General Manager’s Report James R. Webb General Manager – Beartooth Electric President/CEO – Lower Valley Energy

General Manager’s Report Mission System Reliability Competitive Rates Exceptional Customer Service Safety

General Manager’s Report Observations The BEC Board and Committees have worked extremely hard to navigate through some very difficult situations The BEC Employees are very talented and work hard on your behalf The BEC system is in very good shape

General Manager’s Report Observations High number of meters per employee 343 meters per employee – 250 state average 1,798 miles of line 5,800 active meters 17 full-time employees (now 14) Power supply issues High line losses – about double the national average

General Manager’s Report Observations Electric rates are high 17.0/KWh BEC 11.9/KWh National 10.9/Montana Customer usage is low 785 KWh/month BEC 1,199 KWh/month National 1,112 KWh/month Montana

General Manager’s Report Observations Low density – meters per mile of line High number of seasonal accounts 81% residential sales

Significant Financial Points for year ended June 30, 2015 General Manager’s Report Significant Financial Points for year ended June 30, 2015 Equity rose from 25.9% to 29.2% Paid down Long Term Debt of $647,000 and our share of an additional $250,000 on a Southern Montana line of credit No new borrowing of Long Term Debt Administrative and General Expense down $136,957 or 10.1% from 2014 to 2015 Contributions-In-Aid of Construction rose $1,476,700

General Manager’s Report Lower Valley Management Agreement April 1, 2015 start date Three year agreement beartoothelectric.com Who is Lower Valley? lvenergy.com

General Manager’s Report

General Manager’s Report Lower Valley Energy Cooperative Afton, Wyoming 27,000 electric meters 4,000 gas meters Lowest residential electric rates of all cooperatives

General Manager’s Report Meet the Lower Valley Management Team Beartooth has access to a team of 9 professional staff with over 214 years of experience to help manage your cooperative.

General Manager’s Report Lower Valley Management Team Rick Knori Director of Engineering, 35 years in the utility industry Bill Spaulding Director of Electric Operations, 35 years in the utility industry

General Manager’s Report Lower Valley Management Team Wade Hirschi Chief Financial Officer, 15 years in accounting and finance Angie Jennings Staff Assistant, 25 years, Customer Service, Operations and Engineering Departments

General Manager’s Report Lower Valley Management Team Tammy Spracklen Chief Financial Officer, 20 years in billing and customer service John Edwards Information Technology, 20 years in the IT industry

General Manager’s Report Lower Valley Management Team Gay Peterson Human Resources, 20 years in the industry Brian Tanabe Communications, 17 years in communications and marketing fields

What has Lower Valley done to assist Beartooth since April 1, 2015? General Manager’s Report What has Lower Valley done to assist Beartooth since April 1, 2015?

General Manager’s Report Five percent rate reduction New power supply contract through 2020 Transmission agreement with NWE CFC financing for Southern G&T Exit Estimated at $1.4 million Evaluation of NWE option

General Manager’s Report

General Manager’s Report *Photo source – Great Falls Tribune, Annisa Keith

General Manager’s Report Eliminated four positions General Manager Chief Financial Officer Work Order Clerk Part-time Administrative Assistant Engineering services Reduced costs of the Tippet Rise Project Negotiation of the 5 mile NWE underbuild project Evaluation and prioritization of long-term work plan Evaluation of line losses

General Manager’s Report Operations Pole replacements and other jobs being done with BEC employees instead of contractors LVE instructors for some safety meetings Material and warehouse savings New HD Supply contract Employee exchanges Administrative Customer billings – being done in Afton Credit and collections Streamline work order and material processes Cross-training

General Manager’s Report Communications Board reports & minutes Rural Montana articles Update website Video conference system Member survey Finance & Accounting Financial forecast Rate decrease study Budget process

General Manager’s Report Next Steps Present budget options to the board to further reduce costs and rates Follow the transition plan Streamline communications Possibly reduce the number of meetings Set company goals Formalize employee exchanges Reduce line losses

General Manager’s Report Next Steps Reduce legal and consulting fees Establish an energy conservation program

General Manager’s Report The Future is in Your Hands Merge with Lower Valley Energy Merge with another cooperative Hire a new BEC management team Consider selling to another utility Two-thirds vote of the members

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