Nueces Electric Cooperative 2015 Annual Report to Membership

2015 Nueces Electric Cooperative

ANNUAL REPORT 2014 financial health review

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Your Community. Your Electric Co-op.

Current Distribution Rates by Delivery Company A portion of your electric rate each month, referred to as the distribution charge, goes to the company who maintains your power lines. Which power lines you are on, depends on the part of the state you are in. When you have an outage, need trees trimmed, or need service to your meter; you should contact your power line company directly. This distribution charge is in addition to your power cost.

Rate is per kWh based on 1,000 kWh

AEP Central*

5.1¢

NEC Power Lines

AEP North*

CenterPoint Energy*

Texas New* Mexico Power

Oncor*

4.9¢ 4.5¢ 4.4¢ 5.1¢ 3.9¢

Co-ops serve an average of 7.4 consumers per mile of line and collect annual revenue of approximately $15,000 per mile of line

* Investor‑owned utilities average 34 customers per mile of line and collect $75,500 per mile

Publicly owned utilities, or municipals, average 48 consumers and collect $113,000 per mile

Nueces Electric averages 13.5 members per mile of power line

EVEN THREE IS A CROWD. NEVER OVERLOAD OUTLETS. Helping members use electricity safely & efficiently, that’s the power of your co-op membership. Learn more from the experts themselves at: TogetherWeSave.com

76th Annual Membership Meeting

Thursday, October 8, 2015, 7:00 p.m.

Richard M. Borchard Regional Fairgrounds, Robstown, Texas

Pre-Meeting Activities 5:45 - 7:00 p.m. Registration & Entertainment

Dinner catered by Howard’s BBQ Music by Texas A & M Kingsville Jazz Combo, Children’s Entertainment by Cuddles & Critters Meet a Lineman Photo Opportunity Energy Efficiency & Safety Booths Scholarship & Youth Tour Leadership Programs Booth

7:00 p.m. Voting Polls Close

7:00 p.m. Business Meeting Call to Order

Business Meeting

Invocation Presentation of Colors & National Anthem

Brian Menking, NEC Board President

Pastor Jason Fry, Grace United Methodist Church U.S. Navy & Texas A & M Kingsville Jazz Combo, Dr. James Warth, Associate Professor

Pledge of Allegiance

Brian Menking, NEC Board President

Recognition of Board Members, Committee Members, Special Guests & NEC Employees

Brian Menking, NEC Board President Reading of Notice of Meeting & Proof of Mailing of Notice

Minutes of 2014 Annual Meeting & Treasurer’s Report

David Garrison, Attorney Brian Menking, NEC Board President

Annual Report Election Tabulation Results

Brian Menking & John L. Sims Tommy Ermis, Assistant Secretary/Treasurer

Farewell to John L. Sims, NEC CEO 1994-2015

Brian Menking, NEC Board President

NEC Retail Member Referral Program Winners

$500 Electric Bill Credit, Runner-Up receives $250 Electric Bill Credit

Frank Wilson, NEC Retail Manager

PRIZE DRAWINGS- MUST BE PRESENT TO WIN Prizes include: $500 Electric Bill Credit, Yeti Cooler, $75 Electric Bill Credit & more Adjournment

Frank Wilson, NEC Retail Manager

Brian Menking, NEC Board President

Please complete the annual membership meeting SURVEY INSERTED INTO THIS BOOKLET. Please place completed surveys in the box provided near the exit when you leave the meeting.

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As the Board of Directors President, as well as a fellow

member, I am once again honored to be with you for this annual meeting. Each year the Nueces Electric Cooperative Membership has a lot to celebrate as we come together as a co-op family. The vast acceleration of projects and technological abilities which occurred in 2014 continues to position Nueces Electric as a cutting-edge electric cooperative and a leader in our industry. The current state of the Co-op, is inspiring. How well our Co-op is doing not only makes me proud to be your Board President, but I am extremely proud to be a member of this state-of-the-art Co-op.

Like most businesses, since the early 2000’s the Nueces Electric Co-op distribution system has extensively grown in our utilization of technology. Keeping up with technology to bring members reliable service, metering, billing, and customer management is a feat. Your Board of Directors and the Co-op management remain careful in our consideration of all available options. We are extremely grateful to be a part of a nation-wide cooperative network which helps disseminate quality products and assists as we purchase software at co-op prices. Our co-op network also includes a variety of data support services which the Co-op appreciates. It helps keep our internal costs down and we are guaranteed upgraded products and services.

