ML19318D175

Annual Financial Rept 1979

ML19318D175
Person / Time
Site:	Seabrook
Issue date:	03/07/1980
From:	VERMONT ELECTRIC COOPERATIVE, INC.
To:
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Text

..

The Co-op.

We Own 1

It.

1979 Annual Report

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To the Owners of Vermont Electric Cooperative, Inc.

June 1980 i

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.i 60070800'1D o

l The Co-op. We Own It.

Because of the nature of our rural electric systems and the bylaws underwhich they operate, each dollar of payment by a member in excess of the cost of providing electric service is an investment in the cooperative by the members which the member is entitled to recover at some time in the future when the financial condition of the co-op permits.-Capitai Credits Study 1976 by the Capital Credits Study Committee commissioned by the National Rural Electric Cooperative Assn. and the National Rural Utilities Cooperative Finance Corporation 4

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Rural Electric Systems in the U.S.

This is the June issue of Cwp Life, published each month by Vermont Electric Cooperative,

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i Inc., School St., Johnson, Vermont 05656.

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Editor of all issues escept this one is Pat Hunt '

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. of Morgan, Vermont.

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Address inquiries about ihls' Annual Report to Y*

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Assistant Treasurer and ' Controller Jerry s.

Bucholz, Vermont Electric Cooperative, Inc.,

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' School Street, Johnsoni Vermont 0%56..

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- Aisnual Report editor is Nathaniel P. Worman

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Vorman. Associates, Franklin, Vermont

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'10 Printing: Queen City Printers Inc., 701 Pine '

Street. Burlington, Vermont 05102.

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Own It? How?

$1Nu)rovta EQUrrY iT-e In a good year, every dollar a member pays gh h}

8be for electricity has a little chip left over after all a.

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expenses have been paid for equity-for each

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member's investment in the co-op that makes g3

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y him an owner.

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That's the plan, anyhow. But since rates we

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pay for electricity cannot be figured exactly y

ahead of time-and since the cost of power out-races income-it sometimes costs more to run the co-op than is taken in. Then there isn't enough for equity-not enough to build up member ownership in the co-op.

In good years, however, we build our in-dividual ownerships by investing those bits, g

Permanent called capital credits, in tools. The Balance DiC-record Sheet (pages 14 and 15) is a record of the tools

- __ l (Assets) we buy. It is also a record of who W{

of owns those tools (Liabilities and Other each 3

Credits). We members own them (note the en-member's contribution:

try Patronage Cap,tal on page 15), and so do i

All contributions taken together equal institutions which lend us money to buy those total ownership. The Co-op Corpora-

tools, tion owns nothing. The Co-op members Assets grow as we add members, buy are the only owners. As ownership generating facilities, and replace plant. And grows, debt diminishes, some of that money comes from our monthly electric bills-from those little chips assigned to our names called capital credits. Some NOW comes from contributions in aid of construc-l 16% EQUITY tion as new members are connected.

But most of the money (capital) to buy new I

tools comes from borrowing. Electric com-panies thus always owe more than they own.

Co-op members, for example (as the chart shows) presently own 16 percent of assets and owe 84 percent. The goal set by Trustees is also shown. Money borrowed in order to buy more tools is called debt capital.

THE GOAL The capital we contribute as members is called " equity capital." Because an electric I30Of company leans so heavily on borrowing for 70 EQUITY growth, an electric cooperative must show it is capable of reducing debt on one hand, and in-I

"/ 0'70 DEBT creasmg equity on the other. The Co-op is loan more for less interest. Since interest on debt is part of the cost of operation, a strong equity means lower rates.

HOW OWNERSHIP STARTED 1

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Early in 1935, the new Rural Elec-guts, stamina, and fertile minds.

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n trification Administration made an Where was ca ital to come from in a j

9 offer to all investor-owned utilities in capital-hungry business? How could i

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the United States which was reason-stringing wire and erecting poles be j

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$1 able and tempting.

made less expensive?

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If the utilities would build lines to To an industry hemmed in by tra-Q_

y serve rural areas, then the REA would dition, the answer to the second was h

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• provide loans with low interest.

jarring. Do away with the cross arm?

Ninety-five percent of *American It said so, right there in the REA j

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farms were without electricity; bulletin. And lines held by armless thousands of rural banks had closed poles began their cross-country i

their doors on a countryside of pover-march.

ty instead of plenty.

Capital to build those lines? Banks i

The administration of Fran!<lin were closing the courts recorded i

Delano Roosevelt envisioned elec-more and more bankruptcies. Instead

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tricity powering new industry and the of buying a new wick for a nickle, the

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utilities attracting it.

skillful housewife made the I,ast half Within a year it was clear the plan inch serve by pinning a rag to it to i

had failed; a handful of electric com-soak up the kerosene. Even though panies had taken the government up "one patch was thrift and a patch on a on its offer. Their message to patch penury," layered patches were f'

Washington was clear: we'll supply common enough.

j rural areas with electricity when it Simple logic P YS-

4 When you got right down to it, j

No Turning Back there w s a simple logic. If a non-i r-JJ But the appropriation for and the profit co-op outlawed return on in-

.L initials of REA stood for a commit-vestment and if each member was j

' W' ment to ru:al electrification. There also to be an owner when just scrap- {

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was no turning back. The administra-ing together a living was hard i

tion decided to go ahead with enough, then capital, a little bit at a

-j coeperatives.

time, would have to be scraped 6

,2 The idea was age-old, and co-together, too.

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operatives themselves an American building block. In the country

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especially, non-profit, member-C k

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owned and controlled co-ops were

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familiar: t' e Grange helped America T

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grow, and by 1938 when a group of 1'

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Q local people launched Vermont Elec-kgp..

t tric Co-op, farm co-ops in the state fM. _ i P l

were transacting business valued at 4 '

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$40 milhon.

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Electric co-ops, established by local j

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pe 1e, popped up all across the land.

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c ap Nonprofit, member-owned, pro-i P'

" ~'f viding no return on capital invested T

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Armiess poles marked the landscape had never existed, the electric

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when rural electric co-ops began cooperative was eligible for low in-j popping up all over America. A tcrest loans, bulletins on organization handful of members cach mile of and engineering, and the REA project line was an early trademark, shown today m Windham County. The engineer, a job that brought to Ver-rugged, remote areas the system mont Walter Cook, the Co-op's sec-serves is revealed as bear climbs

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l tree. Members and what they own, Fertile Minds right. The substation is in the town But even with co-ops, bringing of Guilford.

electricity into a poor territory took

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Where from? Here the logic was "eq uit y.

more tempting ways to organize the complete. Out of each dollar paid for When that total reaches a certain delivery or electricity that engage less elec t r:c servu e, enough would be percentage of total assets. Trustees of our attention and our thought. But taken to run the c o-op, and enough to can then decide how to return to they would not be democratic. And l

be given back to a member at the end every member on the line f rom its at first blush they might seem to cost of the year.

beginning es trom each less. In the long run. however. a e

But what it the member. instead of year assigned to ' N name.

handf ul of members per mile or line, keeping that small omouat. allowed Those amounts are called cantal rough terraine and local control will the to-op to invest it in hnes and o ctht< What the mernber leaves with prove to be the combination that poles? Couldn't the member su ply the co-op to buy poles and wires is works.

capital that way? Give the (o op ' the called pat rmage < umtal and the Ln-Proht Pau; Ta2cc loan of the money for say. ten surplus from whuh that capital Vermont Electric Co-op has no in-years? Then af ter using the money for comes is called u marxm.

come to tax since it is non-profit. pro-that long, couldn't the co-op begin Todav and Yesterdau The idea is vides service at co t. and pays all returning that capital to the member as sound today as it was yesterday.

local property taxes. as well as all who supphed it in the first place?

