Manager’s Report for Annual Meeting of Members

August 4, 2015

It is my esteemed honor as the General Manager of Alcorn County Electric Power Association to present the 81st Annual Report of your Association. For the past 81 years this report has been delivered by six men who have been blessed by God to serve their fellow man to provide a special service to each and every one of their homes and businesses in their service area. A luxury at first, but now a necessity of life.

Joe M. Peavey

Hamp W. Meeks

C.E. “Runt” McGee

D.F “Dooney” Wright

Charles Barnett

Jim Nanney

Each of these men have been faced with many varied obstacles to meet their goals of providing safe, reliable, and low cost electric service to the members of Alcorn County Electric Power Association. This was accomplished because they were blessed with excellent employees and equipment that the Boards of Directors, who were elected by the members, saw that was needed to be successful. Without Boards understanding that the electric power business was a dynamic business that continually needed upgrading, our communities would have never reached their full potential.

Your Board of Directors:

Bobby Roberts, President

Jerry Brawner, Vice-President

J.B. Darnell, Secretary

Mark Gardner, Director

Sam Tull, Director

Understand it is their duty to make sure that your electric cooperative is not only the “FIRST” in America, but hopefully it is also one of the “BEST”.

This past year has been another successful one, but it has been one filled with challenges. The many challenges, or opportunities, as my predecessor, Charles Barnett, used to call them were dealt with admirably by ACE’s family of team workers.

The first major event of this past year occurred in September with the retirement of the employee who has the most years of service in ACE’s history. Don Rinehart, the Operating Superintendent of ACE, retired with 55 years of service for the company he loves and the job he loves to do for the people of Alcorn County. Don had worked for ACE for 2/3 of ACE’s existence and his dedication to providing service and making sure that service remains reliable to the people of Alcorn County is a tremendous gift that should never be forgotten. It has been my honor to have worked along side this special individual for the past 35 years, and I can promise the membership of ACE that there is no way to replace Don Rinehart. I just hope and pray that God allows him a healthy and happy retirement so we can have access to his astounding memory. Don will be missed, but never forgotten.

Paul McNair has accepted the title of Operating Superintendent and Jason Grisham has been promoted to the Manager of Engineering and Operations. The team of these outstanding leaders will take over making sure the quality of reliable electric service in Alcorn County will continue at its same high standards. The skilled workers of ACE are unmatched in pride and knowledge of what it takes to handle the necessary and dangerous job they are trained to do. ACE is in good hands, and we will continue with the teamwork it requires to make Alcorn County Electric Power Association successful, thus helping all of Alcorn County be successful.

While we are discussing “keeping the lights on”; as everyone can remember the terrible tornado that Tupelo experienced last year. In last year’s report we discussed the huge cost that Tupelo and Tombigbee EPA were faced with and how ACE crews had rushed to their side to help them make the necessary repairs. We also discussed how all electric utilities, including ACE, are faced with maintaining contingency funds for similar emergencies.

After several years without any major power outages or major equipment failures, Murphy’s Law of what can go wrong eventually will go wrong, happened on ACE’s system this past year. ACE’s contingency fund was met with several unique challenges. On the major equipment failure category ACE had two.

On the major equipment category, early in the fiscal year we experienced a failure of a substation transformer at Kossuth Substation. Luckily, we had two power transformers at Kossuth Substation in case of a failure or extreme hot or cold days. The power was only out a short time to disconnect the failed transformer, but the lead-time to get a replacement transformer is approximately a year. Due to the new Rinehart substation that we had recently built on Highway 45 south of Biggersville, ACE had enough capacity for any major extreme temperatures.

It was at this point in time that Jason Grisham and I approached the Board about purchasing a second transformer for the Rinehart Substation, since it was the only substation on ACE’s system that had only one power transformer. Maybe it was the good Lord taking care of us, but a few months later the one power transformer at Rinehart Substation experienced a failure. This failure happened before the winter peak, so the southern part of ACE’s system was vulnerable during this past winter.

But, with all of the new tie lines to Kossuth, Corinth, and Glen that we had recently completed along with the Rinehart Substation we had adequate power service to south Alcorn County. As of the time of this report, the power transformer that failed at Kossuth Substation and the power transformer that failed at Rinehart Substation have been replaced and they are working fine. Just an aside to this experience, this is the first time in my forty-two year career that I have been working where two power transformers have failed during the same year.

No tornado to deal with this year, but February 16, 2015, brought back bad memories of 1994. The ice storm of 2015 was minuscule compared to 1994, but it was just bad enough to remind us all that an ice storm is the most catastrophic event that ACE Power’s electrical system can have. Luckily, mainly just the eastern side of the system had a considerable amount of damage, but without help from Tombigbee Electric Power Association crews it would have been more than a two-day event. We were able to have all of our lines on within a 24-hour period along with every customer whose service was ready to be connected. This ice storm event let us all know that the improvements to our electrical system, technology system, and our right-of-way maintenance system are tremendously improved from 1994. But, we can still do, and will do, more work to make ACE’s electrical system stronger and even more reliable than it is now. We didn’t finish this year with a rate of being on 99.999% of the time. 99.983% is good, but not good enough.

On the operation and engineering end of our business as well as all of the employees of ACE, October 15, 2014, was a day full of emotion and concern. A dreadful call went out on our radio system for help for one of our fellow employees. Danny Lee, serviceman, suffered electrical burns to his hands and arm. Danny, ACE employee for 39 years, thanks to the grace of God, the doctors and nurses at the MED, and his loving family has made a complete recovery and has returned to work full time.

The ACE Accounting and Customer Service department led by Eddie Howard continue to do their admiral job of collecting enough money to pay an average bill from TVA of $3 to $6 million dollars per month. They handle approximately 19,000 bills per month. Each one of ACE’s Accounting and Customer service has to pay an electric bill like the other 19,000 members of ACE and they understand the difficulty when the cold and hot weather makes it tougher to deal with. That is why the Customer Service employees of ACE are always trying to find new ways to help our members handle their electric bills.

During the last 3 years ACE’s PayWise program has helped more and more members to keep their electric power on with no deposit and just make sure they’ve got enough paid for in their account not to run out of electricity. Just like watching your gas tank. We have a kiosk at the Shell Station at the intersection of Highway 72 and Highway 45 that is available 24 hours per day. The PayWise system does a great job of communicating with each customer using it so that you will hopefully not ever run out of electricity. This program has also done a great job of helping the customer on tight budgets to do a better job of being more energy conscious than any program that we have ever initiated. ACE now has over 1,400 members on the PayWise program and we believe this program has proven to be the most successful program at helping the people of Alcorn County who truly need help in keeping their power on than any program we have ever had. Remember if your having trouble paying your power bill and have a deposit with ACE talk to one of our customer service representatives about our PayWise program rather than paying high late fees, and disconnect and reconnect fees. The proof of that fact is in the pudding, for the TVA monthly report indicates ACE is collecting approximately $30,000 per month less in late, disconnect, and reconnect fees than we were collecting prior to the start of the PayWise program.

Our financial picture continues its steady growth as your Cooperative’s TVA report for June revealed ACE’s gross electrical plant at $81.3 million, long-term debt at $3.7 million, and total assets and other debits at $75.2 million.

As I reported to you in the beginning of this report, this past year was a very varied year, but one that your Board of Directors, your Management Team and your Employee Team handled each and every variation as best as we possibly could, and the end result was positive for your Cooperative.

Respectfully submitted,

James D. Nanney, Jr.