MINUTES SOUTHSIDE ELECTRIC COOPERATIVE

MEETING OF THE BOARD OF DIRECTORS JUNE 19, 2014 @ 1:30 P.M.

HEADQUARTERS BOARD ROOM PRESENT: Frank W. Bacon (Chairman)

Earl C. Currin, Jr. (Vice Chairman) Herbert E. Winn (Treasurer) Dorsey L. Drawhorn Charles J. Friedl Michael A. Lobue Kristie Martin-Wallace William T. White John M. Boswell (General Counsel) Christine Marston (Minute Taker)

STAFF: Jeffrey S. Edwards, President/CEO George A. Felts, VP of Engineering & Operations

Dan Hammond, VP of Finance & Corporate Services Jean H. Morris, VP of Human Resources

GUESTS: Fred Davis, Key Accounts Representative Frankie Jackson, Network Administrator Glenda Tucker, Systems Administrator

Dr. Frank Bacon presided and Dorsey Drawhorn gave the invocation.

PREVIOUS MINUTES On motion made and seconded:

“The Minutes of the May 2014 Board Meeting are approved as amended.” MOTION CARRIED

ODEC REPORT The ODEC report was given by Earl Currin and Jeff Edwards.

PRESIDENT/CEO’S REPORT 1. The SEC Financial and Statistical report for May 2014 was reviewed and is

attached to and made a part of the Minutes. 2. Fred Davis gave an update on the Cooperative Connection Card Program:

a. A nationally recognized brand that helps to promote the Cooperative in local communities and encourages members to shop locally. Approximately 450 cooperatives participate in this program nationwide.

b. Provides added value to being a member of the Cooperative.

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c. SEC has 102 businesses participating across its service area. d. Members have saved approximately $82,000 in prescription drugs

since the program was launched in September 2012. e. Touchstone Energy Cooperative provides all promotional materials,

maintains national website, establishes agreements with national accounts and provides cooperative contacts.

f. SEC’s responsibilities: Purchase and distribute savings cards Assist with recruiting local businesses Establish point of contact for members Print and distribute promotional materials Promote to participating businesses, employees and members

g. Co-op Connections is on Facebook and Twitter and has a mobile app. 3. Prepaid Metering update:

a. Prepaid service will be available to residential consumers (Rate Schedule A) only and is on a voluntary basis.

b. Members subject to serious medical conditions are not eligible for the program.

c. Members will receive service upon request with no security deposit required. If security deposit had been previously paid, it will be applied to any outstanding balance owed to the Cooperative. If no balance due the deposit will be returned to the member.

d. Initial fee of $15 will be charged to existing members along with a minimum prepayment balance of $25. New members will be charged a $30 fee plus a $5 membership fee.

e. Meter will be read at least once each day. f. An account balance calculation will be made after each day’s usage

and after each payment. g. The monthly consumer delivery charge of $18 will be prorated daily by

dividing it by 30.4. h. A monthly bill will be made available by member request only. Details

of daily usage will be made available through automated phone system and internet-based account management service.

i. At the time of enrollment the Cooperative and member shall agree to a low balance notification amount (reasonable approximation of 5 days of normal usage - $25 minimum).

j. If account falls below minimum, member and/or third party will be notified daily by telephone, email and/or text messages.

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k. If suspension of service is required, the Cooperative will issue a notice that the service will be suspended if no payment is received by 7 a.m. the following day. Suspension of service can occur seven days a week.

l. If a positive balance is re-established, resumption of service will occur within three hours (24/7).

m. Benefits of Service: Will save members money; no late, reconnection or collection

fees Average members will consume approximately 10% less energy No security deposit required Convenient automated payment arrangement plan on balances

owed to the Cooperative Convenient for landlords Less financial risk and lower operating cost for the Cooperative Reduction in write-offs and collection expenses Reduction in call volume Reduction in number of manual disconnects and collections

n. Program will begin upon approval by the SCC. 4. Business System Redundancy information was reviewed by Frankie Jackson and

