Planning - A Key to the Future Dan Kessler, Regional Vice President ORECA Director Workshop June 2, 2015

2 Created and Owned by America’s Electric Cooperative Network Planning-A Key to the Future  Question to Consider –What are some suggestions from CFC, and from us, for cooperatives to position themselves for continued success in the future?  Compilation of best practices and experiences throughout the national cooperative network  Not universal – these are suggestions that may or may not be appropriate for your cooperative  Purpose is to provoke thought and debate

3 Created and Owned by America’s Electric Cooperative Network Keys to Future Success 1. It begins with Strategic Financial Planning 2. Engineering fundamentals & Planning … 3. Focus on Employees and Directors … 4. Plan for an appropriate Financial Balance 5. Develop a Plan for Accountability … 6. Create an Engaged and Loyal membership 7. Embrace Technology … 8. Attend to Diversified Services 9. Others…

4 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning is a Key…  Strategic planning –Proactive management vs issue d’jour –Sets corporate direction for future –Regular check ups on plan’s progress Modify as the environment change

5 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning Why do it?  More Complex  Less Predictable  Need for Planning

6 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning Traditional Responsibilities  load forecasting  energy/demand forecasting  construction planning  budgeting  tariff design  program development

7 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning Today’s Cooperative’s…  demographic changes  changing member needs  new roles or services  deregulation, re-regulation, competition  renewable resource emphasis, cost of energy  war on terrorism, disaster planning

8 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning Boards & Management must:  Think critically!  Ask constantly: - Where are we now? - Where are we going? - How will we get there?

9 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning  Develop  Implement  Update “ Chart the Course ”

10 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning What is it?  Mission  Vision  SWOT Analysis  Strategic Initiative’s/Goals  Strategies  Action Plans/Implementation

11 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning  When you decide to get started? - Discuss the need to plan and expectations… - Who’s involved? - Develop Board Policy… - Set meeting dates with appropriate audience… - Involvement of staff… - Develop a “draft” plan… - Get final approval/adoption…

12 Created and Owned by America’s Electric Cooperative Network Strategic Financial Planning  CFC will Facilitate Strategic Financial Planning as necessary…

13 Created and Owned by America’s Electric Cooperative Network Engineering Fundamentals…  Providing reliable electric service –Load forecasting (Power Requirements studies) –Long-range engineering planning –Construction planning –Planning for storms and emergencies (LoC’s, etc.) –System maintenance practices  Meeting increased expectations of members –Large commercial loads/ Key Accounts –Consumers want 24/7 reliability Balancing With Financial Realities!

14 Created and Owned by America’s Electric Cooperative Network Focus on Directors & Employees  Increase competence – a continuous process  Recognize expectations of changing generations

15 Created and Owned by America’s Electric Cooperative Network Adapt for generational differences Retiring Baby Boomers (1946 – 1964) About 86 million  75% of baby boomers plan to continue working in some capacity according to a study by AARP.  Flexible work schedules and leaves of absences to allow more leisure time.  Individual contracts to accommodate varying compensation and fringe benefit requirements

16 Created and Owned by America’s Electric Cooperative Network Adapt for generational differences Generation X (1965 – 1980) 50 million (36% drop!)  Skeptical, Pragmatic, practical, Self-reliant, individualistic, reject rules.  Best led by competence and require consistent feedback  Work, life balance: Time away from work is as important as the career  Two career families  Not as likely to relocate for a job.

17 Created and Owned by America’s Electric Cooperative Network Adapt for generational differences Generation Y (Millennials) (1980 – 2000) Approximately 76 million  Feeling of empowerment, security, and optimism.  Make up over 20% of today’s population.  Racially and ethnically diverse  Extremely independent: divorce, latchkey parenting, day care, single parents, technological revolution.  “When Generations Collide”

18 Created and Owned by America’s Electric Cooperative Network Focus on Director’s and Employee’s (cont.)  Expect professionalism  Compensation tied to corporate goals  Succession Planning

19 Created and Owned by America’s Electric Cooperative Network Plan for Financial Balance  Financial best practices and policies  Equity Management (3 decision points) - Capital Expenditures (growth) - Capital Credit Retirements - Margins (TIER Goals)  Electric rates (Cost of Service)  Financial Forecast (Compass)  Debt Portfolio Management  Budgeting (Budget Pro)  Utilize (other) tools: financial presentations, KRTA’s, CFC Staff…

20 Created and Owned by America’s Electric Cooperative Network Plan for Accountability from…  Board (self-evaluation, board goals)  CEO/GM –Updated job-descriptions, clear expectations –Evaluations…  Executive team/ Key Staff  Vendors  Consultants  Affiliated organizations –G&T –Statewide association –National associations

21 Created and Owned by America’s Electric Cooperative Network Engaged & Loyal Membership  Communicate with your members  Survey the members –Understand members’ increasing expectations –Understand members’ changing sophistication  Educate your members  Be open with members/ Listen to them…  Treat members as “owners”

22 Created and Owned by America’s Electric Cooperative Network Embrace Technology…  New ways to gather data  Make better decisions  Track results  Safety issues  Provide Additional Services  Add convenience Better Service/Value For Your Members!

23 Created and Owned by America’s Electric Cooperative Network  Ask why you want to provide this business and/or service - Does it align with our mission, core business goals and skills of staff? - Does the business provide value to electric members?  Complete a solid business plan  Analyze and track performance  Make changes as necessary  Comprehensive exit plan Diversified Services

24 Created and Owned by America’s Electric Cooperative Network Summary - Planning begins with… 1. Strategic financial planning… 2. Engineering fundamentals and planning… 3. Focus on employees and directors… 4. Plan to achieve financial balance 5. Develop accountability… 6. Create an engaged and loyal membership 7. Embrace Technology… 8. Attend to diversified services 9. Others…

25 Created and Owned by America’s Electric Cooperative Network Questions & Discussion

26 Created and Owned by America’s Electric Cooperative Network We Appreciate Being Your Financial Partner! Thank You!