All of this technology still comes with a price. But so far the Co-op has been able to offset the cost by reinvesting capital from under-budget projects, lowering line loss, and smarter sourcing of funds. As our operations continues to practice efficiency, and engineering continues to utilize cost-saving materials and route designs, the excess capital we currently reinvest might lessen. At that time we will have to reevaluate our budget.

2014

$7.6 Million

2012

$8 Million

2011 2010 $0

$ 9.7 Million $10,000,000

In addition to the advancement of technology came the need to refine, and in many cases redefine, policies. Many policies had not been updated since the mid-90’s and were in need of federal and state regulatory updates, OSHA compliance, EEOC refinement, and healthcare / benefits updates.

The Strategic Plan committee continues to monitor the 2013 strategic plan and goals. Management and employees are doing an impeccable job ensuring our five strategic focus areas, and the strategic goals, are being met and/ or improved upon. The five areas include: Safety & Health, Member Satisfaction, Growth & Efficiency, Work Environment, and Key Message Communication. The plan includes 23 pertaining measures to accomplish the goals, the majority of which have met their respective criteria or are moving in a positive direction.

This summer, all NEC members were invited to participate in the annual membership survey. We are extremely pleased that membership gave NEC a customer satisfaction index rating of 83%. This is 6 points above the national co-op average of 77% and 11 points above the national Investor Owned Utility rating of 72%. Individually, 83% of the distribution system members and 91% of NEC Retail members indicated a high sense of pride in being a member-owner of your co-op.

In 2014, Nueces Charities reached $1 million in giving! The Board is so proud of our membership for supporting this fine resource for our community. In 2014, $135,000 was distributed to 30 area non-profits to improve members’ quality of life. This includes $24,000 to our signature project, Halo Flight.

The Nueces Electric Charities Board recently voted to change

As a not-for-profit, your Board of Directors is proud to return the margins (profit) to members. Each year, the Board is diligent to maintain a healthy financial balance while ensuring members profit from their investment.

In 2014, $9.2 million averaged out to $271 per member* via Capital Credits or Merry Christmas Credits. It is our duty to work for you, the member-owners of the Co-op.

$ 11.5 Million

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NEC 2014 Margins Returned to Members

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*Individual returns vary and are based on longevity with the co-op and overall usage. Longer membership and usage yield higher individual returns.

Nueces Electric Cooperative

Board of Directors

Top row, from left: Bill Hartman (District 7, VicePresident), Gregg Truesdale (District 2), Tommy Ermis (District 6, Assistant Secretary Treasurer), John Sims (CEO), Donald Wayne Herrmann (District 4), David Rosse (District 3, Secretary Treasurer).

Front row from left: Maxine Stewart (District 5), Dr. Rumaldo Juarez (District 1), Brian Menking (District 8, President), Johnny Alvarado (District 9), Gladys Lippincott (District 10).

the name of the granting organization. Many times the community confused this grant with one from Nueces County. The Nueces Electric Charities Board voted and officially changed the name to Nueces Electric Charities, Inc. and additionally gave the receiving organizations tools to publicly acknowledge the members of Nueces Electric for their generosity. $1 million is a big deal when it is raised pennies at a time. Thank you to all of the members who support Operation RoundUp. In total, with Capital Credits, the NEC Retail Merry Christmas Credit, bonus credits from the Member Referral Program and the Military Appreciation Credit, your Nueces Electric Board of Directors approved the return of over $9.4 million back to members in 2014. As a fellow Co-op member, it is an honor and a privilege to be able to return our margins back to those we serve. We work for you and we keep every one of the loyal NEC members in mind with each decision we make.

The Board was recently tasked with a very large decision.

Whether or not to enter into the renewable energy market.

With feedback and guidance from membership, we moved forward with a renewable project and signed a 25-year power purchase agreement (PPA) with a third-party company called Clean Energy Collective (CEC). CEC will work exclusively with NEC Retail to provide members the opportunity to participate in “roofless solar” generated energy.

Members who wish to, will purchase panels directly from CEC. CEC will update NEC Retail with the amount of generation from the members panel and the member’s electric bill will be credited for the production.

Negotiations on this project took approximately 18 months.

Three things were of the upmost importance. First, the cost per panel. While members will purchase the panels directly from the seller, it was important that members received the best price possible. As a result, complete with instillation and maintenance, these panels cost half the price of a professional or home installation. Second, our purchase price agreement had to make sure that the project remains cost effective for all members. Third, no subsidies for nonparticipants. The total cost of the program had to be limited to those who volunteered to participate without any subsidization from the rest of membership.

