2013 Annual Report

2013 Annual Report
Northwestern Rural Electric Cooperative, Inc.
2013 Executive Report — Board Chair/President & CEO
Cooperative financial
strength
The financial statement
for 2013 is included in this
annual report and clearly
shows Northwestern REC to
be financially strong and
rock solid. Operating and
net margins are exactly
where the board and management team need them to
be to meet all of our financial targets required by our
lenders.
Our equity, at 47 percent,
is in that sweet spot that
means our lending is under
control and our retail rates
are just right for the best
value. Low equity often
means that most of the system improvements have to
be funded by debt, which
leads to high future interest
CHANGING OF THE GUARDS: Northwestern REC President & CEO Michael D. Tirpak, left, and Northwestern REC
costs. High equity often
Board
Chair Kathryn Cooper-Winters, right, introduce Mary Grill, Assistant President & CEO.
means that retail rates are
higher than needed to fund
the system improvements
dent & CEO, as changes in the cooperacantly, but like the line improvements,
using cash. Northwestern is right at the operational efficiencies have also
tive business model have evolved over
goal set by the board of directors.
the past 26 years.
increased and helped to keep our
Northwestern is nearing an end to
Tirpak has taken a leadership role
expenses under control.
the relocating and rebuilding of our
in the successful load management
Capital credits were again retired
oldest lines that have the copper-covwater heater control program that has
late last year in the amount of
ered steel conductor. This 20-plus-year
saved co-op members over $20 million
$912,406. This brings the cumulative
project has improved reliability and
total of retired capital credits to $31 mil- since its inception in 1985. He has
efficiency by lowering line losses and
guided the co-op through the Electric
lion.
allowing much of our system to be
Competition Act of 1996, the Y2K
worked from bucket trucks by our line- President & CEO to retire
changes in 2000, and the technology
men, which is much faster than carryPresident & CEO Michael D. Tirpak
conversions over the past seven years.
ing equipment back into off-road
informed the board in the fall of 2013 of He and his management team have
rights-of-way and climbing poles.
his desire to retire in October 2014. Tir- worked hard to lead the cooperative to
New technology has been implepak has been an employee of Norththe strong financial position enjoyed
mented over the past seven years in
western REC for 36 years, since his
today.
almost all aspects of our operations,
employment date of Aug. 1, 1978. He
Tirpak has also taken leadership
such as computers and software for
started as an electrical engineer and
positions in community activities, such
accounting and billing, automatic meter was soon promoted to manager of engi- as Kiwanis, Chamber, Community
reading, load management controls,
neering and then to manager of engiHealth Services and the Visiting
digital mapping, outage management
neering and operations.
Nurses Association of Meadville Medsoftware, SCADA, and electronic
He was selected by the board of
ical Center. He has also served in leadtablets for many of our employees,
directors in 1988 to the position of genership of state and national cooperative
including our linemen in their bucket
eral manager. He has served the cooporganizations and committees.
and digger trucks. This new technology erative as general manager, general
Board Chair Kathy Cooper-Winters
has changed co-op operations signifimanager & CEO, and recently as presistated, “Mike’s emphasis on continuous
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Northwestern Rural Electric Cooperative, Inc.
improvement and his focus on the
membership of Northwestern REC
have resulted in the strong and vibrant
cooperative we have today.”
President & CEO search, selection
The board of directors began the
important process of selecting the next
president & CEO with a careful examination of the position description and
the policies covering the relationship
of the board and the president & CEO.
The next step was the appointment of
the CEO Search Committee by Board
Chair Kathy Cooper-Winters in the late
fall of 2013. A process plan was then
developed.
The Search Committee decided to
post the position internally and was
encouraged to find that seven inside
employees applied for the position. All
seven were interviewed and given a
chance to explain their qualifications
and their vision for the future.
Cooper-Winters remarked, “The
Search Committee was extremely
impressed with the level of professionalism and the focus on the membership exhibited by these candidates.”
After a series of interviews with the
Search Committee and the full board,
the board of directors decided to promote Mary Grill, vice president of consumer services and IT, to the position
of president & CEO upon the retirement of Tirpak in October 2014.
Cooper-Winters states, “Mary has
37 years with the cooperative and has a
tremendous vision for the future of the
cooperative with the focus solidly on
the membership. The board is very
confident in her leadership and looks
forward to a smooth transition in the
executive position, as well as the management and employee succession
planning of the future.”
Kathryn J. Cooper-Winters
Board Chair
Michael D. Tirpak
President & CEO
A message from your next CEO
I AM TRULY honored to have been selected to
serve your cooperative as the next president & CEO.