Electric co-ops.

nonprotit and other loc al taxes, amounting to Etactiv T he I'lan member-owned. still serve territories

$108.'% in 1070 An1 that s exac tly the plan. It that are as

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cross-grained and un-The Cooperative s accounting sys-works the saoie today as it did when protitable as ever.

tem contorms to that which has been the elec tru (o op movement began in And so, member by member. rural designated by the Federal Energy 108 Each vear when there is money electric co-ops are still writing their Regulat ory Commission in Wash-lef t over atter all expenses have been own histories: debts contracted in the ineton. D.C and adopted by the paid. each member is tredited with lo40s are being paid off in the lo80s-i ermont Public Service Board as well his share of the surplus. prt.por-ownership is still being built. penny as the Rural Electrification Ad-5 tionate to the unonM ot elec tric ity by penny. slowly pushing total equity ministration of the United States of used toward a level at which capital can be America. Vermont Electric Coop-And eac h year there is money lett ret u rned.

erative is incorporated under the laws over eac h member s ownership of the Pe r m n - to - Pe r<o n of Vermont. and is run in accordance c o-op grows. It s like money in the History is a hst or obhgations and with bylaws as amended Bylaws bank Add together all the individual commitments handed on. Owning were reprinted with all amendments ownerships and t ha t 's the total resources locally combines burden up to and including the August 1070 ownership of the co-op or its with challenge There may be other Annual Meeting.

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I HOW CONTROL AND OWNERSHIP GO TOGETHER The only owners of Vermont Electric Cooperative, Inc. are the people who use its services. They control what they own by being members who elect trustees to represent them in setting policy. The trustees turn the day-to-day operation of the Cooperative over to a vice president / executive manager.

1 IV VII BROWNINGTON-BELVIDERE COVENTRY JOHNSON

~ JAY MORRISTOWN IRASBURG

- STOWE ~

LOWELL WATERVILLE NEWPORT Marshall Washer I-

HINESBURG.

TROY Johnson,1980*

~HUNTINGTON WESTFIELD First Elected 1964 Mu' riel Starr

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RICHMOND yggg STARKSBORO North Troy,1980.*

- MBW Sumner F. Farr ;

Appointed 1978 CRAFTS 8URY -

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-Richmond,1979-y.

EDEN

= First Elected 1971 '

DERBY' GLOVER II Benoit U. Blais HYDEPARK FRANKLIN --

. Derby Line,1979 -

George Wright -

BERKSHIRE; Appointed 1970 Eden,1980*~

ll SHELDON First Elected 1971 First Elected 1960

Arnold C. Centabar

_yg' IX

. Berkshire,1982 '

BAKERSFIELD BOLTON First Elected 1977' FAIRFAX -

ESSEX q

FAIRFIELD.

JERICHO :

'III;

' ENOSBURG >

' FLETCHER MILTON N

MONTGOMERY-

GEORGIA WESTFORD RICHFORD-ST!ALBANS Gerard Caron a

f WESTFIELD* (Montgomery Rd_.). ' SWANTON ~.

_Westford,1981 1

Clifford SniderE J. Douglas Webb First Elected 1957 Richford,19811 Fairfax,1979.

Defeated 1977 ~

i First Elected 1977~.

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First Elected 1952 Appointed 1978

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1 J. Dougl s W:bb PRESIDENT'S REPORT o

'The Co-op. We Own it.". makes ;

clear as anything I know the way co-operatives do business.

It is something we do together, we -

are beneficiaries of low-cost public financing, and yet we each privately; own our share of the Cooperative, combining the best of both worlds.

The rural electric co-op-privately, locally owned = by the members it serves and nonprofit-is one of the monuments of government and peo-pie working together without unfairly I

burdening those who do^not receive 1

co-op electricity.

Begun in 1935 with an'appropria-~

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tion passed by Congress, the Rural Electrification Administration-now 1-

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. makes money for the Federal Govern-O; * '

ment as loans are paid off with in-yggg terest by the more than 900 rural elec-1 DOVER tric co-ops in the nation.

NEWFANE That is why co-ops work together,

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. Clyde W. Jones having the same traditions,- the same 7'

East Dover,19807

. bankers, the same regulations and the First Elected 1963 s me aims. During 1979, a new era of CD peration began with the Lother X.

As Trustee For Former

- electne cooperative.

the state, m

LCAMBRIDGE.

. Halifax Electn. Co-op Washington Electric Cooperative, c

. UNDERHILL,

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ent 8 udotk C. - William Kinney

'XIV This kind of cooperation not only L: Jefferson %. hj?82 MARLBORO with : other' co-ops, but.with all

First Elected 1970 -

READSBORO utilities, is needed in an era of high in-

! Defeated ' 974 -

WHITINGHAM flation and low growth rates as we all 1

Appointed 1979 to -

~ WILMINGTON face more and more rate increases.

I fill the unexpir'ed1 Richard Allen Because costs will keep going up

~

and we all will be paying more and

'. term cf Kenneth Hoeppner -

' Wilmington,1983 more for electricity the sense ex-First Elected 1979 xg; pressed in "The Co-op. We Own It."

is more and more important.

' SHELBURNE XV-At my farm I pay more and more JST. GEORGE f '

'"*'8Y' i"Cl"di"8 'I'i'i'Y iWILLISTON HALIFAX which is about 10 percent-of-my Henry Pillsbury :

VERNON energy costs. I could curse these in-creases but 1 know from my close lWilliston,1981 '

in Vermont ss ciati n with this and other

First Elected 1977?

COLRAIN -

peratives, that I am getting my C

gp- -

LEYDEN electricity m the rural area as cheaply

. ANDOVER'-

BERNARDSTON as it can be supplied.

in Massachusetts

'The Co-op. We Own it." is both a

JAMAICA

TOWNSHENDL J. George Butler statement of fact and a suggestion

. Halifax 1981 that members take management and iWARDSBORO'-

W First Elected 1977 Trustees up on the invitation it im-k,INDHAM =

plies-to behave toward the Coop-

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La;ra L.D. Howe erative like an owner, looking at its

' Tam prim ww. m Je cwp we wm cany operationsL closely and taking part jamaica,f 1982i names of nominees. Date foDowing hometown is date and helping whenever you can.

. First Elected 1970

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w OWNERSHIP AND MANAGEMENT o MANAGER'S REPORT o Willirm J. G:llagh I am pleased to report that I sur-from the Federal Energy Regulatory establishment of the Vermont Gen-vived my first year as your manager Commission to study the feasibility eration Task Force and an agreement retty much unscathed, except for the of a hydro project at the North by the Vermont Public Service Board e

loss of my beloved father who died Hartland, Vermont Corps of Engi-to finance such a study. Since only suddenly in May,1979.

neers Dam. The preliminary study coal and nuclear are possible In spite of the worsening energy was completed with the aid of a baseload generation in Vermont, and crisis, rampant inflation, unbe-

$56,000 grant from the Department since we are already heavily into lievably high interest rates and of Energy. The project is strictly a nuclear, I feel we must determine strangling Federal and State over-peaking project and, because of the whether coal generation is en-regulation, your Cooperative con-increase in the price of oil, the project vironmentally and economically tinued to grow stronger during 1979.

appears to be feasible even though the feasible in our state. We should know While we did uffer an operating estimated installed costs at $3,240 per the answer by the end of 1980.

deficit for 1979, caused purely by in-KW are staggering.