CEC has now selected a piece of property outside of Orange Grove for the array and hopes to have the project completed by the end of 2015. Without a doubt this is only the beginning of our movement towards renewable energy. For years we have utilized hydropower and wind power; adding solar to the portfolio was the natural next step.

Recently, on August 3, President Obama and the EPA announced the Clean Power Plan. At this time we remain unsure of the impact on electricity rates across the nation.

This ruling is not new news to us. It has been lurking in the industry for five years. During this time coal plants have been implementing the necessary measures to prepare for the dramatic regulations. Our coal plant, San Miguel Electric Co-op, located in Christine, TX, currently serves almost 18% of our generation needs. At this time we do not foresee a disturbance in rates.

Last but certainly not least, is the Board’s goodbye to our fearless leader and friend, John Sims. It has been my pleasure to work alongside John for the past eight years. John has laid a solid foundation on which we can continue to build. Under his leadership we have acquired a portfolio of diverse growth opportunities and Nueces Electric Cooperative is positioned as a legacy among our peers.

We prepare for a new CEO with hope and excitement. The new CEO will share our goal to be unified in our membership and will support building on the large amount of pride each member carries.

While our CEO is a crucial piece to our puzzle, the membership is the heart and soul of the Co-op’s existence. As a democratically run organization, members have selected us, the ten member-elected representatives to be your voice, to be your vote. You have selected us to make the right decisions for you, who are the owners of the Co-op as well as our neighbors, our friends, and our communities.

Nueces Electric Cooperative is stronger than ever and we will continue to serve you with honor, integrity and humility. We want to make you proud and show you that the Cooperative Difference are not merely words, it’s our way of life. Today and every day.

C.E.O. Message John L. Sims

It’s hard to believe this is my final address to the Nueces Elec-

tric Cooperative membership as your CEO. It feels like only yesterday I was giving my first address to membership. That was 21 years ago. Time flies by when you have a job you enjoy.

I have had the pleasure of working with hundreds of fine individuals. This includes employees, board members, contractors, and my regional, state and national co-op colleagues. I have sincerely enjoyed conquering the unknown and paving the way with some of the best in the industry. The support I have received from everyone has been inspiring and has motivated me to do my best for this Co-op each and every day.

I’m choosing to take my leave now: when the co-op is as strong as it has ever been.

In the late fall of 2013, the Co-op moved into our new headquarters location in Calallen, which is a suburb of Corpus Christi ,Texas. It was project years in the making. After years of working with 75 employees in a space that had been originally built for 18 in 1948, it was... almost awkward to move. While the Robstown building felt like a closet, it was a closet we were used to. But when employees came to work in the new office, you could feel the excitement in the air. We could breath. We have the space we so desperately needed. We have more than one bathroom. We have ample room to grow.

After this year’s report, our building and all of the work that went into it will be a memory. So once again I would like to sincerely thank VicePresident Bill Hartman and Chief Operating Officer Avan Irani for all of the hard work and hours they invested. We are now settled in. You can tell because our statistics and operational ability across the board has significantly increased.

NEC Distribution Power Lines

Along with the building came the integration of advanced technologies. In 2014, every department experienced a boost in IT ability. A new digital phone system was installed and has enhanced Member Care and Engineering’s ability to assist members. We upgraded our mapping software. In the past ten years, mapping and GPS technology have grown tremendously. As the axial of our entire distribution operation, it has been imperative that we maintain a high level of efficiency.

Members expect us to be able to perform at a high level of functionality. With every call the office takes, it is our goal to

be able to provide immediate answers and efficiently respond.

This only comes as a result of the Co-op investing in advanced line technologies, meters, and multi-faceted interfacial databases. In the past 21 years, we have gone from paper maps and manila member files, to an almost paperless internal communication process. We are constantly learning and adapting as industry technology rapidly grows and redefines our industry every five years or so.

In 2014, we celebrated! We celebrated our 75th Anniversary at our Annual Meeting and at each of our service centers.

One celebration was particularly special; it was also the grand opening of our Orange Grove Service Center which took place in July 2014. This service center was the last of the building expansion efforts that came as a result of a 2007 strategic plan. With the Calallen office acting as the hub, we now have three service centers branched off in three outward directions, much like the spokes of a wheel.

Installing these buildings has had a direct impact on our ability to quickly address outages and service calls.

We are working at a fraction of the response time as compared to ten years ago.