I have 37 years of experience at Northwestern REC,
spending my entire career in consumer services
working directly with our members.
My credentials include a strong financial background. I served as the manager of consumer services and accounting for many years. I have worked
with our board of directors to develop and implement strategies to minimize rate increases while
keeping your cooperative financially strong.
One of my greatest accomplishments has been in
the formation of the Member-to-Member Program
back in 1985. Through the generous financial support of our co-op family, today Member-to-Member,
Inc. offers a hand up to members struggling to pay
By Mary Grill
Assistant President & CEO
their electric bills, reaching out and helping over 500
co-op families each year.
Currently, I am implementing a succession plan with the support of our board of
directors and staff as we prepare our organization for the future. In the next five years,
we expect as many as 14 senior employees to retire, with 22 retirements expected
within the next 10 years. We are at various stages of reorganizing our labor force to
prepare for this event, and I promise you that Northwestern REC will be ready to continue our important mission of providing you with safe, reliable and affordable distribution electric service.
I am excited for this opportunity and I am looking forward to working with and
for our members.
Mary Grill
Assistant President & CEO
Sources of donations
$127,028.23
91,108.07
52,046.08
5,651.73
4,085.85
31,543.91
$311,463.87
Donated capital credits checks
M2M Golf Outing
Operation Round-UP
Annual meeting events (50/50, used book sales)
Co-op employee donations
Other (auctions, Fair games, etc.)
Total donations since inception
Total member benefits paid since the beginning of M2M = $956,464.25
Total members who received assistance since the beginning of M2M = 4,107
Average assistance per member is therefore $232.89
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Northwestern Rural Electric Cooperative, Inc.
Statistics & Trends Your co-op does the heavy lifting for you
NORTHWESTERN REC members are already getting one of the best
deals around on their power costs, even though no third-party organizations (alternative generation suppliers) have signed up to sell to
our members.
Currently, members on the Residential Rate have a price-to-compare (PTC) of $.06286. For your friends who may be receiving electric
service from other utility providers, this PTC will change every three
months. We know our members like stability, so we keep this PTC
constant and review it on an annual basis.
The table below shows where some of the other utility price-tocompare numbers fall, based on projected future PTC disclosures:
Northwestern REC
Duquesne Light
FirstEnergy – Penelec
PPL
$.06286/kWh (for all of 2014)
$.0808/kWh (through 11/30/14)
$.0925/kWh (through 8/31/14)
$.09036/kWh (through 11/30/14)
Members can rest assured, the board of directors and management
of Northwestern REC have been looking out for members for 77
years, and will continue to do so to provide reliable electric service at
the most affordable price possible.
Power reliability & restoration
WE ARE PROUD to report that on average, power was available to
our members 99.998 percent of the available hours in the year. Our
goal is always 100 percent reliability, but Mother Nature and other elements that are beyond our control often enter the picture. In particular, this last winter was long and cold, with record snowfall that
weighed heavy on trees and power lines.
Outages caused by transmission issues (the transmission lines
used to deliver the power to our substations) continue to be the largest
cause of outages, and we continue to work with FirstEnergy-Penelec
to improve that situation for our members. In 2013, the cooperative
performed 624 miles of right-of-way maintenance, amounting to
$1,473,000, to reduce the number of outages that result from trees.
Utilizing technology to more effectively monitor line
conditions and improve outage restoration time will continue
to be key well into the future. Pictured right, Ryan Meller,
technology services manager, monitors Northwestern REC’s
SCADA (supervisory control and data acquisition) system.
SCADA:
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Northwestern Rural Electric Cooperative, Inc.
