Board Chairman & CEO Report

On behalf of Eastern Illini’s Board of Directors and employees, we would like to welcome you to the 2018 Annual Meeting of Members!

Thank you for attending your annual meeting. We hope you enjoy the day with your family, take advantage of the activities and food, and learn a little more about how EIEC is much different than other utilities.

As a member-owned cooperative, we are dedicated to providing you – our members – with reliable electricity and excellent service. Our employees live in this area, just like you, and we are dedicated to improving the quality of life in rural east central Illinois. We would like to provide a few highlights from the past year:

Our driving and continual focus for the cooperative is the safety of our employees, our members, and the general public. The commitment to safety is reflected in the support of our Board of Directors, management, and our employees. The main portion of our safety goal each year is to experience zero lost time incidents. We did not achieve that goal in 2017.

EIEC employees and Directors take pride in providing the service level our members deserve and expect. Each October, we survey each of you. This survey typically covers topics such as member service, employee professionalism, rates, programs, and reliability. We also include questions to calculate an American Customer Satisfaction Index (ACSI) score, which tracks your overall view of EIEC numerically.

In 2017, our overall survey results were very good, and we again received an ACSI score of 89 (out of 100)! This score places us in the top 10 percent of cooperatives across the nation. We are proud of the level of service that we provide you, and we are constantly looking for ways to improve.

2017 was a good financial year for your cooperative. Operating margins totaled slightly above $1.4 million, with total operating revenues of $34.7 million. These margins are in addition to $0.65 million prepayment made to our power supplier at year end to reduce 2018 wholesale power supply costs. Equity for the year ended at 47.2% which is slightly above our benchmark target. Our debt service coverage metric exceeded our lender’s requirements. These two factors allow us to optimize our borrowing costs.

Each year, we review our revenue collected compared to our expenses in providing electric service to you. This difference is similar to profit, but for a not-for-profit cooperative it is referred to as operating margins. The margins try to balance internally generated operating cash (dollars we collect from your monthly electric bills) with capital provided from long-term borrowings (loans). These margins are then allocated as capital credits to be returned to you at a future date. Our Board of Directors have set a goal of returning margins back to our member/owners on a 25-year cycle. We anticipate reaching this goal in 2020.

In 2017, we retired nearly $1.6 million in capital credits to members who received electric service in 1986, 1987, and 1988. For 2018, we are budgeting a retirement of over $1.6 million for the years of 1989, 1990, and one half of 1988. This return of your equity, or prior investment in EIEC, is one of the unique benefits of membership in a local, not-for-profit cooperative.

EIEC has not had a distribution rate adjustment since April 2013. There is no increase budgeted in our distribution rate for 2018. Our projections for total revenue needs the next few years is also stable, barring any catastrophic events. However, we do pass along any increases from our wholesale power provided as necessary, in the power cost adjustment portion of our billing. Our wholesale power costs reflect the capacity, energy, and transmission portions of electricity pricing delivered to the EIEC metering points,. In 2018, we have initiated a cost of service study. This study will help determine our future total revenue requirements, along with reviewing the fairness of the allocation of costs to our members in the various rate classes.

As the technology around us continues to change rapidly, we are always on the lookout for technology that will allow us to better serve you. Our online and smart phone account portal – SmartHub – continues to evolve. SmartHub lets you easily and conveniently pay your bill, view your electric use history, report an outage, and more. You can sign up for your FREE SmartHub account by visiting our website at www.eiec.coop.

About 60 percent of our power is provided by the Prairie State Generating Campus coal-fired power plant, located in Washington County, Illinois. Our wholesale power provider, Prairie Power Inc. (PPI), owns 130 MW of this facility,
along with various other natural gas fired generation units. On the renewable front, PPI has two solar panel arrays and a portion of wind energy provided by the Pioneer Trail wind farm near Paxton. PPI also contracts for power supply in the Midcontinent Independent System Operator (MISO) market. PPI is continually monitoring existing and future market trends in balancing the decision of owning or contracting for future generation resources, to provide you with supply diversity and a stable long-term portfolio.

Our distribution system performed well this year, resulting in an available reliability of 99.98 percent (excluding major storms and transmission supply outages). Even with the inclusion of major storm events and transmission supplier outages, our available reliability was 99.96 percent. We continue to monitor and upgrade our system to maintain the high level of service you’ve come to expect.

Power from PPI is delivered through the Ameren 69 kV transmission system. Annually, nearly one-third of our member’s average outage time is a result of outages on the Ameren system that impact EIEC power substations. We have been discussing this issue with Ameren to jointly seek means to improve their service and reliability. We recently signed an agreement that allows EIEC personnel to operative selective Ameren line switches during outage situations.

Rural areas in general are experiencing population decline and a lack of adequate job opportunities, along with inadequate Internet access. The EIEC territory experiences similar trends, which leads to flat or minimal energy sales growth. We continue to actively monitor the State of Illinois’ renewable incentives, primarily for wind and solar. The final rules for this program should be completed during 2018.

A large increase in member-owned solar could present significant challenges to our current business model and rate structure. All members share in the cost of cooperative assets and annual expenses. Any loss of revenue resulting from member owned generation (such as solar) must be re-allocated and recovered from the total membership.

Most of the recent additions in energy sales in our territory has been driven from existing member expansions of grain, livestock, and other agricultural related businesses. We continue to work with our member/owners to optimize the value they receive from electricity.

Cooperatives are not just in the business of selling energy and providing service, but also in the business of improving the quality of life for our members. There is still a potential for a large industrial load to materialize in our system in the Tuscola area. We expect a decision on this project’s viability in 2018.

We are in our 81st year operating a successful electric distribution cooperative, and we appreciate the confidence that you have placed in us and our employees to represent your interests. We hope you’ve enjoyed this brief recap of our 2017 performance. Thank you for the opportunity to serve you.

Tom Schlatter, Board Chairman                                     Bob Hunzinger, President/CEO



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