Glenda Tucker. 5. The Institute of Electrical & Electronics Engineers (IEEE) outage data and safety

report for May 2014 were reviewed in detail: IEEE Outage Data

a. There was one Dominion Virginia Power (DVP) supply interruption during the month at Ponton substation on May 1st. DVP had an issue while trying to install a mobile substation for work in their Jetersville substation.

b. There were two SEC power supply outages during the month at Lynch and Evergreen substations:

Lynch was off on May 15th due to a relay failure Evergreen was off on May 29th due to a voltage regulator failure

c. System Average Interruption Duration Index (SAIDI) and System Average Interruption Frequency Index (SAIFI) were above historical five-year values.

d. Customer Average Interruption Duration Index (CAIDI) was below historical five-year values.

e. May saw near average temperatures with multiple thunderstorms. Safety Report

a. No lost-time injuries reported in May. b. Total lost-time accumulated in March was 0 days.

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c. As of May 31st, employees have worked 325 days without a lost time injury.

6. Engineering and Operations update: a. Reliability Plan is updated every two years and will be updated next in

the Fall of 2014 and will facilitate development of the new Long Range Plan

b. Goals of the Reliability Plan have been incorporated into the current Long Range Plan and the 2012–2013 & 2014–2016 Construction Work Plans (CWP)

c. Integrated focus on reliability through planning and maintenance programs:

Year-end SAIDI, SAIFI & CAIDI results have continued to improve

2013 goals were met and/or exceeded

YEAR RUS SAIDI (MINUTES)

SAIDI (MINUTES)

SAIFI (EVENTS)

CAIDI (MINUTES)

GOAL ACTUAL GOAL ACTUAL GOAL ACTUAL GOAL ACTUAL

2011 195 243.7 221 293.0 2.00 2.41 111 122.1

2012 186 187.7 211 218.8 1.90 1.99 111 110.1

2013 176 166.9 199 197.3 1.80 1.80 111 110.7

d. Re-established focus on safety performance in 2008 following Board

Strategic Planning directives e. Re-established a “culture of accountability” and revised the safety Board

policies and SEC’s safety manual f. The Cooperative’s safety committee was revitalized g. Safety Incentive Bonus program was developed with a focus on “zero

incidents” h. SEC’s incident rate dropped from a high of 12.64 incidents in 2003 to

1.34 in 2013 i. SEC’s DART rate (days away, restricted or transferred) dropped from a

high of 10.34 days in 2003 to 0.67 in 2013 j. Engineering and Operations staffing has decreased to a total of 88

employees Cooperative-wide k. A Reliability Improvement Plan was developed and identified areas for

improvement: Reduce/eliminate transmission & delivery point outages Reduce/eliminate substation outages Eliminate circuit outages on worst performing feeders Aggressive right-of-way management to reduce tree outages

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l. Areas for improvement have been integrated into the current Construction Work Plan (CWP) and budget; current plan covers 2014–2016.

m. A new CWP for 2016 – 2020 will be developed along with a new Long Range Plan to follow these objectives

n. Construction work orders peaked in 2005 at 1,978; total in 2013 was 691 (a 65% reduction in new service construction)

o. Year-to-date, 2014 is showing a slight improvement in work orders over 2013 (227 vs 220)

p. Sycamore Substation/Transmission was the final project of the 2012–2013 CWP. This project moved load from Altavista delivery point (12.47kV) and Lone Gum circuit 2 to the new station.

q. Dominion’s 69kV delivery now serves SEC’s breaker station and transmission; all lines have been converted to 24.9kV and all 3-phase has been reconditioned

r. New London Substation/Transmission is being built under contract with Bedford County Economic Development Authority; 25 MVA station (expandable to 100MVA) and 0.8 mile of 115kV transmission tap

s. Automation/Circuit reconditioning projects: Currently 70 down-line reclosers installed with remote SCADA

capability 48 additional units to be deployed in 2014–2016 41 circuits will have remote tie capability by the end of 2016 Performing design of a microwave system upgrade to be

installed in 2015 to support these devices Completed a control room remodel in June 2014

t. Voltage conversion/reconditioning projects: SEC crews performing voltage conversions on Gladys and

Stoddart substations Davis H. Elliot crews performing voltage conversion on Red

House substation u. Vegetation Management:

Converted to herbicide application; no brush or mechanical clearing Side trimming is a year-round process; six-year cycle Hazard tree removal is a three year process; trees are not

removed from the property v. Vegetation Management challenges:

Extreme wet growing seasons Member expectations for debris removal

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Expectations related to right-of-way authority or property rights 7. Workers compensation experience modifier rate dropped to .68 for the time

period of 2010–2013. 8. Jason Loehr from Adams, Jenkins & Cheatham was hired as Controller and

assumes this role on July 14th. 9. An editorial will be in the next Cooperative Living Magazine by Jeff Edwards

regarding EPA Rules and Regulations. 10. Governance Assessment is scheduled for July 14th & 15th. Monica Schmidt from

NRECA (National Rural Electric Cooperative Association) will be facilitating the meeting.

11. Day in the Life of a Lineman Program has finished up for the current school year. Congressman Hurt would like to participate next year. SEC hired an intern who participated in this program last year. He has signed up for and been accepted to the Southeast Lineman School in January 2015.

12. Allan Sharrett and Jacob McMann are chaperoning during the NRECA Youth Tour. Eight participants from our service territory were selected to attend.

NEW BUSINESS 1. Power Requirements Study (PRS) update:

a. PRS is an annual projection of members, peak loads and energy sales; forecasts 15 years into the future and is required by Rural Utilities Service (RUS).

b. Old Dominion Electric Cooperative (ODEC) and Cooperative Staff prepare the study based on the Form 7 and other load data on industrial and commercial consumers. ODEC uses economic and weather models to forecast future loads based on historical data.

c. Used for load projections in the Long Range Plan and Two-Year Work Plan. Also used for financial forecasts, loan applications and annual budgets.

d. Projected minimal residential growth. e. Total kWh projections indicate an increase in usage while total

connected services remains below previous projections. f. System demand is forecasted to increase steadily.

Upon motion made and seconded: “The 2014 – 2028 Power Requirements Study is approved as presented, along with the Resolution for the same, which will be attached to and made a part of the minutes.”

MOTION CARRIED 2. In preparation for the NRECA Regional meeting, selection of voting delegates

are needed: a. Voting Delegate: Michael A. Lobue

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General FundCash in Banks 2,632,321.38

General Funds Invested CFC - CTC's 2,201,532.73 CFC - Patronage Capital 1,748,620.02 Federated Insurance Corporation 260,102.00 VED Corporation Incorporated 66,937.00 TEC Trading Incorporated 622,500.00 Town of Hurt 1,000.00

Notes and Accounts Receivable Electric Consumer 8,566,245.07 Other Accounts Receivable 2,613,136.28

18,712,394.48 Material and Supplies in Stock 687,257.02

Construction Work in Progress to be Paid from Construction Funds 0.00

TOTAL 19,399,651.50

Construction Funds Available First Citizens Bank 0.00

CFC & FIRST CITIZENS BANKCFC RUS & FFB LINE OF CREDIT

Allocation Under Notes 56,969,109.57 128,337,835.45 26,000,000.00

Advance to Date 56,969,109.57 128,337,835.45 13,800,161.95

Balance Available for Advance 12,199,838.05

Gross Obligations 64,495,767.69 111,054,492.97 13,800,161.95

Interest Paid This Year 844,959.87 783,517.16 99.79

NOTES STATISTICS

STATEMENT OF GENERAL FUNDS AND OTHER ASSETSMay 31, 2014

Page 1 of 6

Comparative Operating Statistics

177 163 411,022 1,135 256

862 894 2153,794 4,174 4,174

15 12 254,682 54,776 54,776

8,158 8,192 8,192

Meters Installed - New Services

2009 2010 2011 2012 2013 2014January 63 48 33 34 38 28February 50 53 37 38 39 25March 74 51 53 12 30 27April 73 70 48 30 33 42May 48 79 30 32 37 41June 70 77 60 37 41July 73 73 58 40 46August 111 62 43 59 57September 96 64 48 43 55October 87 58 36 49 54November 47 55 47 39 95December 49 48 47 41 45Total 841 738 540 454 570 163