Solar Electric Generation creased purchase power costs, We are presently working through our overall equity position remained the morass of Federal and State res-During 1979, the Department of stable thanks to an infusion of capital ulations to bring the project through Energy announced a program of pro-contributed by new members coming the licensing stage. I fear I will have t type solar geration demonstra-on 'he lines.

to spend much more time in Wash.

ti n Projects. To our disappomtment (but not surprise). Vermont does not Many significant goals were ington than I like, to see it through.

achieved during the year which will However, I am determined to fight as qu lify f r generation of electricity help keep your cooperative strong hard as necessary for the right to

". central station basis under ex-during the remainder of the century.

build the project.

isting solar tcchnology. We simply have too much snow and cold In early February,1980, we re-FUTURE POWER SUPPLY ceived preliminary permits at three weather and not enough sunshine.

8 Nuclear Thus, we were not eligible to par-additional sites, and we will be We finally obtained all necessary evaluating them during 1980.

I'P '*' " "* ** "III f II

• regulatory approvals to consumate developments.

our ownership in Seabrook Units 1 Wind Energy Conversion Systems and 2, which we obtained from Con-During 1979, we applied for Distributm, n System necticut Power and I.ight Company Department of Energy grants to study During 1979, we received a concur-rent loan from REA and the and Central Vermont Public Service wind energy possibilities at two sites Corporation. These ownership in.

in Southern Vermont. In February Cooperative Finance Corporation for

$3,702,000 to carry out the 1980/81 terests were financed with 35 year 1980, we received a grant to study a loans from the Rural Electrification system on Stratton Mountain. The Work Plan. These funds, which carry Administration (REA) carrying an in.

study will take about two years and, n interest rate of 6.15%, will be used terest rate of 5%. Our ability to use if successful, we will be in line for a to mab necessary improvements to our low cost money to invest directly grant to construct a windmill. Gen-y ur electric system to ensure that as owners will result in savings of eration of electricity by wind on a y u c ntinue to receive the same high millions of dollars to co-op members large scale is an infant technology and quality of service as time goes on.

in the late 1980's and 1990's.

we will be breaking new ground.

Conscreation We now have direct ownership In-State Coal Generation hiembers continued to conserve shares in Seabrook Units 1 and 2, With the announcement in the lat-electricity during 1979. Despite the Pilgrim Unit 2 and Millstone Unit 3, ter part of 1979 that New England fact that we connected 325 new which are the only baseload units Power Pool planned generating units members' services in 1979, actual presently planned or under construc-at Charlestown, Rhode Island, Mon-KWH consumption declined slightly tion in New England. These owner-tague, Massachusetts and Sears from 91,269,307 KWH in 1978 to ship interests will help us meet our Island, Maine, had been cancelled, I 90,688,477 in 1979. However, the future power requirements at rela-requested permission from our Board prolonged cold spell in February, tively stable costs

• of Trustees to persuade other Ver-1979 took its toll on our peak, in-flydro-Electric mont utilities to join together in a creasing it from 25,700 KW in 1978 to After 17 frustrating months, we study of possible in-state coal genera-28,300 KW in 1979, an increase c,f finally received a preliminary permit tion. My efforts have led to the 10.1 %.

Remember, we define conservation as " elimination of waste." Unless members conserve at peak time, their efforts are in vain. As the peak goes y

up, costs go up, no matter how much I,[

]g you conserve at other times. Please watch for the Wise Watt Owl @

Alerts during winter months.

Steff Changes The Board approved sever.:

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i changes in staf fing pat terns which I fei.

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were necessary. The position of District Supervisor was established m

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g Brattleboro, thus putting a full time U

member of management on the scene.

N-J Kevin Kidney was promoted to that i

position. The position of Assistant Vice President and Executive Superintendent-Northern District Manager William 1. Gallagher and was created to relieve the Superinten-symbot of heart of a rural electric dent of many routine duties and allow co-op's operation: tvires foreground, him time to concentrate on intricate and antenna of radio that coordi-problems facing us in the 1980's. Dick "dtc5 'n rement in the field from n rth to soutk Simays was promoted to that position.

The position of Meter Department 9

Head was implemented during the year with Pete Tilton be:ng promoted.

did not allow the rate increase to baseload coal or nuclear plant. Seven The position of Data Prccessing Coor-dinator was established to reflect our become effective as we asked. They to 10 years of that time represent the held a Public Hearing-nobody came paperwork of regulation-only 3 to 4 progress in data processing and was t testify gainst the increase. The m-years are required to build the plants.

filled by Page Guertin.

cre se was therefore put into effect on We are being strangled by the Even with these staff changes, full the April bill.

OPEC nations because of our de-time employees numbered 59 at the end of 1979, compared tc.55 at the end OeReguladon pendence on imported oil. Yet, our og 3973, One very serious problem faces government keeps putting more and your cooperative which only you, the more regulatory obstacles in the way.

Rate Changes members, can correct-OVER-Unless we can convince our legis-After holding rates stable since 1975 REGULATION.

lators and Congressmen to streamline by using our ability to trade power For every month that the PSB does the process by which new generating supply, the OPEC nations finally not allow your cooperative to charge plants, whether they be coal, hydro caught up with us. Purchased Power its members the necessary higher or nuclear, can be built, the fate of Costs rose about $340,000 and rates to pay for increased purchased you, and all 25 million rural without sufficient revenues to power costs, we have to borrow the Americans served by rural electric offset this, we filed in November, money, pay high interest on it, and cooperatives, will be higher and 1979, for an average 6.95 % increase in eventually charge the interest to you.

higher electricity costs.

rates. When you consider what has For every month of delay caused At our Annual Meeting to be held happened to the price of other energy by Federal and State regulations August 23, 1980, I intend to speak sources (gasoline, fuel oil, etc.), we holding up construction of our hydro further on the problem of OVER-were quite certain the members would project, we are incurring the effects of REGULATION, how it is draining understand.

inflation and interest being added to your pocketbooks, and how I believe They did. Few complaints were the cost of that project.

we can overcome it. Please plan to be filed with the Vermont Public Service It now takes between 10 and 14 there and participate in person.

Board (PSB). Unfortunately, the PSB years to license and complete a

OWNERSHIP AND POWER SUPPLY To make full use of low-cost capital, the Cooperative Wholesale Electric Company and the fact that the power in a buys joint ownership in generating plants. Members own given unit is purchased through MMWEC.

their share of these plants, just as they do the distribution The fall and rise of various power blocks indicates that one system, the buildings, the trucks and the equipment which of the power sources is no longer available-for example, support the system.

Power Authority State of New York after 1985, and Merrimac The New G. & T. In his report, the Treasurer tells why the af ter 1998.

plants the members own will be placed in a member-owned The upshot of the diagram is shown in the question mark subsidiary, the Vermont Electric Generating and Transmis-and the initial CVPSC, Central Vermont Public Service Corp.

sion Cooperative. Here, with the help of the diagram below, The Co-op will be seeking new sources of peaking power the meaning of the Co-op's power supply strategy comes shown in the question mark area, and new sources of baseload I

clear, and the meaning of "baseload generation" underscored.

and intermediate to replace power purchased from CVPSC.

The number of megawatts needed by the Cooperative are Approximate cost of the Joint Ownership sources shown shown from the bottom up-from baseload to peaking. The by names Seabrook, Pilgrim, and Millstone is $16 million, years each source will be needed runs from left to right.

owned by members through the Vermont Electric Genera- !

J. O. means Joint Ownership. LO.U. means Life of Unit tion and Transmission Cooperative.

contracts. M.M.W.E.C. means Massachusetts Municipal VERMONT ELECTRIC COOPER ATIVE, IN C.