Northwestern Rural Electric Cooperative
Association, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES
Years Ended December 31, 2013 and 2012
CONSOLIDATED BALANCE SHEETS
December 31, 2013 and 2012
Assets
Property and equipment:
Electric plant in service - at cost
Headquarters construction work in progress
Construction work in progress
2013
$
Less accumulated provisions for depreciation
Total electric plant
$
898,897 8
302,143 3
197,132 1
8,025,6948
60,597 6
587,318 5
898,897
228,139
219,177
8,329,900
85,780
587,960
Total other assets and investments
1
10,071,781
10,349,853
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for
uncollectiable accounts of $57,000 and
$62,178 for 2013 and 2012, respectively
Current maturities of notes receivable
Materials and supplies
Other current and prepaid assets
O
9
E
90,493,174
C
372,443
8
R
860,008
9
91,725,625
2
29,607,192
6
62,118,433
65,844,480
Other assets and investments:
Non-utility property, at cost
Notes receivable, less current maturities
Cash surrender value of life insurance
Investments in associated organizations
Certificates of deposit
Board designated funds
C
D
D
C
C
S
A
O
Operating revenues:
Electric energy revenue
$
Customers' forfeited discounts and penalties
Rent from electric property
Miscellaneous electric revenue
Total operating revenues
Deferred charges
3,785,4043
7
76,679 F
506,371 5 I
64,526 6
5,959,378
6,233,1226
$
Equities and Liabilities
84,712,547
$
2013
7
78,629,074
Total equities
Long-term debt:
CFC notes, less current maturities
Farmer Mac notes, less current maturities
Long-term debt, other, net
Total long-term debt
Non-current liabilities:
Accumulated post retirement benefit obligation, less
current portion
Employee deferred compensation
Total other long-term liabilities
Current liabilities:
Current maturities of long-term debt
Current post-retirement benefit obligation
Accounts payable:
Purchased power
Other
Capital credit retirement funding liability
Customer deposits
Accrued interest
Accrued payroll
Accrued vacation liability
Total current liabilities
Total liabilities
Deferred credits
81,430
11,595,215
27,039,647
2012
$
38,716,292
3
36,740,504
28,811,427
8,146,205
228,139
23,750,450
8,448,750
302,143
37,185,771
32,501,343
387,137
227,000
523,449
172,848
614,137
696,297
1,512,979
38,451
1,824,936
40,995
1,583,011
883,749
357,440
295,368
391,962
266,861
454,526
5,784,347
1,607,235
935,631
459,829
280,819
394,829
261,492
450,197
6,255,963
43,584,255
39,453,603
2,412,000
$
$
83,820
1
11,080,254
2
25,576,430
84,712,547
Fixed charges:
Interest on long-term debt
Operating margin after
fixed charges
fixed charges
N
M
$
3
2012
31,961,9352 $
107,324 1
133,180 1
589,889 5
29,886,747
102,687
147,334
549,064
32,792,3283
30,685,832
16,459,0681
1,468,293 9
2,427,206 2
1,320,433 1
618,891 5
182,768 1
4,088,416 3
2,952,897 2
88,536 7
16,154,776
981,544
2,627,826
1,268,924
572,869
143,245
3,686,112
2,809,002
78,545
29,606,5082
28,322,843
3,185,820 2
2,362,989
1,714,398 1
1,659,400
1,471,422 7
1
G & T and other capital credits
205,738 2G
2,558,836
Total operating expenses
Operating margin before
O
fixed charges
fixed charges
4,450,992
74,004
500,458
72,848
$
Operating expenses:
Cost of power
Distribution - operations
Distribution - maintenance
Consumer accounts
Customer service and information
Sales
Administrative and general
Depreciation and amortization
Other
T
1,800,1421
861,076
Total current assets
Equities:
Memberships
Patronage capital
Other equities
96,474,765
-676,812
97,151,577
31,307,097
2013
2012
734,457 3
2,205,879 1
Net operating margins
Nonoperating margins:
Interest income
Gain (loss) on disposition of property
Miscellaneous non-operating income
703,589
346,713
1,050,302
66,575 6
(15,295) 4
60,217 1
63,383
42,204
163,240
111,497 2
268,827
8
T
Total non-operating margin
Net margin
$
2,317,376 1 $
1,319,129
The financial statements of the cooperative for the year
2013 has been audited by Buffamante Whipple Buttafaro,
P.C., Jamestown, New York. The audit resulted in a clean
opinion stating that the financial statements presented
fairly,Jamestown,
in allJamestown,
material
respects,
the
of the
NewThe
York.
Thefinancial
audit resulted
in a clean
New York.
audit
resulted
in position
a clean
o
ocooperative
and subsidiaries as of December 31, 2013
and results of their operations and cash flows for the
years ended in accordance with accounting principles
generally accepted in the United States of America.
The auditor’s complete report is on file in the office of the
cooperative and is available for inspection by the membership.
2,434,967
$
78,629,074
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Northwestern Rural Electric Cooperative, Inc.