Services Idle, Excluding SeasonalNumber of Services RetiredTotal Consumers Receiving ServiceTotal Miles Energized

Y-T-D 2013 May 2014

Southside Electric CooperativeFor the Month Ending May 2014

New Services ConnectedMeters RemovedMeters Reinstalled

Y-T-D 2014

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Revision: 64723

General LedgerFinancial And Operating Report Electric Distribution

Page: 18:40:13 am06/13/2014

SOUTHSIDE ELECTRIC COOPERATIVE

Item Last Year This Year

----------------------------------Year - To - Date -------------------------------

Budget Current

------------- Period - To - Date -----------------

Budget

INCOME STATEMENT FOR MAY 2014

46,714,737.80 53,844,529.74 52,050,097.00 8,242,705.81 4,140,779.00 1. Operating Revenue and Patronage Capital0.00 0.00 0.00 0.00 0.00 2. Power Production Expense

29,481,018.62 32,256,134.66 31,205,327.00 4,631,387.72 3,803,506.00 3. Cost of Purchased Power5,184.66 2,941.60 24,203.70 2,069.18 4,840.74 4. Transmission Expense

0.00 0.00 0.00 0.00 0.00 5. Regional Market Expense1,037,219.23 1,293,993.52 1,752,267.05 158,564.48 350,453.41 6. Distribution Expense - Operation4,682,566.12 4,545,663.35 4,654,616.15 860,038.50 930,923.23 7. Distribution Expense - Maintenance1,050,613.02 969,896.61 980,444.50 171,065.92 196,088.90 8. Customer Accounts Expense

827,934.25 1,020,914.16 848,638.00 168,867.64 169,727.60 9. Customer Service and Informational Expense113,774.01 115,327.16 149,934.15 9,920.69 29,986.8310. Sales Expense

2,423,494.19 2,377,036.35 2,401,395.95 510,608.85 480,279.1911. Administrative and General Expense39,621,804.10 42,581,907.41 42,016,826.50 6,512,522.98 5,965,805.9012. Total Operation & Maintenance Expense (2 thru 11)

3,851,989.18 3,866,636.91 4,011,039.25 774,696.38 802,207.8513. Depreciation & Amortization Expense340,915.00 565,818.00 0.00 113,163.60 0.0014. Tax Expense - Property & Gross Receipts

0.00 0.00 0.00 0.00 0.0015. Tax Expense - Other2,786,940.86 2,667,820.82 2,598,113.00 595,024.50 519,622.6016. Interest on Long-Term Debt

0.00 0.00 0.00 0.00 0.0017. Interest Charged to Construction - Credit916.71 1,084.08 0.00 216.19 0.0018. Interest Expense - Other

17,881.07 58,285.21 20,399.60 32,272.64 4,079.9219. Other Deductions46,620,446.92 49,741,552.43 48,646,378.35 8,027,896.29 7,291,716.2720. Total Cost of Electric Service (12 thru 19)

94,290.88 4,102,977.31 3,403,718.65 214,809.52 -3,150,937.2721. Patronage Capital & Operating Margins (1 minus 20)5,000.06 51,014.52 48,860.00 852.30 9,772.0022. Non Operating Margins - Interest

0.00 0.00 0.00 0.00 0.0023. Allowance for Funds Used During Construction0.00 0.00 0.00 0.00 0.0024. Income (Loss) from Equity Investments

-2,938.81 -7,033.71 1,387.50 -3,219.47 277.5025. Non Operating Margins - Other338,511.00 317,842.10 333,333.50 63,568.42 66,666.7026. Generation and Transmission Capital Credits245,155.54 553,064.24 207,083.00 96,273.58 41,416.6027. Other Capital Credits and Patronage Dividends

0.00 0.00 0.00 0.00 0.0028. Extraordinary Items680,018.67 5,017,864.46 3,994,382.65 372,284.35 -3,032,804.4729. Patronage Capital or Margins (21 thru 28)