GenerOtion COpOcity Requiraments 10 I

I I

so =

?

So a WC rotel Regadrements Prat and Reserves HARTLANO 40

• NORTH C.V. P S C. -

NORTHEAST UTILtTIES j

. GAS TURS-PILGRIM e 2 J.O.

4WC Asse test PILGRIM # 2, J.O.

C.V. R S C.

N 7 '-'""*

SEABROOK e2, J. O.

SEABROOK # 2, J.O.

SEABROOK #2, L. O. U.

30 a SEA.e t SE ABROOK e'2, L.O.U.

J. O.

l MILLSTONE

• 3.

J0 MILLSTONE e 3, J.O.

M.Q l'

SE A.*l SEA 8 ROOK #1, J. O.

GMP j L.O.U.

SEABROOK e t, J.O.

' SEABROOK e l, L.O. U.

O, PASNY M. M. W. E.C.

3 ME RRIM AC, L. O. U.

VERMONT. YANKEE, J. O.

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_ y YEAR

t OWNERSHIP AND PLANNING W

CHIEF ENGINEER'S REPCRT

• John Bohn

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" Indirect Accomplishment" is the hallmark of the Engineering Department for the year 1979.

Although we connected 335 new services to the system, prepared and carried out system improvement projects, and monitored per-e formance, most of our work concerned future power supply, and

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the operation of the system itself.

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A. Power a_. A 4

1.

Assisted our Engineering Consultant, Acres American, Inc.,

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7. 3 in preparing a proposal to the Department of Energy for a J f #h Grant of 15% for the construction of our North Hartland

' D Project. We were not one of those selected for a grant.

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Further refined the Acres studies of the North Hartland j'

Project. We now believe this project should utilize tw -2 Mw y

.'e turbine generators.

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We prepared, in house, two proposals to the Department of

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Energy, for grants to erect meteorological towers for the 1a ~

gathering of wind data. This data would then be used to

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study the feasibility of a Wind Energy Conversion System

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(windmill) at these sites. If a site showed feasibility, we

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would submit a second proposal to the DOE in late 1983, for a grant to erect a Wind Energy Conversion System.

In February of 1980, the DOE announced that our Stratton g

Mountain site was one of eigit en (18) grant winners in the United States for the erection of a meteorological tower.

Our Dover, Vermont site was not chosen.

4.

We studied the requirements for a proposal to DOE for a

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3 grant to erect a large solar energy electric generation park on

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the VEC system.

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We continued our swap of surplus generation capacity and y,

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. iff i energy in the summer months with Northeast Utilities in

%'WD yf j Massachusetts and Connecticut.

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+ -

1 B. System

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We condu;ted a pole by pole inventery of Telephone Com-t

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pany attachments in four substation areas of the VEC t'

system. This resulted in an additional 59,000 revenue for

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-if 1.y=:y1'.g.;.77%

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We prepared and printed in house, a complete booklet of the 7

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" Requirements for Electric Service" from VEC. These re-l..;. c,7 g'

quirements were adopted by the Board of Trustees in j

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Ig, :d,,_ j y :

November,1979.

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We revised and simplified the procedure and requirements

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for an Application for Electric Service.

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We did an inventory and numbered every pole in three J'T M L.7.

substation areas in the southern area.

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Chief Engineer folm Bohn and substation in Cambridge. It is one of

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24 substations and metering points owned by Cooperative members for t. ' S% <

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which the Engineering Department k

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must plan additions or improve-V ments. The Department also gy y.

9-works with the Power Supply sec-

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s tion on power planning including alternative sources.

1 1

OWNERSHIP AND OUR LINES LINE SUPERINTENDENTS REPORT Robert E. Lamb v

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~

The Line Department continued its right-of-way cutting and spraying program to maintain the many miles of power lines which Y

serve our members along the hill sides of Vermont from one end of j

5 the State to the other.

g The Vermont Department of Agriculture approved our request i

to conduct right-of-way spraying on our system. Treatment was made in the following towns: Albany, Craftsbury, Glover, Eden, j-l Hyde Park, Johnson, Morristown, Cambridge, Fletcher, Fairfax, Westford, Essex, Underhill, Jericho, Bolton, Richmond, Hunt-v ington, Hinesburg and Starksboro.

use of herbicides has s

become an important tool for vegetation control in rights-of-way y[4 and results in lower maintenance cost.

Right-of-way cutting was done to prevent outages which are 1

y 7r caused by trees falling on or near lines. Cutting was done in the l

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following towns: Eden, Johnson, Underhill, Fairfield, Mont-T(j gomery, Cambridge, Belvidere and Wardsboro. Hand cutting N

brush, like mowing a lawn, results in only temporary cor trol because most hardwood stumps and roots will soon send up

. f'~y sprouts to replace those cut. The result is high cost for vegetation

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{

control and this is the reason why herbicides are used to control j

undesirable vegetation.

j_

The Line Department also constructed power lines for connecting n 335 new members to our system.

In the Halifax District we had two major storms. The first storm was on January 25, 1979 and it snowed continuously until the evening of January 26. There were reports of 1 to 4 feet of wet,

- ^

heavy snow. Towns had a difficult time plowing the roads, cars were stuck and abandoned. Snow banks were so high and roads so narrow that trucks could not turn around. One crew reported backing up 3 miles to the main road because they could not turn 1

around. I consider this one of the worst storms we have experi-enced since we joined with the Halifax District.

Our members were remarkably patient about the duration of the outages. There were very few complaints and many members praised the work of the line crews.

The second storm was on September 6,1979 and was named Hurricar,e David. The winds were exnemely high and damage was principally caused by trees blown down which broke several poles

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7

• • • • 'Y""'

I wish to offer thanks to all of our employees who worked so Substation 24 in Belvidere all represent service to gy,ncrs.

long and hard restoring service to our members.

OWNERSHIP AND APPLIANCE SALES & SERVICE

.l 4

The Member Services Dept., under transmitter sites in the northern i

Manager Philip Locke, stocks, sells district, one at the headquarters in MM e

and services Hotpoint appliances, Johnson, and one at the warehouse on A.

O.

Smith electric hot water Rt.15. The departmen t also assists line

... }i_. -

4

..A heaters, Singer Electromode heaters crews in repairing storm damage and 2

i M.C and farm and home electrical equip-provides on-call helpers outside

"~

~ f ment. The department also answers regular working hours. It also installs TG complaints about high use of electrici-primary and secondary underground Ql ty and low voltage, calculates heat services. The department also takes j

loss, makes special meter tests and care of all non-energy billing and col-4 answers inquiries about members' lections. Almost 61% of its payroll i

e!cctrical problems.

goes toward the primary business of i

N In addition, the department main.

the Cooperative-the supply of elec-tains five generators: three at the radio tricity.