With safety as a top priority, we held 49 weekly operations safety meetings. All employees attended eight safety trainings as well as a special railroad safety training. Material Safety Data Sheets (MSDS) were electronically logged and an easy-to-use link was placed on all employees computers, iPads and cell phones. Through the year, we encountered a very low injury rate and zero lifethreatening injuries. Additionally we began utilizing a anti-slip climbing device called a bucksqueez. In heavy storms, line crews are not able to utilize buck trucks and have to physically climb poles. This task is exhausting even in dry conditions.

This new device has already assisted them several times while climbing wet power poles. Finally, in July 2014 NEC hosted a PV / Solar Safety conference for area first responders and the general public who was interested in being safe around solar panels.

In 2014, the Co-op entered into an industrial agreement with a gas pipeline called Net Mexico. The project was a huge undertaking for NEC and our partner, South Texas Electric Cooperative (STEC). As a result of the partnership, new infrastructure was built and NEC’s purchased power increased by 9%.

Throughout the year, NEC constructed 365 new services; a total of 3,204 total miles of power line; 18,477 active meters;

“The process of generating electricity is redefining itself every year and a solution to store electricity is right around the corner. Just as we have for over 75 years, Nueces Electric will adapt to meet our members’ needs.”

78 employees worked a total of 158,055 hours and drove over 850,000 miles; the total average outage time per member was 3 hours and 44 minutes.

NEC Retail

NEC Retail, the Co-op’s competitive retail electricity subsidiary, had a terrific year in 2014. NEC Retail experienced a healthy 3% growth in accounts and sold 713 million kWh to member homes and businesses.

NEC Retail embodies many excellent qualities, but the best quality is the amount of money we are able to return to the member -owners throughout the year.

2014 was the inaugural year for our Military Appreciation Credit. In total, NEC Retail distributed the credit to 1,873 members for a total of $47,000 back to members! This credit holds a special place in my heart as I am a proud veteran myself.

Additionally, 2,528 members took advantage of the Member Referral Program credits which totaled $151,680 back to those members. Thank you for spreading the good word about your electric cooperative! Your endorsement is our best form of advertising. With the help of NEC Retail members who donate to the Member-To-Member assistance program, NEC Retail was able to distribute almost $17,500 to area agencies to help members pay their electric bills.

Finally, NEC Retail was able to make the holidays a little bit brighter with the Merry Christmas credit and Capital Credit return in December 2014. In total NEC Retail gave back $5.5 million in Merry Christmas Credits and $3.7 million in Capital Credits. Many consider capital credit refunds a gift back to the members, but it is not. These credits are your equity in the Co-op. This is what being a member-owner of your electric cooperative is all about: it is the cooperative difference.

While for-profit companies pocket these extra margins, at the Co-op, they are returned to you.

I am extremely proud of the Co-op membership who has embraced NEC Retail. It gives me great pride as I reflect back fifteen years ago to when we questioned whether we could tackle this bear or not. The Co-op created this entity, grew it and we have sustained on honesty, transparency, and excellent customer service. At

first glance, most people don’t understand how our rate is competitive. But it is competitive. We have simply chosen to display an all-in-one rate that does not misguide consumers.

Our business model has been successful and I am optimistic that NEC Retail can continue to compete in the high stakes retail electricity market while we continue to maintain our integrity and close relationships with the member-owners.

My Final Goodbye

As you have read in Brian’s address, we recently voted to incorporate solar power into our business model. I feel that of all of the things I worked with the co-op to accomplish over the past 21 years, stepping into renewable energy will be one of my most proud moments. During my time with the Co-op we entered the deregulated market, we were the first Co-op in the country to acquire Navy Base contracts, and we built efficient business centers for the members and employees.

Stepping into the renewable energy sector is truly preparing the Co-op for the future. With technology accelerating each year, the electric industry has come farther in the past 10 years than it did in the first 115 years. We are on the brink of massive change in the utility industry. The process of generating electricity is redefining itself every year and a solution to store electricity is right around the corner. Just as we have for over 75 years, Nueces Electric will adapt to meet our members’ needs. Entering the solar industry will be our foot in the door, and the groundbreaking of the first community solar array in the Coastal Bend will be a glorious day.

I’m not sure what retirement has in store for me, but I know I will miss coming to the office every day. I will miss troubleshooting random problems and the heavy due diligence that comes with growth. Everything myself and the employees at the Co-op do, is for YOU, the members. I have been blessed to be a part of such a fine organization. While I am retiring, I will still be a member of the Co-op. I look forward to continuing the comradery with you and other members at open houses and the Annual Meeting. Thank you all for believing in me and allowing me to serve for 21 years as your CEO.

