Keeping the LightsOn - Jackson EMCJackson EMC received the highest numerical score among midsize utilities in the South region in the proprietary J.D. Power and Associates 2008 Electric

2008 annua l r e por t

Keeping the Lights On

Jackson EMC received the highest numerical score among midsize utilities in the South region in the proprietary J.D. Power and Associates 2008 Electric Utility Residential CustomerSatisfaction Study.SM Study based on 35,588 responses ranking the 27 largest providers in the South (AL, AK, FL, GA, LA, MS, OK, NC, SC, TX). Proprietary study results are based onexperiences and perceptions of consumers surveyed in March-May 2008. Your experiences may vary. Visit jdpower.com.

Jackson EMC ranks highest in Customer Satisfaction

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In a study by J.D. Power and Associates, Jackson EMC ranked highest in customer satisfaction amongmidsize utilities in the South, as well as all utilities in the nation. This marked the first year thatJackson EMC had been included in the study, which ranked both large and midsize utilities in theEast, Midwest, South and West. Midsize utilities serve 125,000-499,999 residential customers,while large utilities serve 500,000 or more customers. Factors examined by the study includedpower quality and reliability, price, billing and payment, corporate citizenship, communicationsand customer service.

This year’s annual report tells the story of the workwe do every day to keep our members’ lights on — plan-ning our distribution system to reliably handle the demandfor electricity; maintaining our system so the possibility ofoutages is minimized; responding when the unforeseenhappens. All so the homes and businesses we serve havethe electricity they need when it’s needed.

And while those activities are vital, there’s anothercomponent to keeping the lights on — making certain thatwe will always have a sufficient supply of electricity tomeet our members’ needs as the communities we servegrow and develop.

Unlike most businesses that produce a product or serv-ice, we can’t decide that we’ve produced all the electricitywe care to sell or all that our infrastructure can handle.Our charter brings with it the obligation to provide elec-tricity to everyone in our service area who applies forservice — every house in every subdivision, every smallbusiness, every church, every shopping center, everywarehouse, every manufacturing plant. And the demandfor electricity is growing.

In just ten years, the number of meters our cooperativeserves has grown from 132,904 to 204,999, a 54%increase. There has been dramatic growth in the number

Randall Pugh, President/CEO

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Our charter brings with it theobligation to provide electricity toeveryone in our service area whoapplies for service — every house inevery subdivision, every smallbusiness, every church, everyshopping center, every warehouse,every manufacturing plant.

A MESSAGE FROM OUR PRESIDENT/CEO

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keeping the lights on

of meters served in four counties over the last ten years –Barrow County 94%, Jackson County 65%, GwinnettCounty 56% and Hall County 48%. In fact, all except HallCounty were listed among the 100 fastest growing coun-ties in America for 2002-2004. While growth in otherareas of the country has ground to a halt, growth in ourservice area has slowed, but by no means stopped. And webelieve that as the economy turns around, area growthwill return to its previous robust rate.

Over the same period that our membership has grownby 54%, the amount of electricity our members use hasincreased an incredible 81%, from 2.7 billion kilowatt

hours to nearly 5 billion kilowatt hours. Part of thatincrease is due to the 97% growth over the past 10 yearsin the number of commercial and industrial customers weserve. But we’ve also seen the residential use of electricitysteadily increase from 1,055 kWh per month to 1,277kWh per month over the last decade, driven in large partby today’s lifestyle — larger homes, multiple heating andair conditioning systems per home, multiple television setsand computers, home theaters, as well as a long line ofnew products that use electricity. Part of our ability tosupply enough electricity to meet our members’ needs isto make sure that electricity resources are used wisely.

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Our cooperative has a long history of working on ourside of the light switch to manage demand, as well as pro-viding our members with information and tools they canuse to manage demand and use energy wisely on theirside of the switch. After all, the “greenest” energy is theenergy we don’t have to produce to begin with.

Managing electric demand is important, since we mustdesign our distribution system not just to meet averagedemand, but to respond to peak use — summer weekdaysfrom 3:00 to 8:00 p.m. During peak demand we can easethe strain on our distribution system by adding supple-mental power from a natural gas-fired generator, managingdemand by asking industrial load management partnerswho are able to curtail operations, and shaving the peak bytemporarily cycling off the air conditioners and waterheaters of residential members participating in our Switchto Savings plan, all part of our load management program.We reward both residential and commercial members for

not using electricity during peak demand periods withlower Time of Use rates.