680,018.67 5,017,864.46 3,994,382.65 372,284.35 -3,032,804.47Operating - Margin0.00 0.00 0.00 0.00 0.00Non Operating - Margin1.03 2.54Times Interest Earned Ratio - Operating1.24 2.88Times Interest Earned Ratio - Net1.03 2.55Times Interest Earned Ratio - Modified

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General LedgerFinancial And Operating Report Electric Distribution

Page: 18:40:23 am06/13/2014

Revision: 65726SOUTHSIDE ELECTRIC COOPERATIVE

This YearLast Year Variance

BALANCE SHEET FOR MAY 2014

ASSETS AND OTHER DEBITS 1. Total Utility Plant in Service 299,807,599.16 4,121,314.38295,686,284.78

2. Construction Work in Progress 8,327,196.30 1,151,777.907,175,418.40

3. Total Utility Plant (1 + 2) 308,134,795.46 5,273,092.28302,861,703.18

4. Accum. Provision for Depreciation and Amort. 84,096,960.82 -2,215,027.0686,311,987.88

5. Net Utility Plant (3 - 4) 224,037,834.64 7,488,119.34216,549,715.30

6. Non-Utility Property (Net) 37,444.68 -12,301.0049,745.68

7. Invest. in Subsidiary Companies 0.00 0.000.00

8. Invest. in Assoc. Org. - Patronage Capital 43,541,737.12 1,037,368.7742,504,368.35

9. Invest. in Assoc. Org. - Other - General Funds 2,462,634.73 80,871.412,381,763.32

10. Invest. in Assoc. Org. - Other - Nongeneral Funds 0.00 0.000.00

11. Invest. in Economic Development Projects 0.00 0.000.00

12. Other Investments 1,030,568.84 634.001,029,934.84

13. Special Funds 0.00 0.000.00

14. Total Other Property & Investments (6 thru 13) 47,072,385.37 1,106,573.1845,965,812.19

15. Cash - General Funds 2,632,321.38 -1,639,592.804,271,914.18

16. Cash - Construction Funds - Trustee 1,427,701.65 1,427,701.650.00

17. Special Deposits 0.00 0.000.00

18. Temporary Investments 0.00 0.000.00

19. Notes Receivable (Net) 0.00 0.000.00

20. Accounts Receivable - Sales of Energy (Net) 8,566,245.07 1,196,780.387,369,464.69

21. Accounts Receivable - Other (Net) 2,613,136.28 -703,777.573,316,913.85

22. Renewable Energy Credits 0.00 0.000.00

23. Material and Supplies - Electric & Other 687,257.02 11,654.24675,602.78

24. Prepayments 522,445.26 -345,847.60868,292.86

25. Other Current and Accrued Assets 4,750,344.19 981,289.403,769,054.79

26. Total Current and Accrued Assets (15 thru 25) 21,199,450.85 928,207.7020,271,243.15

27. Regulatory Assets 1,155,519.05 126,901.741,028,617.31

28. Other Deferred Debits 6,771,030.22 -1,360,036.948,131,067.16

29. Total Assets and Other Debits (5 + 14 + 26 thru 28) 300,236,220.13 8,289,765.02291,946,455.11

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General LedgerFinancial And Operating Report Electric Distribution