Balance Sheet

Operating Statistics

Assets: What We Own

Revenues: What We Took In

Net Utility Plant

$105,288,434

Sale of Electric Power

$77,667,841

Cash in Bank

$88,924

Miscellaneous Electric Revenue

$211,449

Investments

$41,656,518

Nonoperating Revenue

$1,470,501

Accounts Receivables

$2,564,974

G&T Capital Credits

$2,943,439

Materials and Supplies

$2,417,363

TOTAL REVENUES

$82,293,230

Prepayments

$234,515

Other Current & Accrued Assets

$3,281,203

Expenses: What We Paid Out

Deferred Charges and Other Assets

$2,058,354

Purchased Power

$50,525,273

TOTAL ASSETS

$157,590,285

Operations and Maintenance

$4,096,697

Consumers Accounting

$4,500,077

Administrative and General Expenses

$5,013,146

Depreciation

$3,251,547 $2,874,571

Liabilities: What We Owe Membership Fees & Consumer Deposits $2,306,003

Interest

Long-Term Debt

$64,264,699

Tax Expense

Current & Accrued Liabilities

$18,961,199

TOTAL EXPENSES

Patronage Capital and Equities

$65,038,784

Deferred Credits

$7,019,600

Margins: What We Had Left

TOTAL LIABILITIES

$157,590,285

Full audited financial report available at www.nueceselectric.org

How Your Dollar Was Spent in 2014 68¢: Cost of Purchased Power

$4,038,835 $74,300,146

Operating Margins

$6,590,225

Nonoperating Margins

$1,402,859

TOTAL MARGINS

$7,993,084

6¢: Member Services & Information 6¢: Distribution Operations & Maintenance

4¢: Net Interest

7¢: Admin & 5¢: Taxes General

4¢: Depreciation

By The

Numbers Total Power Sold 2014

2013

Number of Members 43,707 Number of Accounts 47, 249 Members on Operation Round-up 19,936

730,684,211 kWh

Members using NEC / Halo Flight Guardian Program 1,188

667,331,621 kWh

2012

683,905,308 kWh

Number of Facilities 6

2011

687,541,579 kWh

Total Miles of Line 3,204

620,000,000

660,000,000

700,000,000

740,000,000

NEC Retail 2014 Power Resources NEC Retail 2014 Total Power Purchase = 730,159.90 Power Resources MW Total Power Purchase = 730,159.90 MW (1MW(1MW = 1,000 kWh) = 1,000 kWh) Renewables 4%

Calpine 35% SMEC 18%

Open Market 30% STEC Renewables 13%

Number of Poles 83,698 Number of Transformers 18,407 Number of Employees 81 Business Office: 23 Operations: 30 IT / Metering: 9 Engineering: 6 Compliance & CEO: 6 Retail: 5 Facilities: 2 Annual Miles Driven 850,000 + Competitive Retailers in the NEC Territory 22

NEC Youth Tour Leadership Program Win THE Trip of a LIFETIME! Each year NEC sends four delegates to participate. Each winner receives an all-expense-paid trip, $250 spending money, and clothes.

Delegates will travel with other Co-op delegates from Texas. You will tour monuments and museums, a dance aboard a river boat, and meet with Texas Legislators in Austin and Washington D.C. to discuss NRECA priorities.

How do you apply? It’s as easy as 1,2,3!

1. Complete the website application 2. Write a 300 - 500 word essay 3. Submit your application and essay

Entry Deadline: January 29, 2016 Apply Today!

Essay Topic: If the world’s electricity was permanently turned off tomorrow, how would it impact you?

Ramiro De la Paz Memorial

SCHOLARSHIP Application Deadline: Friday, February 12, 2016

Calling all High School Seniors!

If your parents are members of the Co-op, you could win a scholarship!

For Applications & Details: www.nueceselectric.org & www.necretail.com

Two $4,000 scholarships and

Ten $1,000 scholarships

Employees In 2014, eighty NEC employees worked a total of 144,685 business hours plus 13,370 hours of overtime. Total payroll equaled $3.6 million.