All together, our load management program can reducethe demand for electricity on our distribution system by30 megawatts — enough electricity to power a city thesize of Decatur or Newnan.

While we can’t require the efficient use of energy,

we certainly champion it. And we have done so consis-tently for more than 30 years. Today, through online tools,Jackson EMC staff-conducted and do-it-yourself energyaudits, and products like our Right Choicesm HomePerformance with ENERGY STAR®, we provide residentialmembers with the means to check their home’s energyuse and ways to make it more efficient. Partnering withbuilders, we are producing highly energy efficient RightChoicesm new homes, an ENERGY STAR® qualifiedprogram, that reward home owners with warranties and

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HGTV Home Expert Pat Simpson, has beenJackson EMC’s spokesperson for our Right Choicebrand of energy efficient services. Pat is featured intelevision commercials, print ads, billboards, directmail, newsletters, trade show displays, online ads,DVDs and our own web site.

At left, Pat is filming television commercials withthe Right Choice Home Performance Audit crew(far left) and with Bailey Hicks (near left), daughterof Commercial/Industrial Marketing Representative,Joe Hicks.


our lowest residential rate. We recently introduced incen-tives for residential solar power and solar water heating.We offer our commercial members technical support aswell as professional energy audits to provide energy effi-ciency analyses and recommendations.

For members who want to use electricity moreefficiently, our website offers energy efficiency guidancefor both residential and commercial members. Throughour member newsletter, we keep the issue of efficiencyin our members’ minds and provide monthly energyefficiency ideas for their homes.

Ultimately though, energy efficiency is a choice ourmembers must make for themselves. While we work tomanage the demand for electricity, our obligation is tomeet that demand.

How we meet that obligation is extremely important,a balancing act of choosing the right power generationresources to ensure a sufficient, reliable supply whilemaking sure that supply can be provided to our membersat a reasonable cost and in the most environmentallyresponsible manner possible. The best way to accomplishthat is through a diverse generation portfolio.

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Ultimately, energy efficiency is a choice our members must make for themselves.While we work to manage the demand for electricity, our obligation is to meet that demand.

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Hall

48% 56%65%

94%

Gwinnett Jackson Barrow

100

80

60

40

20

0

Growth In Meters Over Last Ten Years

2007 2009 2011 2013 2015 2017

2,500

2,000

1,500

1,000

500

0

Dem

and

(M

W)

Year

Projected Demand

megawatts neededwithin ten years in order

to meet the demand

1,000

Jackson EMC By The Numbers

*system demand record set in 2007

1998 2003 2008

Number of Meters Served 132,904 174,372 204,999

Number Residential Meters 122,993 159,539 185,443

Number Commercial Meters 9,911 14,833 19,534

kWh Sold in 12 months (billions) 2.747 3.917 4.966

Plant Assets ($ millions) 339 501 713

Miles of Energized Wire 9,158 11,167 13,373

Employees 353 417 452

System Demand 666 888 1,220*


Simply put, we cannot put all our eggs in one basket.Diversity ensures the flow of reliable, economical powereven when resources are interrupted, as was the supply ofnatural gas after Hurricane Katrina, or when worldwidemarket influences threaten to escalate the cost of thoseresources.

A portion of our portfolio should be fromrenewable resources, helping to reduce our dependenceon fossil fuels. As founding members of Green Power EMC,Jackson EMC has been using renewable energy from land-fill gas and low impact hydropower since 2003, and hasfunded the Sun Power for Schools program that is puttingsolar energy in classrooms across Georgia. This cooperativeeffort will shortly deliver the first electricity generated inGeorgia from poultry litter and is investigating additionalopportunities in solar and wind generation. But whilerenewables play an important role in our generationportfolio, they simply cannot by themselves provideenough power to meet our members’ future needs.

Today we own generation resources that includecoal, nuclear, natural gas, hydropower and biomass, as wellas offer a photovoltaic program that assists members whowant to use solar power in their homes and sell us theirexcess power. Even taking into account the currenteconomic slowdown, we’ll need an additional 1,000megawatts of power in just ten years to meet demand.To provide that power, Jackson EMC will participate in avariety of economically feasible generation projects, bothtraditional and renewable, including coal, nuclear, naturalgas, biomass and solar.

Day-to-day and tomorrow, our promise to ourmembers is that they can count on us to provide themwith a reliable source of quality power at a reasonableprice. Keeping the lights on is our duty and our privilege,a responsibility we are prepared to handle with the bestinterests of our members in mind.

