasing subscriptions.

A July 5th article in Global Energy News “Big solar is leaving rooftop system in the dust” references the economies of scale of installing large utility size arrays versus more expensive small-scale rooftop sized installations. According to the article rooftop style systems are three times more expensive and rely on tax credits or subsidies from the government. The article goes on to say, larger utility scale arrays with its economies of scale may be competitive with little to no subsidies.

Woodbury REC’s stance on solar energy generation has been conservative, to watch the technology, learn from others, and to provide information to members when requested. The technology has improved even within the last three to four years, panel configurations and output has been improved. We have watched other Cooperative’s demonstration projects produce varying kilowatt hour output with an average 17% capacity factor (that is it produces power only 17% of the time throughout the year) and have experienced vari-ous issues from wiring problems to component failures. We have read reports and attended educational sessions where Cooperatives with large amounts of individual solar installations like in Hawaii have experienced power quality issues because of the intermittency issues with solar that require the Cooperative to invest in additional grid equipment to respond. We have learned from third parties and our own analysis individual systems could work well for some members and do not work well for others. Some members have very limited solar capabilities due to property constraints or even property ownership rights. We have also relied on our power gener-ation providers North West Iowa Power Cooperative (NIPCO) and Basin Electric Power Cooperative (Basin Electric) to move forward if the economics become beneficial for larger-scale systems, current analysis says large scale renewable wind generation is more economical than solar and operate at a 40% capacity factor.

We also believe the Cooperative has the responsibility to provide information and to assist members when determining if solar gen-eration is right for you just as we do when you are interested in energy efficiency improvements. Members choosing to self-generate some of your own power will continue to be members of Woodbury REC. We want you to be fulling informed before committing to an installation from the Cooperative’s point of view as well as your own. We want to be asked questions before rather than after the fact. The Iowa Energy Center has developed a “Solar PV Energy Guide” that can be found on our website using the following link http://www.woodburyrec.com/news/Livelines/PDF/15302_IEC_SolarEnergyGuide_Web.pdf. This 30 page guide can help answer questions as well as get you thinking about what questions to be asking when evaluating a solar installation. We encourage any member that is interested in evaluating an individual solar array to contact us for assistance.

The Woodbury REC Board has also discussed if it is time to investigate owning a local medium size array to benefit our membership and share in the costs if economics are right. Whether it be constructed on a subscription basis as a community solar array or just used to supplement our existing power inputs. We would like to hear what the Woodbury Membership would support.

Please complete the enclosed Solar Survey and return it with your ballot.

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How is Woodbury REC member’s energy generated?Over the last decade, Basin Electric mitigated its risk by diversifying its energy portfolio to ensure the most reliable and cost effective power supply possible. The co-op added more than 1,500 megawatts of wind generation capacity and installed more than 1,200 megawatts of natural gas resources. This graphic showed total generating power available to Basin Electric and its members by the end of 2016. Ten short years ago 80% of Basin Electric’s energy portfolio was coal based now it is 45%. Keep in mind only 80% of the power we receive comes from Basin Electric the other 20% comes from the Missouri River Dams through the Western Area Power Administration (WAPA). When this fact is figured into the power generation portfolio available for Woodbury REC members to use, only 36% is coal based generation.

Basin Electric is the wholesale power provider for 138 electriccooperatives across a region that spans nine states from the Canadian to Mexican borders. Those cooperatives in turn serve just under 3 million consumers consisting of residential, commercial and industrial loads in urban, suburban and rural areas.

Basin Electric was created by its members to provide power beyond what theWestern Area Power Administration (WAPA) could provide. At first, this was a modest percentage. In the past 50 years,however, that has changed dramatically. By year-end 2016, the cooperative will hold more than 6,500 megawatts (MW) of nameplate capacity, and will have produced approximately 30 million megawatt-hours in annual sales. To put this intoperspective, one megawatt typically serves 800-1,000 homes.

Basin Electric serves its membership through owned and operated resources along with purchase power contracts. The cooperative holds a diverse generation portfolio mix designed to best serve its members with low-cost, reliable power. Generation resources include coal, natural gas, nuclear, waste heat (known as recovered energy), wind and hydro. In order to balance resources with actual load, Basin Electric and its members continually undergo vigorous load monitoring and load forecasting processes.

Additional Facts about Basin Electric