Success

ROSIE AVALOS 40 WARREN HOELSCHER 40 MARY PAVELKA 36 LARAE MARTIN 33 AL PENA 32 ELOISE FLORES 30 CHRIS KNETIG 30 TYRON HEFLIN 27 ALBERT PENA 26 PETE RAMIREZ 26 MANUEL MAYORGA 25 FRANK WILSON* 22 JOHN SIMS 21 ALBERT GOMEZ 20 SARAH FISHER 18 ROBERT BRIONES 17 ADRIANA PENA 17 ROLAND SAMANIEGO 17 ROLAND TREVINO 15 RHONDA HAMLYN 14 JOE RIVERA 13 AVAN IRANI 12 JASON RAMIREZ 12 RAYMUND PINA 12 CASSY HILL 10 PAULA SHADLE 10 GLORIA SALAZAR 9 DOUG WILSON 9

=

SERGEY SERYOGIN 9 MANUEL PINA 8 CLAY DENNIS 8 SONIA STOUT 8 HILDA AYALA 8 PEDRO SALINAS 7 ROXANE FLORES 7 VICKY GARCIA 7 LIANE PADILLA 7 ROXANNE ELIZONDO 6 CYNTHIA GARZA 6 SYLVIA GARZA 6 RICHARD PADILLA 6 JESUS OLIVAREZ 6 CHRIS CARRION 5 JOSE HUERTA 5 ANGELA RODRIGUEZ 5 AMANDA AVILA 5 BENNY TORRES 5 MICHELE MATHIS * 4 KENNETH KRUEGER* 4 ISABEL RODRIGUEZ 3 JULIE BEDSOLE 3 ERIC HERMAN 3 ROBBIE SORRELL 3 BEATRICE REYES-GARCIA* 2 CRISSY TAMEZ 2 ROBERT HOLLOWAY 2

CHRISTINE GRISSOM VELMA VASQUEZ JOE LOCKHART NICK WEBER GUS GONZALEZ JON SHEPARD VLADIMIR LOBANOV BILL GUNN JOHN GUZMAN DOM CORTEZ REUBIN KENNEDY TAYLOR BENNETT ALAN SANDERS TAYLOR JONES TATE PRIEST MARK KOSIER BRENT WOLKERSDORFER LARRY RAHMES ROLAND RAMIREZ JASON SHIELDS JORDAN FROST ELY MEDINA *NEC Retail Employee

2 2 1 1 1 1 1 1 1

MINUTES OF THE 2014 ANNUAL MEETING

October 9, 2014

Call to Order: The 75th annual meeting of the members of Nueces Electric Cooperative, Inc., was held on Thursday, October 9, 2014, at the Richard M. Borchard Regional Fairgrounds in Robstown, Texas. The number of members present and registering was 1080 with 5705 represented by mail-in ballot, for a total of 6785 members (Exhibit “A”). Upon determining that a quorum was present, the meeting was called to order by President Brian Menking at 7:00 p.m.

The United States Navy presented the colors and Carroll High School Madrigal Singers led the audience in the Star Spangled Banner.

Pastor Justin Moss, Calallen Baptist Church, delivered the invocation.

Recognition of Board Members, Committee Members, Special Guests & NEC Employees President Menking introduced the Cooperative’s Board of Directors and members of the Community Involvement Committee.

Recognition was given to special guests in attendance and employees of the Cooperative.

Reading of Notice of Meeting & Proof of Mailing of Notice: Cooperative Attorney David Garrison read the “Proof of Mailing of the Notice of the Annual Meeting.” After the reading, the document was submitted to Secretary-Treasurer David Rosse for attachment to the official minutes of the meeting.

Minutes of 2013 Annual Meeting: President Menking stated that the minutes of the 2013 annual meeting had been provided in the October 2014 issue of the Texas Co-op Power Magazine and the Annual Report booklet.

Upon calling for corrections or additions to the minutes, a Motion was made, seconded and duly carried that the minutes of the 2013 Annual Membership Meeting be adopted as published.

Treasurer’s Report: President Menking stated the Treasurer’s Report had been provided in the October 2014 issue of the Texas Co-op Power Magazine and the Annual Report booklet. A Motion was made, seconded, and duly carried to approve the report as printed.

President & CEO Reports: President Menking and CEO John L. Sims delivered simultaneous reports through a pre-recorded video message to members which followed the

information distributed to members in the printed President’s and CEO Report provided in the October 2014 issue of the Texas Coop Power Magazine, as well as the Annual Report booklet.

President Menking and CEO Sims acknowledged that this Annual Meeting marks the Cooperative’s 75th anniversary. NEC has gone from a small cooperative to an innovative front runner and is known all across the US being one of just a few co-ops in the nation to offer choice; and the first and one of just a few to hold Navy contracts.