Randall PughPresident/CEO

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Ensuring the Power behind the Switch


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PLANNING FOR RELIABLE SERVICE

Jackson EMC has a virtual electric highway, a local distri-bution system that runs over nearly 13,500 miles of ener-gized wire and through 82 substations carrying power tohomes and businesses.

Deciding when and where to build those assets toserve growing demand is part science and part art. Thescience lies in analyzing data and computer models to stayfar enough ahead of the growth so that demand is metwithout waste; pinpointing how much will be needed,how soon. The art lies in looking at the big picture to see

if neighboring substations are close to being overloaded,projecting how future outages could be handled by rerout-ing the path of electricity, then planning new assets withthe capacity to handle both situations. It’s not enough justto handle demand, it must be handled reliably.

A substation is both a major investment and undertak-ing. In planning the capacity needed in a new substation,computer models analyze the acres of usable land that willultimately need to be served, projected growth, and emer-gency backup requirements of neighboring substations.

The average substation is 30,000 kVA, enough to serveabout 6,000 homes, but substations built in industrialized

The staff of System Control manages a powerdistribution system that is one of the largest inthe country.

Shanta Dalton (top left)System Control Coordinator

Kelly Porter (top center)System Control Coordinator

Jason Autry (top right)System Control Coordinator

Scott Burley (bottom left)System Control Coordinator

Darrell Chaisson (opposite page)System Control Coordinator


Overhanging branches and dead trees are arecipe for power outages during wind andice storms. So crews working for Jackson

EMC maintain the almost 7,000 miles of overhead distribution lines in order

to reduce the possibility of customer power outages.

(Opposite page)Cliff Mize, who serves as

Jackson EMC’s on-staff arborist, advises the Right-of-Way

crews on the healthy approach to pruning trees.

or dense population areas, or that serve a large geographicarea can be double that size or even larger. A substationcan’t be built overnight and it can’t be built in small incre-ments, so new substations are planned to handle currentdemand and engineered to be expanded to meet futuredemand.

The response to growth and increased reliability mayalso involve adding circuits from an existing substation,upgrading power lines or converting existing power linesto carry 25kV of electricity.

PREVENTING PROBLEMS FROM HAPPENING

Like any network, the cooperative’s electric distributionsystem must be maintained. A bit of housekeeping canprevent outages before they happen.

Much of the energized wire serving our membershangs on poles, making clearing the right of way one ofthe most important maintenance activities steps.

Overhanging branches, dead trees and trees growinginto the power lines are a surefire recipe for outages whenwindy weather or storms roll through. Contractor crewstrim trees around lines and vegetation underneath in a

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15-foot-path on either side, working their way throughthe distribution system in a cycle that gives each mile ofline a grooming every four years. With nearly 6,625 milesof primary overhead distribution line, that’s nearly theequivalent of clearing a path from Atlanta to Helena,Montana each year. An on-staff arborist makes certainthat when trees must be pruned, it’s done for the tree’scontinued health.

Jackson EMC has about 165,200 poles carryingenergized wire. The more than 131,300 wooden poleshave a normal life span of 25-30 years, but can be dam-aged by decay, weather and woodpeckers. When stormy

weather occurs, damaged poles can be a weak link in thedistribution network chain.

Every pole is inspected once each seven years, averag-ing about 25,000 poles each year. Concrete, metal andnewer wooden poles receive a visual inspection. Olderpoles or those with visible problems receive a sound andbore inspection to check for internal and ground leveldecay. Poles with mild decay are treated, while those withserious decay are marked for replacement. Then, as a safetyprecaution, the pole’s guy wires get yellow marker sleevesto make them more visible.

About two percent of the poles inspected must be

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AboveThe approximately 1,650 miles ofoverhead distribution line thatJackson EMC maintains each yearcould reach from Atlanta to Helena,Montana.

At LeftInfrared cameras are an advancedtechnological tool used to inspectour substations in order to help spotweaknesses before they becomeserious problems.

Approx 1,650 miles of overhead lines

maintained each year

replaced, but with good maintenance some of the woodenpoles originally erected by the cooperative in the 1940sare still in service today.

The cooperative’s more than 6,750 miles of under-ground service, much of which is in subdivisions, alsorequires routine maintenance. Crews visit older subdivi-sions, checking underground transformers and switches,making sure that connections are tight and insulation isintact. They also treat for fire ants, which are attracted tothe transformers. While they don’t typically cause outages,fire ants hiding in a transformer could seriously injure alineman working in the dark to restore power.