j

~

FINANCIAL REPORT Marshall Washer TREASURER'S REPORT ~^ b, As long as the growth rate of electric sales is low and 4; 'b1 inflation high we will almost always be paying less for E d' electricity than it takes to generate, transmit and distribute it. That's why, over the next several years, rate increases will come thick and fast: so that the price we pay can catch up with costs. In 1979, we met this fact head on. Rates sufficient for .g early 1978, were insufficient by mid 1979; the cost of .^ ~ and transmission alone had skyrocketed power $340,000 in eleven months. The result was an operating deficit. But since our cooperative revenues also come from [ non-operating sources-investment income and ap-pliance sales-the operating deficit does not tell the Asst. Treasurer and ControIIer ferry Bucirolz. whole story. Subtracting the operating deficit from non-operating income an overall margin of $74,125 remains. The Cooperative thus continued to grow and get 7.. ~ stronger. These margins in addition to contribution in p aid of construction from new member connections, [ boosted the equity ratio of the distribution system 13 h about one percentage point, from 18 percent in 1978 to j 18.9 in 1979. Y The financial report, however, will show a decrease in equity percentage, a temporary condition caused by 4 [ our investment in joint ownership of generating plants. h s'\\ Totalling over $3 million in 1979, these payments add to g debt and subtract from equity. In order to prevent equi-N 1, \\ x ty being undermined, Trustees established the Vermont l\\' Electric Transmission and Generation Cooperative to \\*w. which all liabilities and assets associated with the h I \\ S AT generation construction projects will be transferred. sA This not only returns Vermont Electric Cooperative IQ.?' ~ to its original role as an electric distribution co-op, but ^ 3 reduces the amount members must contribute to equity ij 4 since the Generation and Transmission Co-op requires 4 [h[b L \\ [h f \\ g that margins only equal the yearly payment on long- ~ \\ C. ?? E term debt and not exceed it by fifty percent, as in the Yd-TFML distribution co-op. By the mid 1980s this will save / \\ members several hundred thousand dollars yearly. ["h 'N - \\ The G & T is another example of our Cooperative's N i continuing effort to provide the best possible electric H9 m" ~ service at the lowest possible cost. b' = a , Rising cost line ot,er Williston substation sisows what's frappening to all aspects of rural electric co-ops, from wires to power that flows ot'er them.

Exhibit 1, Asse The purpose of the bhc2 sheet is ment in Vzrmont Electric Pow:r Com-DAT A' "t ' to show the resources, called assets, pany, Inc. (VELCO). The dividend IJfiLfL which the Cooperative has ac-and interest income received from cumulated in order to buy and these investments helped to hold down distribute electric energy to the income necessary from our retail reflects those amounts owed by our members. The origins of these assets electric rates. members who financed their line ex-rre also shown: Resources provided Current Assets. This category of tensions through the Cooperative. by creditors are called liabilities. assets consists of those cash items or The increase in materials and sup-Resources received from member / those investments which can be readi-plies is a result of the cost of each item owners are called patronage capital ly converted to cash. Current Assets of the inventory maintained by the Resources provided by the operation increased by $194,914 at the end of Cooperative, not an increase in the of the Cooperative are called margins. 1979 compared to 1978. number of items maintained in the in-ASSETS. The total assets of the This increase was primarily in the ventory. Cooperative increased during 1979 by area of Notes Receivable, which When the area of Accounts 53,975,144, a 25% jump over the previous year. Utility Plant. This is the resource BALANCE SHEET which is most visible to our members. DECEMBER 31,1979 AND 1978 ASSETS (Note 1) Included in this category are the poles, increase wire, transformers, and other equip-1979 1978 (Decrease) m:nt which the Cooperative uses t Utility Plant:(Note 2) distribute the electricity, and the Electric plant in service-at cost 516,015,791 514,752,050 S 1,263,741 cquipment necessary to maintain these Completed construction not classified 482,388 893,133 ( 410,745) facilities-Work in progress 4,837,735 1,880,294 2,957,441 It is also the category within which, 21,335,914 17,525,477 3,810,437 during 1979, we included our invest-Less: Retirement work in ment in future generating facilities. progress (dr) ( 1,229) ( 2,725) 1,496 M Thus, the Cooperative's net utility Accumulated provisions plant increased by S3,810,437 in 1979. for depreciation 4,411,553 3,951,985 459,568 Of this increase, 4,410,324 3,949,260 461,064 - 5548,878 was in distribution and Net utility plant 16,925,590 13,57/ 217 3,349,373 transmission facilities, Electric plant acquisition adjustment 73,701 84,230 ( 10,529) - 52,850,579 in generating plant (see Electric plant held for future use 2,800 3,600 ( 800) auditor's note number 2 for the det ails Nuclear fuel in process 239,640 42,058 197,582 regarding the progress payments in the 316,141 129,888 186,253 various generating units in which we Investment in Utility Plant 17,241,731 13,706,105 3,535,626 are joint owners), -5124,573 in general plant, which in-Other Property and Investment-At Cost: cludes the trucks and equipment used Non-utility property (Note 3) 42,952 20,000 22,952 by the Line Department in its construc-Patronage capital from associated tion and maintenance activities, and organizations (Note 4) 10,330 4,362 5,968 - 5286,407 to connect new members Investments in associated who contributed $218,648 of that organizations (Note 5) 354,194 291,878 62,316 amount. Other investments 563,521 539,181 24,340 Restricted funds 20,105 19,517 588 Other Property and Investments, 991,102 874,938 11s,1s4 Included in this category of assets are thz resources of the Cooperative Current Assets: which cannot be classified specifically Cash-general funds 15,131 37,195 ( 22,064) as utility plant and equipment. Temporary cash investments 54,356 51,621 2,735 This categoryis principally made up Special deposits 475 475 of our investment ownership in Ver-Notes receivable-net (Note 6) 231,974 156,493 75,481 mont Yankee Nuclear, Vermont Elec. Accounts receivable-net (Note 7) 438,802 362,091 76,711 tric Power Company, Inc., and the Materials and supplies 398,839 341,622 57,217 N tional Rural Utilities Cooperative Prepayments 52,905 48,071 4,834 Finrnce Corporation (CFC). Total Current Assets 1,192.482 997,568 194,914 The increase in this category is rel: ted principally to our obligation to Deferred Charges and Debits 356,008 227,568 128,440 invest in Capital Term Certificates TOTAL ASSETS S19,781,323 515,806,179 5 3,975,144 issued by CFC (see auditor's note number 5) and an increased invest-(The accompanying notes are an integral part of this statement)

. Li2bilities the members' cooperation ir, paying allow it to continue to secure long-SHEET electric bills pronptly, meant we were term financing at the most reasonable able to keep the related Accounts rates available. Receivable at a level consistent with Three hundred and forty-four new l Receivable is adjusted for an extraor-previous years. consumers joined our Cooperative dinary item due from New England during 1979, and it is anticipated that Telephone, it represents 7.7 % of LIABILITIES AND OTHER CREDIT the Cooperative will experience this revenues as compared to 7.4% of EQUITIES AND MARGINS. The continued growth in new members far revenues for 1978. According with the members' ownership, reflected in into the future. To adequately supply wish of members, the Coopeiative equities and margins, increased by this growing demand for electricity it is continues its strict enforcement of col- $284,693 in 1979 over that of 1978. necessary to build member ownership lection policies by adhering to the rules This continued growth in equity ex-(equity) in order to secure the financ-and regulations filed with the Vermont emplifies the Cooperative's continued ing necessary to provide the supply of Public Service Board. This, along with strong financial position, which will power, transmission and distribution facilities. L ng. Term Debt. Our primary source BALANCE SifEET f L ng-Term Debt continues to be the DECEMBER 31,1979 AND 1978 Rural Electrification Administration LIABILITIES AND OTIIER CREDITS and Cooperative Finance Corpora-increase 1979 1978 (Decrease) tion. During 1979 our long-term debt increased by $2,7M,206 over 1978, Equities and Margins: $2,107,000 of which is directly related Memberships S 45,775 5 's,295 5 480 Patronage capital (Note 8) 2,599,823 2,322,608 277,215 to our continuing invcstment in joint Other equities 137,023 134,841 2,182 ownership of generation facilities. Donated capital 37,857 33,041 4,816 This increase bears an interest rate of Total Equities and Margins 2,820,478 2,535,785 284,693 5% per annum, andis repayable overa 35-year period. But with the strict cash 15 Long-Term Debt (Note 9) 15,e>35,172 12,870,966 2,764,206 management, we are able to control ur borrowing to the greatest extent Current Liabilities: Notes payable 960,000 75,000 885,000 possible in order to maintain a balance Accounts payable 225,161 195,654 29,507 between our debt and equity. As a Consumers' deposits 62,413 54,627 7,786 result, we have $15,941,147 of unad-Taxes accrued and payable 30,796 29,762 1,034 vanced long-term funds committed to Other current and accrued liabilities 16 ( 16) us by REA and CFC. We will continue Total Current Liabilities 1,278,370 355,059 923,311 our policy of drawing upon these en ecessary to make th un n Deferred Credits 28,050 26 084 1,966 required investment m generation and Operating Reserves 19,253 18.285 968 distnbution facilities. Current Liabilities. This category is TOTAL LIABILITIES AND made up of items which are related to OTHER CREDITS $1 ^,781,323 515,806,179 5 3,975,144 the day-to-day operations of the Cooperative and are expeued to be (The accompanying notes are an integral part of this statement) paid during the next operating year. sr g. p, ,g, Because expenses outstripped income u l, in 1979 the Cooperative made use of W ^ " ' Wl - w[ 2 Mg ' k ' the short-term lines of credit with I' 't m gg