Northwestern Rural Electric Cooperative
Association, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITIES
For the years ended December 31, 2013 and 2012
Patronage
Capital
Memberships
Balance, at December 31, 2011
$
Membership fees cancelled
Net operating margins
Non-patronage source margins
Net non-operating margins
Retirement of capital credits
Equity payable upon liquidation
Gain on early retirement of capital credits
Change in post-retirement benefit obligation
Donated capital
Balance, at December 31, 2012
Membership fees cancelled
Net operating margins
Non-patronage source margins
Prior year non-operating interest allocated
Net non-operating margins
Retirement of capital credits
Equity payable upon liquidation
Gain on early retirement of capital credits
Change in post-retirement benefit obligation
Donated capital
Balance, at December 31, 2013
Northwestern REC
Quick Facts
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$
86,110
$
12,291,142
(2,290)
-
1,050,302
(843,620)
(1,417,570)
-
83,820
11,080,254
(2,390)
-
2,205,879
(835,294)
63,383
(919,007)
-
81,430
$
11,595,215
Other
Equities
$
23,646,332
843,620
268,827
831,725
9,660
(23,597)
(137)
25,576,430
835,294
(63,383)
111,497
460,561
4,736
114,593
(81)
$
27,039,647
Northwestern Rural Electric Cooperative, Inc.
Your board
of directors
NORTHWESTERN Rural Electric Cooperative is guided by a board of 10 directors, one from each of the 10 districts within its service territory. Although each
director is a member from his or her district, the entire co-op membership votes
the directors into office through the election process held during the annual
meeting. Director terms last for three years.
CO-OP PRINCIPLE 7:
District 1
Jack Sheffer
District 2
Earl Koon
District 3
Roger Follett
District 4
Robert Agnew
District 5
District 6
Kim Docter
Kathryn Cooper-Winters
Concern for Community;
Mike Tirpak checks out
some of the new safety
equipment purchased by
the Venango Volunteer Fire
Department with help from
the Rural Economic
Development Loan Program
through Allegheny Electric
Cooperative. Venango VFD
purchased personal safety
equipment and a used
fire truck with the funds
supported by
Northwestern REC.
FANS AT THE FAIR:
District 7
David Rectenwald
District 8
Bob Davis
District 9
Larry Proper
District 10
Lanny Rodgers
Northwestern Rural
Electric Cooperative
Association, Inc. provided
the funds to have 24 commercial grade ceiling fans
and their respective
controllers installed in
Home Show Building No. 1
at the Crawford County
Fairgrounds. This amounted
to a $12,000 investment
by Northwestern and an
additional $5,000 grant
match for the Crawford
County Fair Board from
CoBANK.
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Northwestern Rural Electric Cooperative, Inc.
Know the nominees
You and the other members at the Northwestern REC Annual
Meeting elect your board of directors on a rotating basis. This year,
directors from Districts 6, 7, 8 and 9 are up for election. Nominating
meetings were held in each of the districts during April. The members
who attended these meetings nominated people they believed met the
qualifications necessary to be a director of Northwestern REC. The following biographical sketches will familiarize you with the candidates.
District 6 - Rockdale, Richmond, Athens and Bloomfield townships
(Crawford County)
Kim Docter, 27553 Miller Station Road, Cambridge Springs
Incumbent. Kim Docter was first elected to the board of Northwestern REC in 2007. She is a Credentialed Cooperative Director and
achieved her Board Leadership Certification. She currently serves as
the board secretary. Docter is a graduate of Villa Maria College,
where she was honored by the Pennsylvania Institute of Certified
Public Accountants for excellence in accounting. She is in her fourth
term as the Rockdale Township tax collector and has been employed
for 10 years by the Penncrest School District as a substitute teacher.
Previously, she was also the owner/operator of a registered home
daycare for 16 years.
Docter has been a member of the Millers Station United
Methodist Church since 1984. She currently holds the position of
treasurer and is on the church’s board of trustees. She is a 29-year
member of the Erie Motorcycle Club, where she currently serves as
the vice president. Over her years with the club, she has also served
as president, treasurer and secretary. She also serves as the Western
Pennsylvania representative and newsletter editor for Retreads, an
international organization for motorcyclists over the age of 40.
Docter is a resident of Cambridge Springs. She has three children:
Kristopher, who is an interior designer with a large firm in Chicago;
Emily, a freshman at Laurel Technical Institute in Meadville; and
Alandis, a ninth-grader at Cambridge Springs Junior/Senior High
School. She has been an active co-op member for 29 years, attending
both the spring member meetings and annual meeting each year.
District 7 - Sparta, Rome, Oil Creek, Troy, Steuben and Elder
townships (Crawford County)
David Rectenwald, 40084 Mystic Park Road, Titusville
Incumbent. Longtime Titusville resident David Rectenwald was
first elected to the Northwestern Rural Electric Cooperative Association’s Board of Directors in 2005. He currently serves as board vice
chair and has previously served as board secretary. He is a Credentialed Cooperative Director and has obtained his Board Leadership
Certification.