Even the cooperative’s 82 substations are inspected forproblems each year. A loose connection, such as a switchthat doesn’t close completely, impedes the flow of currentand creates heat. Inspectors armed with an infrared cam-era can detect a problem before it becomes serious enoughto cause an outage, and get maintenance scheduled.

In addition to formal maintenance programs, JacksonEMC field personnel can generate maintenance reportsusing laptops in their trucks while they drive around ourservice area assessing storm damage. And all Jackson EMCemployees are responsible for reporting abnormal or dan-gerous situations.

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The cooperative’s Geographic Information System, orGIS, records system maintenance, tracks its progress andkeeps a history of inspections and subsequent mainte-nance. At the same time, the GIS forms one part of anintricate information network that enables the cooperativeto more quickly identify the source of outages when theydo happen and make repairs more quickly. It all beginswith a service application.

INFORMATION THE KEY TO SOLVING OUTAGES

When a new member applies for electric service, theyprovide information that will not only help generate theirbill, but also help solve future outages. Customers’ addressinformation is sent from the Customer Information Systemto the GIS, where it is added to maps of the cooperative’sdistribution system, maps which are updated every nightas changes are made to the system and membership grows.Every piece of equipment — substations, wire, poles, andnearly 108,000 switches, fuses, breakers and reclosers —is marked on the map, along with every residence andbusiness.

Information from the GIS in turn feeds the cooperative’sOutage Management System (OMS), a sophisticatedcomputer Sherlock Holmes that thrives on data. Itscomputer counterpart Doctor Watson is the SupervisoryControl and Data Acquisition (SCADA) system that monitorsthe distribution system and tells the OMS what’s going on.Each customer call to the cooperative’s Contact Centerand online outage report form provides the OMS withadditional “clues” that it uses to predict what is causingan outage.

Meanwhile, the distribution system, OMS and SCADAare being monitored 24/7 by the staff of System Control,the nerve center of the distribution system. System Controltracks outages as they happen, thanks to the watchful eyeof SCADA and incoming customer reports. Problemsinvolving transmission lines and transmission substationsthat connect to the cooperative’s distribution network andcould impact Jackson EMC members come in from theGeorgia System Operations Center (GSOC).

Four screens in front of each System ControlCoordinator show the distribution system map, which canzero in on a single street; outage status reports showingwhen the problem occurred, where, how many membersare affected, which crews were dispatched and otherinformation; member outage reports; and email communi-cation with the cooperative’s district engineering andoperations staffs.

As the OMS predicts what could be causing the outage,System Control personnel can in some cases use SCADA toremotely restore electric service by opening or closing aswitch. In others cases, crews are dispatched to ride theline, verify the problem indicated by the OMS and makerepairs. Customer reports of outages are prioritized sorepairs to the distribution system can be made first wherethey will impact the largest number of customers.

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Jackson EMC By The NumbersPower/Light Poles 179,219

Transformers 86,240

Fuses 18,293

Miles of Energized Wire 13,373

Switches 2,543

Reclosers 673

Substations 82

WHEN THE WORST HAPPENS, PLANNING HELPS

Despite the best maintenance, outages will happen —animals will crawl into substations and cause a short, carswill crash into power poles and pad-mounted transform-ers, seemingly healthy trees weakened by drought willtopple over, and Mother Nature will whip up a severestorm.

Planning for the worst helps the cooperative performthe best. The cooperative’s comprehensive EmergencyRestoration Plan provides a step-by-step process to planfor and respond to crisis situations. The plan lays out howinformation is gathered from district offices, how employ-ees are called in to work, how needed materials are inven-toried and stocked on trucks, how repairs are prioritizedand crews assigned, when assistance from contractors andother EMCs should be requested, even how to feed andhouse linemen who could be on the job long hours whenan ice storm strikes.

By outlining in detail everyone’s role and the steps tobe taken to restore power, the plan helps the cooperativerestore service to the largest number of members, safelyand efficiently.

The results of Jackson EMC’s overall response to out-ages — preventing as many as possible and restoring powerquickly when they do occur — are clearly reflected in theresponses to last year’s Residential Customer SatisfactionSurvey. When asked to rate the cooperative on havingfew power outages, restoring power quickly after anoutage and having few momentary disruptions of service,members responded with an impressive 90 percentsatisfaction level.