1. IA.

CFC. We continued to apply our strict policy of cash management m order to V ki.' 4 4., q, i __a g keep our short-term borrowing re-f quirements to a minimum. However, <'-~---M our short-term notes payable balance ~ increased by 5885,000 by year end. This amount was reduced substantial-( - [ lK. j ' ly during the first quarter of 1980. The other current liabilities represent the i b ( s si l tive's business. Their increased 1 i normal operations of the Coopera-8 1 s x -- ( .m__ ~.. #" ;, - - [ lik s. g h; i - i, balances are directly related to the I b 95 d growing size of the Cooperative's Substation in Derby Line operations.

i Exhibit 2, Patronage Capital and Other Equities HOW MECH YOU OWX l l l l I f I i 1 1 1 1 ,1 I 'l 1 1 { k 1 ..f d 0 / m \\ g s = I ~ I / ./ l 16 j AJN l t :: e , m.. y 3 i , 4 --sq,.;Lars ' z c m_1 4 ni - s' ~ _. y -, ,1. , ~';e. ~ p .~.am. 'n p-... p_ q __ ~- ,.s ,~ a a - 1 ..A. J,. .w ' ' l - E W m,;c.,.-:

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. ~*"*[ 5 ' ' ' { 9= a- , ;*w s-: m. ,q _f : :;,gn s..n ,.;n m:a :~w u-- j ~ f i'% Q *' % p^ j ly g \\,Q*l ~ s yt y g .,,. [ l.LA.~ :,,a ,$y }& '. };}fy R d?'f;Qf j95:.;-g.l' ' 4 ~., ;;a ;g.m..: ~ y

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\\ .._,1,. 8 ~. - :.y;t-x x-y.c3 u. i .~ o , a; a,1 Chhuwb< sxalC&%dsa.;u., :nb - : aLL.a.: % ea.ww,.n:::.%wC;;&f,1 Alemlns own a flect of trincks titat l mamtain lines and meet emergencies. l How mincit tlicy own of wiiole j cooperative is sliown in report of l l'atronage Capital on next page. I

l l PATRONAGE CAPITAL "O STATEMENT OF PATRONAGE CAPITAL 1 m " 7" Patronage Capital. Vermont Electric) AND OTHER EQUITIES Cooperative,11nc. 7 maintains. ' thel FOR THE YEARS ENDED DECEMBER 31 status under both federal and state law; of O non-profit corporation.!Whilei holding this status, all the revenues of! Increase the Cooperative in excess'of expenses} 1979 1978 (Decrease) must be assigned to the members and; Pationage Capital: accounted for in exh member's name.; Assignable $1,522,250 $1,450,307 5 71,943 The accumulated Patronage Capital at i Assigned 12,212 12,212 the end '. of :1979 ~ is 52,599,823,: Patrons capital credit-representing a 11.9% increase over, G.O. 52 (Assigned) 1,065,361 860,089 205,272 1978. This Patronage Capital Invest.; $2.599,823 $2.322,608 M77,215 ment, which is the investment of the' members was 91.6% 'of the Coop i Other Equities: ers.tivGfs equity. Operating margin ($ 207,501) ($ 126,837) ($ 80,664) Othe ty Thisexhibitispresented) Non-operating margin 334,726 251,880 82,846 Capital gain 9,798 9,798 by ditor to show the sources of S 137,023 S 134,841 5 2,182 e m Patronage Capital and otheri uities that took place during 1979. STATEMENT OF PATRONAGE CAPITAL AND OTHER CREDITS ~ ~. 17 DECEMBER 31,1979 PATRONAGE CAPITAL Assignable Assigned Balance Balance-January 1,1979 S1,438,765 5 12,212 51,450,977

y*

~~ r operating margin 151 1 lgl f' l Et,I Non-operating margin transfer 71,943 71,943 b =.. Transfer from Halifax s O Cooperative, Inc. 11,542 11,542 "alance-December 31,1979 1,522,250 12,212 1,534,462 g N:s-wp., Hm Patrons Capital Credits G.O. 52: w/ Balance-January 1,1979 860,089 860,089 ~- Additions 1979-net 205.272 205,272 i Balance-December 31,1979 1,065,361 1,065,361 OTHER EQUITIES Non-Operating Operating Capital Margin Margin Gain Total Balance-JW January 1,1979 (deficit) ($126,837) 5251,880 59,798 $134,841 Operating margin ( 80,664) ( 80,664) V q Non-operating Ni h margin 1979-net 82,846 82,846 i BALANCE- .F December 31,1979 ($207,501) 5334,726 $9,798 $137,023

Exhibit 2b, St:t:nnnt of Opercting Rev:nues and Expenses OPERATING REVEE STATEMENT OF OPERATING REVENUES AND EXPENSES Operating Revenues and Expenses. FOR Tile YEARS ENDED DECEMBER 31 The purpose of the statement of Increase Operating Revenues and Expenses is to 1979 1978 (Decrease) provide the detailed information relate t the income which the Operating Revenues $5,036,517 S4,882,963 $ 153,554 Cooperative earned from operations during the year and the associated ex-OPERATING EXPENSES penses it incurred to maintain elec-I Cost of power 2,264,648 2,145,935 118,713 trical service over 1500 miles of Transmission expense-by others 452,292 397,882 54,410 distribution line in 63 towns to over Suhtotal 2,716,940 2,543,817 173,123 9300 patrons. The expense of supplying this ser. CONSUMER SERVICE-RELATED OPERATIONAL COSTS Operating Revenues. Operating Transmission expense-operation 31 824 ( 793) Revenues increased during 1979 by ; Distribution expense-operation 228,030 216,620 11,410 3.1 % over 1978. Since the Transmission expense-Cooperative did not have any rate in-maintenance 1,417 5,029 ( 3,612) Distribution expense-creases during 1979, the increase in maintenance 347,363 357,123 ( 9,760) revenues w s produced primarily by General plant maintenance 16,206 15,805 401 new members on the system. 18 II Consumeraccountsexpense 251,432 284,154 ( 32,722) Operating Expenses Sales expense 13,371 7,062 6,309 I. Cost of Power. The cost of Pur-Administrative and general expense 508,168 449,898 58,270 chased Power incrcased by 5.5% dur-Subrotal 1,366,018 1,336,515 29,503 ing 1979. Many factors contributed to this increase. They were the higher cost of opera-UTILITY PLANT-RELATED FIXED COSTS ti ns for the generating facilities which Amortizatien 10,529 10,529 -0 provide the electricity the Cooperative III Taxexpense Depreciation 481,370 449,589 31,781 purchases related to the inflationary 186,994 171,016 15,978 increases in the cost of fossil fuels: Interest on long-term debt-net 469,375 372,315 97,%0 -the increase in the capacity charges Allowance for borrowed funds which the Cooperative incurred used during construction ( 82,334) ( 47,415) ( 34,919) related directly to the peak demand Other interest charges 6,819 3,444 3,375 recorded during February, which the Subtotal 1,072,753 959,478 113,275 Cooperative must pay for the re-mainder of the year. Miscellaneous income deductions 13,722 1,851 11,871 -an increase in the wholesale cost of energy (kilowatt-hours) from 2.5 cents l Total Operating Expenses 5.169,433 4,841,661 327,772 per KWHin 1978 to 2.7 cents per KWH l in 1979. The Cooperative also experienced a l PATRONAGE CAPITAL AND MARGINS 6.1% increase in the cost of trans-Net Operating Margin mitting the electrical energy from the IV (Deficit) ( 132,916) 41,302 ( 174,218) generating source to our system. Income applicable to prior