Page: 28:40:23 am06/13/2014

Revision: 65726SOUTHSIDE ELECTRIC COOPERATIVE

This YearLast Year Variance

BALANCE SHEET FOR MAY 2014

LIABILITIES AND OTHER CREDITS 30. Memberships 227,680.00 -260.00227,940.00

31. Patronage Capital 93,990,647.89 -211,774.4694,202,422.35

32. Operating Margins - Prior Years 0.00 0.000.00

33. Operating Margins - Current Year 5,017,864.46 4,337,845.79680,018.67

34. Non-Operating Margins 0.00 0.000.00

35. Other Margins and Equities 147,155.62 19,644.55127,511.07

36. Total Margins & Equities (30 thru 35) 99,383,347.97 4,145,455.8895,237,892.09

37. Long-Term Debt - RUS (Net) 17,597,399.93 -503,809.3018,101,209.23

38. Long-Term Debt - FFB - RUS Guaranteed 91,160,895.04 9,177,143.3281,983,751.72

39. Long-Term Debt - Other - RUS Guaranteed 0.00 0.000.00

40. Long-Term Debt - Other (Net) 60,308,410.69 -5,527,174.3565,835,585.04

41. Long-Term Debt - RUS Econ. Devel. (Net) 0.00 0.000.00

42. Payments - Unapplied 0.00 0.000.00

43. Total Long-Term Debt (37 thru 41 - 42) 169,066,705.66 3,146,159.67165,920,545.99

44. Obligations Under Capital Leases - Noncurrent 0.00 0.000.00

45. Accumulated Operating Provisions 115,057.86 -28,209.54143,267.40

46. Total Other Noncurrent Liabilities (44 + 45) 115,057.86 -28,209.54143,267.40

47. Notes Payable 13,800,161.95 0.0013,800,161.95

48. Accounts Payable 5,593,407.98 -481,805.736,075,213.71

49. Consumers Deposits 2,563,302.40 307,959.432,255,342.97

50. Current Maturities Long-Term Debt 6,483,555.00 1,698,721.004,784,834.00

51. Current Maturities Long-Term Debt - Econ. Devel. 0.00 0.000.00

52. Current Maturities Capital Leases 0.00 0.000.00

53. Other Current and Accrued Liabilities 2,871,586.62 -46,093.122,917,679.74

54. Total Current & Accrued Liabilities (47 thru 53) 31,312,013.95 1,478,781.5829,833,232.37

55. Regulatory Liabilities 0.00 0.000.00

56. Other Deferred Credits 359,094.69 -452,422.57811,517.26

57. Total Liab. & Other Credits (36+43+46+54 thru 56) 300,236,220.13 8,289,765.02291,946,455.11

0.680.68Current Assets To Current Liabilities to 1 to 1

32.62 33.10 % %Margins and Equities To Total Assets

54.8754.78 %Long-Term Debt To Total Utility Plant %

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No. Receiving Service

a.

No. Minimum Bills d.

Avg. No. Receiving Service

e.

kWh Sold Cumulative

f.

Amount Cumulative

g.

1. Residential Sales (excl seas.) 52,546 27 52,588 356,860,851 45,645,8432. Residential Sales Seasonal3. Irrigation Sales4. Comm. & Ind 1000 KVA or Less 1,940 12 1,943 23,064,563 2,730,9475. Comm. & Ind Over 1000 KVA 12 0 12 35,689,886 2,782,3866. Public St. & Highway Lighting7. Other Sales to Public Authority 278 1 280 20,310,344 2,053,2988. Sales for Resale - REA Borr.9. Sales for Resale - Other

10.

(1 thru 9) 54,776 40 54,823 435,925,644 53,212,47411. Other Electric Revenue xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 632,05512. Total (10 + 11) xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx xxxxxxxxxxxx 53,844,530

THIS MONTH a.

THIS MONTH a.

YEAR-TO-DATE b.

1. Net kWh Generated . . . . . . . . 148,850 1,069,2532. kWh Purchased . . . . . . . . . . . 64,164,2363. Interchange kWh - Net . . . . . . 4. Total kWh (1 thru 3) . . . . . . . . 64,164,236 12.07 0.77

163,570 305,075January 2014

PART D. CONSUMER SALES AND REVENUE DATA May 2014

CLASS OF SERVICEkWh Sold

b.Amount

c.

3,402,261

42,666,394

4,243,345

PART D. CONSUMER SALES AND REVENUE DATA

6,098,414

6,631,470

xxxxxxxxxxxx

8,171,49071,216

8,242,706xxxxxxxxxxxx56,273,444

394,425

ITEM ITEM

8. Percent System Loss (7/4)x100 . .

YEAR-TO-DATE b.

5. Total kWh - Sold . . . . . . . . . . . . 56,273,4449. Maximum Demand (kW) . . . .

440,397,158

440,397,158

435,925,644 10. Month When Maximum Demand Occurred . . .

6. Office Use . . . . . . . . . . . . . . .7. Total unaccounted For

(4 less 5 & 6), . . . . . . . . . . 7,741,942

YEAR-TO-DATETHIS MONTH

614,104

3,265,291

531,491

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