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Planning for the worst helps thecooperative perform the best. Thecooperative’s comprehensiveEmergency Restoration Plan providesa step-by-step process . . .

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FINANCIALS

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of DirectorsJackson Electric Membership Corporation

We have audited the accompanying balance sheets of Jackson Electric Membership Corporation as of May 31,

2008 and 2007 and the related statements of revenue and patronage capital and cash flows for the years then

ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to

express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of

America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the

Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement. An audit includes

consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s

internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,

on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting

principles used and significant estimates made by management, as well as evaluating the overall financial statement

presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial

position of Jackson Electric Membership Corporation as of May 31, 2008 and 2007, and the results of its operations

and cash flows for the years then ended in conformity with accounting principles generally accepted in the United

States of America.

In accordance with Government Auditing Standards, we have also issued our report dated August 14, 2008 on

our consideration of Jackson Electric Membership Corporation’s internal control over financial reporting and on our tests

of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The

purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance

and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on

compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards

and should be considered in assessing the result of our audits.

McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP

AUGUST 14, 2008

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BALANCE SHEETSMay 31

ASSETS 2008 2007Utility Plant

Electric Plant in Service-At Cost $688,256,565 $ 647,834,514Construction Work in Progress 23,542,241 16,957,560

Gross Utility Plant 711,798,806 664,792,074Accumulated Provision for Depreciation (163,071,655) (146,545,637)

548,727,151 518,246,437

Other Property and InvestmentsInvestments in Associated Organizations 83,560,534 79,861,018Restricted Funds 40,200,000 63,881,952

123,760,534 143,742,970Current Assets

Cash and Cash Equivalents 17,421,675 9,260,881Accounts Receivable (Net of Accumulated Provision forUncollectibles of $1,454,318 in 2008 and $1,225,688 in 2007) 23,228,579 19,631,762Materials and Supplies 13,474,370 12,806,948Other 3,667,512 3,602,689

57,792,136 45,302,280

Deferred Debits 3,202,390 2,173,778

Total Assets $733,482,211 $ 709,465,465

EQUITIES AND LIABILITIES 2008 2007Equities

Membership Fees $ 2,503,170 $ 2,390,615Patronage Capital 241,740,952 224,609,827Other 555,761 528,718

244,799,883 227,529,160

Long-Term Debt 367,280,007 360,051,748

Other Long-Term LiabilitiesAccumulated Provision for Postretirement Benefits -Noncurrent 13,498,525 3,244,057

Current LiabilitiesLong-Term Debt-Current Portion 9,121,000 8,673,000Accumulated Provision for Postretirement Benefits -

Current Portion 915,083Accounts Payable 27,247,894 28,757,331Consumers’ Deposits 6,789,869 6,913,775Other 10,486,788 11,558,316

54,560,634 55,902,422

Deferred Credits 53,343,162 62,738,078

Total Equities and Liabilities $733,482,211 $709,465,465

The accompanying notes are an integral part of these balance sheets.

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STATEMENTS OF REVENUE AND PATRONAGE CAPITALFor the years ended May 31

2008 2007Operating Revenues $429,765,646 $393,117,352

Operating ExpensesCost of Power 315,393,597 299,158,952Distribution Operations 11,307,960 10,165,344Distribution Maintenance 14,209,586 11,781,461Consumer Accounts 15,315,878 11,638,100Customer Information and Sales 8,705,344 7,490,519Administrative and General 10,440,682 8,670,056Depreciation 22,691,197 20,945,097

398,064,244 369,849,529

Operating Margins Before Interest Expense 31,701,402 23,267,823

Interest Expense 19,895,020 19,944,063

Operating Margins After Interest Expense 11,806,382 3,323,760

Nonoperating Margins 5,489,131 6,602,467

Generation and Transmission Cooperative Capital Credits 3,775,930 3,497,906

Other Capital Credits and Patronage Capital Allocations 542,965 427,866

Net Margins 21,614,408 13,851,999

Patronage Capital-Beginning 224,609,827 214,947,645

Retirement of Patronage Capital (4,483,283) (4,189,817)

Patronage Capital-Ending $241,740,952 $224,609,827

The accompanying notes are an integral part of these statements.