11. Consumer Service-Related Opera-1 years 52,252 52,252 tional Costs. Overall increase in this l

/ 80,664) 41,302 ($ 121,966) category of expenses was 2.4 %, '

TES AND EXPENSES vice continues to increase. For 1979 WHERE DOES YOUR DOLLAR GO7 our expenses exceeded our income and Pic Shows Expenses Met By Each Dollar result:d in an operatmg deficit. Member Pay r Electricity: 1. Power.11. Scr-The single largest expense-and the vice. Ill. Fixed Costs, and IV. Margins (Patron-one which increased the most-was GRC CdF fGIl

• i the cost of Purchased Power. During 1979, the Cooperative's members used 90,688,477 kilowatt-hours of electrici-ty. The system's high peak demand was 28,297 KW recorded during the TTT menth of February. The low 111 monthly peak was 13,519 KW n July.

,,,a cm,, .u; the largest increases being in:

1. Distribution Operational Ex-O 6

cmi ot rower penses-The increased costs in this Power Costs area are related primarily to the in-service 2A exceeded each creased cost in materials and labor re-d of revenue quired during normal operations. by 64'

2. Administrative and General Ex.

g pense-These expsnses increased as a TV result of rising cost of insurance, J, y employee benefits and increased ac-Co-op failed to make enough from operations tivity by regulatory agencies. nd atronage capital. I ' **T8 nS i P 111. Utility Plant-Related Fixed Costs. These costs and the associated in-creases are related directly to the growth of the Cooperative's invest-II. CONSUMER SERVICE-RELATED ment in plant facilities. OPERATIONAL COSTS IV. Margins and Patronage Capital. 27.2 sf of Each Dollar Paid By Members, They Members build ownership from each Represent Costs &cr Mrich Drere Is Some dollar paid for e!ectricity except when Measure of Control. expenses exceed revenues. For that reason, there is no margin and patronage capital shown in the illustration, right, in connection with the operating statement. Th-e are, c(/ however, other sources of margins, investment income and income frora appliance sales. In addition, equity is increased from contributions in aid of TN construction, paid by new members when they are connected to the system. For more discussion of patronage capital and margins, kind- ~ k%,, ly see Treasurer's Report on Page 13. Vej I.

• When there is an operating deficit. there is no operating margin. It is. In fact.

shown as a " negative margin * (the bulge) becauw it must be subtracted from the f .,k 4 % a y ] o margin made from income from interest payments and the sale of appliances in order to establish the total margin for any given year. o 2:

Exhibit 2c, Merchandising R;v:nues cnd Costs Statement of Non-operating Revenues STATEMENT OF NON-OPERATING REVENUES AND EXPENSES and E. penses, This statement shows FOR THE YEARS ENDED DECEMBER 31 income earned by the Cooperative Increase from sources other than the retail sale 1979 1978 (Decrease) of clectricity to its member-consumer-Merchandising revenues $365,913 $399,597 ($ 33,684) owners. It also shows the expenses Merchandising costs 357,074 384,117 ( 27,043) which are incurred to provide this in-Net Merchandising 8,839 15,480 ( 6,641) come. All wance for funds used It should be noted that although the ' Cooperative showed a deficit from its during construction (A) 40,309 28,036 12,273 Miscellaneous income 6,032 2.656 3,376 retail electa. cal service distribution Interest and dividend income-net 99,609 105,218 ( 5,609) operations during 1979, the Net Margin for Period 154,789 151,390 3,399 Cooperative was still abk to achieve Less: Transfer to patronage capital ( 71,943) ( 80,907) 8,964 an overall operating margin for 1979 82,846 70,483 12,363 because of non-operating revenues. Balai.ce-Beginning of year 251,880 450,042 ( 198,162) Some of these revenues come from Transfer prior years to patronage the Member Services Department, capital '.58,645) 268,645 which continued to be self-supporting during 1979 in its function of appliance BALANCE-END OF YEAR $334,726 $251,880 $ 82,846 sales and providing jobbing services, even though it lid experience a reduc-( A) Represents the capitalized interest charge of general funds expended on nuclear tion in overall evenues for the year. generation projects. Member Services personnel are also employed in other areas of the bination of these two factors allow the dividend income. This income is 20 Cooperative's operation. The sales department to play a dramatic roll in derived from dividends received on and service of appliances operations keeping the electric rates as low as our investments in Vermont Yankee continues to absorb a portion of the possible. and VELCO stock, and interest payroll burden and contributes to the The other primary source of non-earned on temporary cash investments margin of the Cooperative. The com-operating revenues is from interest and made throughout the year. M b nO -nz P' O m Revenue and Empenws HCC [ 19'9 1978 g APPLIANCE .A9@ g g Revenue 5292.509 1338,729 my Expenw 277.511 315,s6o g $ 14.998 $ 23.169 ,0 ELECTRICitEAT 569 Revenue 5 1,299 Expense 739 526 s 56o s c SALES AND SERVICE OPERATIONS wArrR nErms 18 % OF APPLIANCES k,ven, s 3o,389 s 2:,202 Expenn 28.132 J a12 38.9 % $ 2,257. $ 1,270 N . JOBBING 5 18.715 o y Revenue . $ 17,293 ' Expense 16.341 18.287 b 5 957 5-428 g SERVICE OUT OF WARRANTY. Revenue 5 24.418 $ 19,383 tw Expenw 34.351 28.813 i l ($ 9,933) (5 9,430) TOTAL REVENUE $36s 913 ~ $399.598 . TOTAL EXPENSE 357 o74 '384,118 $ 8.839 $ 15,480 Pie is 100% of labor costs of Member Services Dept. White area shows only 38.9% L. devoted to sales and service of appliances.