CEO Sims added that the co-op ended the 2013 year with favorable net margins in spite of an 8.1% increase in our cost of power compared to 2012. This amounted to an additional $2 million in expense over the 2013 budgeted cost. NEC purchased 726,641,910 kWh and sold 667,331,621 kWh. Member’s average electricity use was 1,308 kWh per month which is a 3% decrease in usage compared to 2012.

The co-op saw a 14.4% increase in total assets and debts. Of the $154.6 million, utility plant investments totaled $104.3 million, property and investments totaled $37.2 million, current assets totaled $10.9 million, and deferred charges were $3.3 million. Total Operation and Maintenance expenses increased by 7% over 2012, but NEC ended the year 10% over the 2013 budget. Patronage and Operating margins were relatively even between 2012 and 2013. All eligible members received a total of $7.7 million in Capital Credits and Merry Christmas Thank you during November and December 2013.

President Menking commented that the most prominent agenda item in 2013 was the construction of the new facilities, which was a result of the 2007 Strategic Plan. After five years of planning, the new headquarters facility was completed in September and the Co-op officially moved in on October 28, 2013. As a result of the new headquarters facility, NEC’s Operations division has experienced more efficiency in handling member outages and new service requests. Employee overtime has been reduced as well primarily as a result of the more loading docks and truck bays. As a result of the new facility, new

technology was implemented which has drastically improved the employees’ ability to communicate interdepartmentally and to address members’ needs faster than ever.

While no new jobs have been added since early 2013, the Co-op did grow the workforce by approximately fifteen employees since 2008 in order to handle the size and complexity of NEC. All of these imposed factors have led the Co-op to begin an assessment of our tariff and the need for a current cost of service evaluation as the NEC Retail Division has been subsidizing distribution costs for the last four to five years. Presently the Board is looking at ways to align NEC Retail rates with competitive retail electric rates in Texas.

A Motion was made, seconded and duly carried to approve the reports as presented.

Member Voting: Secretary David Rosse read the nominating, voting and election procedures for Directors as outlined by the NEC Bylaws. Survey and Ballot Systems (SBS) supervised the collection and counting of the ballots. Upon completion of the counting of the ballots, the following results were announced and certified by Ryan O’Conner, a representative of SBS and Board Secretary David Rosse: District 1: Rumaldo Juarez

5820 Votes

District 2: Gregg Truesdale

5719 Votes

District 4: Donald Herrmann 5713 Votes It was declared that those elected as Directors for Districts 1, 2 and 4 are: Rumaldo Juarez District #1; Gregg Truesdale District #2; and Donald Wayne Herrmann District #4, all for three-year terms.

Nueces Charities Check Presentation from CoBank. Director Tommy Ermis accepted a check from CoBank for $5,000.

NEC Retail Member Referral Program Winners and Prize Drawings: Frank Wilson, announced the Referral Program winners who received $500 electric bill credit for first place and the runner up received a $250 electric bill credit and held the prize drawings.

Adjournment: There being no further business, the meeting was adjourned at 8:10 p.m.

Nominees For Director 2015 Election

DISTRICT 3: David Rosse David Rosse grew up as a member of an NEC family. He, himself, has been a member of NEC for 39 years.

His grandfather was an NEC director for 32 years. Mr. Rosse was elected as an NEC director in 1988 and has served as director for the past 27 years. As an NEC director, Mr. Rosse currently serves as secretary-treasurer for NEC and as director for San Miguel Electric Cooperative - one of NEC’s power suppliers. He additionally serves as the chair of each of the following committees: Government Affairs, Director Screening, Governance, and Capital Credits. Mr. Rosse is the Kleberg County Commissioner for Precinct 1. Mr. Rosse believes that the most important role NEC di-

rectors have is to ensure affordable, reliable energy to our membership and to represent the membership in the decision making processes of the Co-op.

Mr. Rosse believes that he qualifies for service as an NEC director because of his Certified Electric Cooperative Director training, his experience serving NEC members as a director that helps him understand how the process works and his willingness to listen to all ideas and concerns that will help the co-op grow. Mr. Rosse resides in Kingsville and is the father of five children - Oscar David, Charles William (wife, Sarah), Maranie May, Morgan Marie, and April Nicole - and the grandfather of four - Mason, Landon, Maysie, and Isabel.

DISTRICT 5: Maxine Stewart Maxine Stewart has been an NEC member for 51 years and an NEC director for the last 20 years. She was appointed in August 1995 to the Nueces Electric Cooperative Board of Directors, where she completed the term begun by her late husband, Raymond Stewart.