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STATEMENTS OF CASH FLOWSFor the years ended May 31

2008 2007Cash Flows from Operating Activities

Net Margins $21,614,408 $ 13,851,999Adjustments to Reconcile Net Margins to Net Cash

Provided by Operating ActivitiesDepreciation and Amortization 23,871,658 22,152,444Patronage Capital from Associated Organizations (4,318,895) (3,927,002)Deferred Revenue (10,533,468) (10,482,374)Postretirement Benefits 11,169,551 (2,249,846)Gain (Loss) on Sale of Utility Plant (26,658) 27,283Change In

Accounts Receivable (3,596,817) 362,194Other Current Assets (64,823) (960,753)Accounts Payable (1,509,437) 502,037Other Current Liabilities (1,071,528) 2,043,626

35,533,991 21,319,608

Cash Flows from Investing ActivitiesExtension and Replacement of Plant (56,137,126) (49,282,231)Return of Equity from Associated Organization 552,072 345,355Plant Removal Costs (1,460,772) (1,622,538)Material Salvage 3,272,184 2,857,843Deferred Debits (1,028,612) 2,682,945Materials and Supplies (667,422) (601,473)

(55,469,676) (45,620,099)Cash Flows from Financing Activities

Advances from Long-Term Debt 34,324,000 30,000,000Membership Fees 112,555 128,895Principal Repayment of Long-Term Debt (9,787,431) (8,997,710)Retirement of Patronage Capital (4,483,283) (4,189,817)Investment in Capital Term Certificates 67,307 65,695Deferred Credits 1.138.552 (302,523)Consumers Deposits (123,906) 315,168Other Equities 27,043 36,219Restricted Funds 23,681,952 (24,211,042)Advance Payments on Long-Term Debt Unapplied (16,860,310) 15,958,047

28,096,479 8,802,932

Net Increase (Decrease) in Cash and Cash Equivalents 8,160,794 (15,497,559)

Cash and Cash Equivalents-Beginning 9,260,881 24,758,440

Cash and Cash Equivalents-Ending $ 17,421,675 $ 9,260,881

The accompanying notes are an integral part of these statements.

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NOTES TO FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Accounting policies of the Corporation reflect practices appropriatein the electric utility industry. The following describes the moresignificant of those policies.

Nature of OperationsJackson Electric Membership Corporation is a not-for-profit corpo-ration organized to provide electric service to its members. TheCorporation operates as a cooperative whereby all monies in excessof cost of providing electric service are capital, at the moment ofreceipt, and are credited to each member’s capital account.

Use of EstimatesThe preparation of financial statements in conformity with generallyaccepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabili-ties at the date of the financial statements. Estimates also affect thereported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates.

Long-Lived AssetsThe Corporation evaluates long-lived assets for impairment whenevents or changes in circumstances indicate that the carrying valueof such assets may not be recoverable. The determination ofwhether an impairment has occurred is based on either a specificregulatory disallowance or an estimate of undiscounted future cashflows attributable to the assets, as compared with the carryingvalue of the assets. If an impairment has occurred, the amount ofthe impairment recognized is determined by estimating the fairvalue of the assets and recording a provision for loss if the carryingvalue is greater than the fair value. For assets identified as held forsale, the carrying value is compared to the estimated fair value lessthe cost to sell in order to determine if an impairment provision isrequired. Until the assets are disposed of, their estimated fair valueis reevaluated when circumstances or events change.

Accounting standards require the present value of the ultimate costfor an asset’s future retirement be recorded in the period in whichthe liability is incurred. The cost should be capitalized as part of therelated long-lived asset and depreciated over the asset’s useful life.The Corporation has no legal retirement obligations related to itsdistribution facilities; therefore, a liability for the removal of theseassets will not be recorded. Management believes the actual cost ofremoval, even though not a legal obligation, will be recoveredthrough rates over the life of the distribution assets.

Utility PlantUtility plant is capitalized at cost less related contributions in aid ofconstruction. In general, utility plant is capitalized at the time itbecomes part of an operating unit and has been energized.

Depreciation and MaintenanceDepreciation of capitalized cost is provided using straight-linerates. When property subject to depreciation is retired or other-wise disposed of in the normal course of business, its capitalizedcost and its cost of removal less salvage are charged to theaccumulated provision for depreciation.

Provision has been made for depreciation of distribution plant atstraight-line rates ranging from 2.3 to 6.7 percent per annum.Depreciation of general plant is provided on a straight-line basisover the estimated useful lives of the various assets. The ratesrange from 4.5 to 14.3 percent per annum.

The costs of maintenance, repairs and replacements of minor itemsof property are charged to maintenance expense accounts.