Exhibit 3, Statement of Changes in Financial Position Statement of Changes in the Financial STATEMENT OF CHANGES IN FINANCIAL POSITION Position. The purpose of this state. FOR THE YEARS ENDED DECEMBER 31 ment is to illustrate the sources and ap-i plications of the money handled by the 1979 1978 Funds Were Provided By: l Cooperative during the operating Operating margin-net ($ 80,664) $ 41,302 year. Asin previous years, most of the Non-operating margin 154,789 151,390 il funds, 82.3% m. 1979, were used for Depreciation and amortization expense 491,899 460,118 plant additions and replacements. 566,024 652,810 This statement as well as those previously illustrated reflect that your Depreciation allocated 48,091 44,329 Cooperative continues to grow and Memberships 480 4,450 Adv nces fr m R.E.A. and C.F.C. 3,142,000 1,613,000 strengthen its financial position. It is Retirement salvage 71,956 53,280 I essential that we continue to Decrease in working capital (increase) 728,396 ( 303,401) demonstrate this ability to grow to the M 8% perat ng reserve financial community in order that Donated capital 4,316 1,611 when it becomes necessary to borrow Other patronage capital-C.O. 52 205,272 187,780 from these financial sources, the SJ 768,004 $2,254,752 i Cooperative can present itself in the

== most favorable position possible. Funds Were Used For: 4 Extension and replacement of classified plant 51,378,749 $ 993,643 Payments on long-term debt 377,793 368,275 Cost of plant retirement 26,842 79,381 Increase in other property and in vestments 116,164 57,779 Increase in net deferred debits over deferred credits 126,475 147,531 21 Electric plant held for future use ( 800) 2,800 Addition to plant unclassified and under construction 2,546,696 601,065 Addition to nuclear assets 197,582 3,637 Retirement work in progress-credit (debit) ( 1,497) 641 $4,768,004 $2,254,752 ..f rw [} U' l .e _1 . } aer u. i w l 3/- 4 / L s v +

Co-op substations-owned by

l

~' tuen:bers-dot Vermont. Some are tucked into the landscape, like ] Pleasant Valley, lower right, or beneath trees, like Smuggler's Notch. Others, like Scotts Bridge in Windham County, lower left, are l visible.

i 1 l ACCOUNTANT'S REPORT i i VN g NOTES TO FINANCIAL STATEMENTS DECEMBER 31,1979 1 f J 13s

1. Assets Pledged:

• '3~'

All assets are subject to the first mortgage lien held by the United States i 3 Government. j w j '.f

2. Electric Plant and Depreciation Procedures:

6_ The major classification of plant is as follows: l ~~ p g 1779 1978 -/- -y. Intangible plant S 1,547.99 5 1,547.99 i f 'l i-Transmission plant 945,316.33 927,532.24 T i Distribution plant 13,575,132.59 12,453,748.91 p fi(f General plant 1,493,794.31 1,369,221.10

• J Completed construction unclassified 482,388.45 893,132.86

}ga ' c = gs g ) {, * ' 'f Construction work in progress (A) 4,837,734.62 1,880,294.13 7 '5 ) $21,335,914.29 517,525,477.23 q (A) Construction work in progress consists of: ] General and distribution plant S 235,452.98 ~. lh,Il 1 l A i * [; Generation: 1 l I('p~s;' ~ Millstone Nuclear Unit #3 of which the cooperative has a.2% interest S 1,326,549.09 h, l 22 1-h* d Pilgrim Nuclear Unit #2 of f g which the cooperative has j w a.2 % interest 708,305.68 . '#",3 New England Power Nuclear i i - L Units #1 and #2 in which i ? i the cooperative was to 3 1 acquire a.2% interest 94,265.28 ~ ( } Seabrook Nuclear Units #1 'N and #2 in which the coop-j, J 5 l erative will acquire a g w-Q .2 % interest 2,471,666.35 4,600,786.40 iM ~ Eagle Mountain project 1,495.24 i j S 4,837,734.62 [ ;$ k' h 'j in the opinion of management any adverse effect of New England Power Units

3

1. 1 and #2 will be minimal.

i ) 1 The cooperative is obligated for the proportionate share of the carrying and ( } progress costs in the nuclear projects. .M . g L Provision has been made for straight line composite depreciation of the trans-mission and distribution plant at the rates of 2.6% and 3.0% per annum. General plant depreciation rates have been applied on a straight line basis at the following rates: Leasehold improvements 2 years Buildings composite rate Office furniture and equipmer,t composite rate Stores equipment 10 years Shop equipment composite rate Laboratory equipment composite rate l Power operated equipmcat based on usage Communication equipmot 8 years Miscellaneous equipment compcsite rate Demonstration equipment composite rate Transportation equipment 3-10 years

Electric plant acquisition is being amortized over a fifteen year period. During 1979 the amortization totaled $10,528.80. 'Certificat On Electric plant held for future use represents the cost of the Waterville pump storag2 project. Of Ceftifiedc Nucle:r fuel in process represents the cost aggregates of the proportionate shire of the fuel costs to date of: Pubh,c -Accountant Seabrook Nuclear units S183,717.58 Pilgrim Nuclear units 11,032.28 Millstone Nuclear units 23,434.53 Peter A. Castalde New England Power Nuclear units 21,455.20 - Certified Public Accountant S239,639.59 i' 44 Highland Place _ Ridgefield Park,- N.J. 07660 L Represents 20 acres located in the Town of Troy, Vermont, the Van Everest property and properties in Jay Valley. gg. ). P tron:ge capital from associated orgar izations: The balance represents the patronage capital certificates received of the

1. Douglas Webb, President National Rural Utilities Cooperative Finance Corporation.

. The Board of Directors ' Vermont Electric Cooperats,ve, Inc.

1. Crpitti t:rm certificates:

' C'"'I'*'" Invest ments in associa ted organizations include capital term certificates (CTC) of the National Rural Utilities Cooperative Finance Corporation in the fol-We have examined the Balance Sheet = lowing amounts: c of the Vermont Electric Cooperative, 1979 1978 5353,194.00 $290,878.00 . December 31,1979, and the related - 2,3 The corporation is obligated to purchase additional CTCs in 1980 through statements of Operating Revenue and 1985 in the amount of 5481,821.00 in annual installments based on the . Expense, Income and Earned Surplus estimated revenue oi the years. .and Source and Application of Funds ' for the twelve months then ended. > N;t of thz following provisions.'or doubtful accounts: i'.Our examination was made in accor-- 1979 1978 dance with generally accepted $4,185.34 $4,185.34 " ^ auditing standards and, accordingly, 'includedsuch tests of the accounting such o@uaudWngpro;. rear s an > Net of thz following provisions for doubtful accounts: ""*D

• 1979 1978 the circumstances.

$54,628.32 562,699.01 In our opinion, the financial - > Under the provisions of the first mortgage note agreements with the U.S.D. A. . statements referred to above present accumulated patronage credits may not be remitted the applicable patrons - fairly the financial position of the until the total of equities and margins equals or exceeds 40 percentum of the Vermont Electric Cooperative, Inc. at total assets of the cooperative. December 31,1979, and the results of ' its operation and changes in financial. The long-term debt to R.E.A. is represented by two percentum first mortgage - position for the twelve months then. i notes payable to the United States government, totaling 57,586,349.60 re-7 ended in conformity with generally - i maining balance and five percentum notes of 57,313,853.05 outstanding i accepted utility accounting principles; ; , balince. The notes are for 35 year periods each and principal and interest applied as~a basis consistent with that ; j installmentsareduequarterlyinequalamountsof approximately$222,368.36. of the preceding period. j it is estimated that installments of 5889,473.44 due within the next twelve s i months will include 5378,406.84 in principal. The notes are scheduled to be L Peter A. Castalde, C.P.A fully repaid at various times from April,1979 to June,2014. Long-term debt to i N.R.U.C.F.C. was 5734,969.60 at December 31,1979. s 1 l Litigation: j ! We hav? requested that corporate counsel advise us of any litigation of s ~ l which he is cognizant. t s ' Pension benefits are provided for all eligible employees under the retirement and security program of the National Rural Electric Cooperative Association. ' The cost of the plan to the cooperative was $117,110.42 which was allocated Li '^ (Mxpense and construction and retirement cost aggregates. L u.h ad .x

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