Rectenwald received a bachelor’s degree in geology (minor in
physics) from Allegheny College and a master’s degree in environmental studies from Gannon University. He also received a Certificate in Environmental and Occupational Science from Gannon University.
He is employed by the U.S. Environmental Protection Agency
(EPA) as an environmental scientist. Prior to this position, he served
as an inspector and consultant for the EPA. He also held scientist
positions with companies out of Massachusetts and Maryland. After
graduating from Allegheny College, Rectenwald worked as store
manager for the Republic Supply Company in Titusville.
Rectenwald serves on the board of the Crawford Area Transportation Authority, as treasurer for the Titusville Rod and Gun
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Club, and is a past president of the Titusville YMCA Board of Directors.
He resides in the Titusville area, is married to Amy Murphy
Rectenwald, and has six children: Amanda, Andy, Edward, Robbie,
Ginger, and Charlie.
District 8 - East Fallowfield, Vernon, Greenwood, Union, Fairfield and
Sadsbury townships (Crawford County)
Robert Davis, 17401 Mullen Road, Meadville
Incumbent. Bob Davis is a professional, positive, and engaging
“people person,” loves life, and has a genuine interest in people and
the community. Davis is a longtime resident of Vernon Township, a
proud member of the co-op since 1962 and a board member since
2010. After graduating from McKeesport High School, he completed
extensive management training for the G.C. Murphy Company and
was transferred to Meadville in 1962. From Murphy’s, he moved on
to become the owner and operator of the Stag Bar and Grill in
Meadville from 1965 to 1977, and was also a conductor for the Erie
Lackawanna Railroad and Conrail from 1968 until 1977. Davis also
operated a franchise for Gibble’s Potato Chips. He then became the
general manager for Sandalini’s and the VIP in Niles, Ohio, and Sandalini’s in Meadville. From 1981 through the mid-1990s, he owned
and operated a Perkins Family Restaurant, the Waterfront Restaurant, and The Franklin Depot, all in Venango County. Concurrently
with his restaurant ventures, he developed Birchwood Exploration
oil and gas wells. After 15 years of service, Davis retired from the
Pennsylvania Department of Corrections as a food service manager
in 2007.
He has been active in the community as a Vernon Township
supervisor for 18 years and chairman of the board for 14 years. He is a
member of the Pennsylvania State Association of Township Supervisors, and a member of the board of directors for Goodwill Industries,
serving Northeast Ohio and Northwest Pennsylvania. He also volunteers on the board of directors of Tri-State Saddle Horse Breeders
Association, Inc., which hosts the annual Pink Ribbon Classic Charity Horse Show benefitting breast cancer research. He is also on the
board of the Economic Progress Alliance.
His strong commitment to family shows in his marriage of 57 years
to his wife, Marian. The core value of the Davis family is unity —
their three children and four grandchildren remain close to one
another and close to home. They are members of Trinity Lutheran
Church. They all reside in Vernon Township. The family’s focal point
has always been working together on their horse farm.
District 9 - West Mead, East Mead, Randolph and East Fairfield
townships (Crawford County)
Larry D. Proper, 28938 Hickory Corners Road, Guys Mills
Incumbent. Larry Proper has been a board member since 1981. A
native of Crawford County, Proper has been a co-op member for
more than 35 years. His family includes his wife, Connie, and daughters, Lisa, Andrea, and Cindy, as well as 11 grandchildren. A graduate
of Randolph East Mead High School, he attended the Erie Business
Center and Meadville Area Vo-Tech School.
Proper received his Credentialed Cooperative Director certification from the National Rural Electric Cooperative Association by
completing a national course of study designed for rural electric
directors. He is the owner and president of Proper Cutter, Inc., which
is now in its 40th year of business. Proper and 16 employees handle
the sales and service of industrial tooling.
The Proper family attends the New Beginnings Church at the
Titusville campus.
Northwestern Rural Electric Cooperative, Inc.
Northwestern Rural Electric Cooperative Association, Inc.
22534 State Highway 86
P. O. Box 207
Cambridge Springs, PA 16403-0207
Consumer Services (billing/moves):
Engineering (Field services, new services,
water heater servicing):
1-800-352-0014
Emergencies/outages:
Administration:
REC fax:
1-800-474-1710
1-800-472-7910
1-814-398-8064
1-800-473-3567
www.NorthwesternREC.coop
Office Hours Monday-Friday 7 a.m. – 3:30 p.m.
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