Accounts ReceivableAn allowance is made for doubtful accounts based on experienceand other circumstances which may affect the ability of con-sumers to meet their obligations. Accounts considered uncollectibleare charged against the allowance. Receivables are reported on thebalance sheets net of such accumulated allowance.

Materials and SuppliesMaterials and supplies are stated at lower of cost or market. Costis determined substantially by the moving average method ofinventory valuation.

Patronage Capital and MarginsJackson Electric Membership Corporation operates under thecooperative form of organization. As provided in the bylaws, anyexcess of revenues over expenses from operations is treated asadvances of capital by the patrons and credited to each of themon an individual basis. Under provisions of the longterm debtagreements, until the total equities and margins equal or exceed30 percent of the total assets of the Corporation, the return topatrons of capital contributed by them is limited. Total equitiesapproximated 33 and 31 percent of total assets as of May 31,2008 and 2007, respectively.

Operating Revenues and Patronage CapitalOperating revenues which include patronage capital are billedmonthly to consumers. Electricity which had been used bymembers of the Corporation but had not been billed to themembers was not recorded. This unbilled electric revenue totaledapproximately $17,349,000 and $17,952,000 for 2008 and2007, respectively.

Cost of Purchased PowerCost of power is expensed as consumed.

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(1) Summary of Significant Accounting Policies (Continued)

Generation and Transmission Cooperative Capital CreditsGeneration and transmission cooperative capital credits representthe annual capital furnished generation and transmission coopera-tives through payment of power bills. The capital is recorded in thecalendar year provided, even though notification of the capitalallocation is not received until later.

Cash EquivalentsFor purposes of the statements of cash flows, cash equivalentsinclude time deposits, certificates of deposit and all highly liquiddebt instruments with original maturities of three months or less.

Fair Value of Financial InstrumentsFinancial instruments include cash and cash equivalents, restrictedfunds, other investments and longterm debt. Investments inassociated organizations are not considered a financial instrumentbecause they represent nontransferable interest in associatedorganizations.

The carrying value of cash and cash equivalents, restricted fundsand other investments approximates fair value because of theshort maturity of those instruments. It is not practicable to esti-mate the fair value of long-term debt; additional information per-tinent to its value is provided in the footnote for long-term debt.

Income TaxesThe Corporation has obtained exemption from federal and stateincome taxes under Section 501(c)(12) of the Internal RevenueCode which provides, in part, that the Corporation derive at least85 percent of its annual gross income from members. TheCorporation files an information return with the Internal RevenueService each year and has always met this requirement. In addi-tion, the Corporation is subject to income taxes on its netunrelated business income. The Corporation currently has losscarry forwards for unrelated business income tax of $27,395,which expire in 2022.

New Accounting PronouncementsIn September 2006, the Financial Accounting Standards Board(FASB) issued Statement of Financial Accounting Standards (SFAS)No. 158, Employers’ Accounting for Defined Benefit Pension andOther Postretirement Plans – an amendment of FASB StatementsNo. 87, 88, 106, and 132(R). SFAS No. 158 requires an employerthat sponsors a defined benefit postretirement plan to report thecurrent economic status (the overfunded or underfunded status)of the plan in its balance sheet, to measure the plan assets andplan obligations as of the balance sheet date, and to includeenhanced disclosures about the plan. The Corporation was requiredto adopt the recognition and disclosure provisions of SFAS No. 158for the fiscal year ended May 31, 2008 and will be required toadopt the measurement date provision for the fiscal year endingMay 31, 2009.

(2) Utility PlantListed below are the major classes of the electric utility plant as ofMay 31:

2008 2007

Distribution Plant $601,153,368 $562,930,629Generation Plant 12,652,143 12,652,143General Plant 74,451,054 72,251,742

Electric Plant in Service 688,256,565 647,834,514Construction Work In Progress 23,542,241 16,957,560

$711,798,806 $664,792,074

(3) Investments in Associated Organizations 2008 2007National Rural Utilities Cooperative Finance Corporation

Capital Term Certificates $ 3,552,266 $ 3,619,573Capital Credits 1,476,428 1,511,136

Oglethorpe Power CorporationCapital Credits 57,354,958 55,237,761

Georgia Systems Operations Corporation

Capital Credits 20,509 18,938CoBank

Stock 426,691 606,776Georgia Transmission Corporation

Contributed Capital 5,166,245 5,166,245Capital Credits 10,610,549 9,230,591

GRESCO Utility Supply, Inc.Capital Credits 2,042,819 1,838,776

Smarr EMCContributed Capital 617,420 617,420Capital Credits 2,274,426 1,997,222

Green Power EMCContributed Capital 12,400 12,400

The National Rural Telecommunications Cooperative

Capital Credits 4,683 3,040Memberships in Associated Organizations 1,130 1,130Other 10 10