Ms. Stewart has taken several courses from the National Rural Electric Cooperative Association and is a fully Certified Electric Cooperative Director. Ms. Stewart currently serves on the following NEC Board of Director Committees: Finance, Capital Credit, and District Boundary. Ms. Stewart is also on the Nueces Electric Charities Board of Directors that guides and

manages the funds raised through Nueces Electric Cooperative’s Operation Round-Up program. Ms. Stewart believes the NEC directors make very important decisions for the co-op and its members. In addition to her Certification as an Electric Cooperative Director, Ms. Stewart believes she is qualified because she genuinely cares about the co-op and the people it serves- those who also own it. She will care and listen to the concerns and ideas of other co-op members. Ms. Stewart earned a nursing degree from James Daughtery School of Nursing in Corpus Christi and is a lifelong resident of McMullen County. Ms. Stewart currently runs her family ranch in Tilden and has one daughter - Susan Stewart - and one grandson - Jess Stewart.

District 9: Juan Alvarado Juan Alvarado is a life-time member of NEC. He was appointed to the NEC Board of Directors in February 2004.

Currently, Mr. Alvarado serves as chairperson of the annual meeting planning committee and serves on the Director Screening committee.

Mr. Alvarado is active in the community as a eucharistic minister and bingo chairman of his church (Our Lady of Consulation), he is a member of the Knights of Columbus, and a member of the Historical Society of Texas A&M Kingsville and the Riviera Beautification Committee. Mr. Alvarado believes the most important

role of an NEC director is to do what is best for the cooperative and its members. Mr. Alvarado has completed all courses required to be a Certified Electric Cooperative Director and feels this is an important qualification for a NEC director. He also believes his membership in the Rural Friends/Acre program, past electrical coursework at Austin Community College and his 11 years of experience as an NEC director are valuable qualifications as well. Mr. Alvarado currently is a rancher in Riviera where he resides with his wife, Edna. They are the parents of six children - Maria Berry, Ada Eskeets, Johnny Alvarado, Jr., Anita Jefferson, Delfino Alvarado and Edna Mae Larson - and have eleven grandchildren.

Nueces Electric Charities, Inc. Thanks to the generosity of NEC members who round up their electric bill, over $1 MILLION has been given to community organizations to improve members quality of life.

Grant Applications can be found at www.nuecescharities.org Boys & Girls Club of Harlingen Brush Country CASA Charlie’s Place Recovery Center Children’s Advocacy Center of the Coastal Bend CHRISTUS Spohn Foundation Coastal Bend Community Foundation Coastal Bend Wellness Foundation Communities In Schools Corpus Christi Education Foundation Corpus Christi Hope House Corpus Christi Metro Ministries Corpus Christi Pregnancy Resource Center Dress for Success Education Service Center-Region 2 Emmanuel Christian Fellowship Community Center

Food Banks Fire Departments Shelters Education Scouts

In 2014, $135,000 was distributed to 29 area 501(c)3 organizations. (see below) That is a lot of pennies which rounded up to a lot of good!

Grant Deadlines: February 1st & August 1st Fannie Bluntzer Nason Renewal Center Good Samaritan Rescue Mission Halo-Flight Harbor Playhouse Education is Our Freedom GED Scholarship Program Montessori School of Corpus Christi Refuge of Hope Ronald McDonald House Charities South Texas Lighthouse for the Blind South Texas Literacy Coalition The Ark The Rise School of Corpus Christi United Way of the Coastal Bend YWCA

Helping the community through

the power of change

Rehabilitation Health Care Research Ministry Counseling

Over $9.4 million returned to members in 2014!

How? Why? We work for Main Street. Not Wall Street.

Cost Effective Service Integrity

Reliable Service

$9.4 Million

Members First. Always.

Nueces Electric

Mission Statement

Honesty

Compassion

The mission of Nueces Electric Cooperative, Inc, a member-owned cooperative, is to help our members continually improve their quality of life by providing reliable and cost effective electric service.

NEC District Map Which District Are You In?

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All members vote on all directors regardless of what district you reside.

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Directors serve three year terms.

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Election packets are available each June for the districts slated for election. Districts 6, 7, 8 & 10 will be slated for election in 2016.

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Your elected district director represents and votes for your communities best interest at monthly board meetings.

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Directors receive training and represent the Co-op at conferences and annual trainings.

Districts 1-9 are shown above.

District 10 (Retail) includes all areas outside of 1-9

www.nueceselectric.org 1.800.632.9288

#ThankALineman Dedicated & Committed.

It’s not just a job, it’s a way of life.

If you live on NEC power lines, just know that you are in good hands.