$ 83,560,534 $ 79,861,018

(4) Deferred DebitsDeferred debits are comprised of the following as of May 31:

2008 2007Software $ 355,317 $ 310,778Prior Service Cost-Pension 1,632,000 1,862,400Resource Planning 1,199,030 —Other 16,043 600

$ 3,202,390 $ 2,173,778

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(5) Patronage Capital2008 2007

Assignable $ (3,217,859) $ (4,549,826)Assigned 314,144,550 293,862,109

310,926,691 289,312,283Retired (69,185,739) (64,702,456)

$241,740,952 $224,609,827

(6) Other Equities2008 2007

Capital Gains and Losses $ 534 $ 534Retired Capital Credits-Gain 322,862 321,388Donated Capital 232,365 206,796

$ 555,761 $ 528,718

(7) Long-Term DebtLong-term debt consists primarily of mortgage notes payable tothe United States of America acting through the Rural UtilitiesService (RUS) and the National Rural Utilities Cooperative FinanceCorporation (NRUCFC). The notes are secured by a mortgage agree-ment among the Corporation, RUS and NRUCFC. Substantially allthe assets of the Corporation are pledged as security for long-termdebt of the Corporation. The notes generally have 35-yearmaturity periods and are payable on an installment basis.

Holder of Note Interest Rate 2008 2007

RUS 4.46% to 5.75% $275,340,425 $246,784,570NRUCFC 4.15% to 6.90% 132,888,157 136,907,444RUS Cushion-of-Credit 5.00% (31,827,575) (14,967,266)

376,401,007 368,724,748Maturities Due Within One Year (9,121,000) (8,673,000)

$367,280,007 $360,051,748

Principal maturities of long-term debt approximate $9,121,000for each of the ensuing five years.

The Corporation has a $50,000,000 line-of-credit at 4.75 percentwith NRUCFC which had no outstanding balance as of May 31,2008 and 2007. The Corporation also has a $50,000,000 line-ofcredit at 4.16 percent with CoBank which had no outstanding bal-ance as of May 31, 2008 and 2007.

Interest payments totaled $19,907,417 and $19,926,449 for theyears ended May 31, 2008 and 2007, respectively.

The Corporation has made unapplied advance payments to the RUSCushion-of-Credit program. Under this program the Corporationmay make voluntary deposits into a special cushion-of-creditaccount. The cushion-of-credit account balance accrues interest tothe Corporation at a rate of 5 percent per annum. The use of thecushion-of-credit account is restricted to funding the future debtservice payments that the Corporation is obligated to pay againstits outstanding indebtedness to RUS.

(8) Deferred CreditsDeferred credits are comprised of the following as of May 31:

2008 2007Unclaimed Retired Capital Credits $ 3,820,403 $ 2,681,851Power Cost Revenue Deferral 49,522,759 60,056,227

$ 53,343,162 $62,738,078

The power cost revenue deferral represents revenues which arebeing recognized to reduce the impact of power cost on theCorporation’s rate structure.

Plan transactions were as follows:2008 2007

Beginning Balance $60,056,227 $ 70,538,601Returned to Revenue (10,533,468) (10,482,374)

Ending Balance $ 49,522,759 $ 60,056,227

The revenue deferrals detailed above are in compliance withStatement of Financial Accounting Standards (SFAS) No. 71 andhave been approved by the Rural Utilities Service.

The board of directors of Jackson Electric Membership Corporationspecified the deferred funds be deposited in special accountsuntil such time as a like amount is subsequently amortized intorevenue. Accordingly, the funds have been set aside as restrictedfunds and RUS cushion-of-credit for the years ended May 31,2008 and 2007.

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(9) Retiree BenefitsPension Plan (Defined Benefit)Pension benefits for substantially all employees of the Corporationare provided through participation in the National Rural ElectricCooperative Association (NRECA) Retirement and Security Program,a defined benefit plan qualified under Section 401 and tax exemptunder 501 (a) of the Internal Revenue Code. The Corporationmakes annual contributions to the program equal to the amountsrecorded for the pension expense. Total pension cost of$3,294,671 and $2,998,544 was charged to operations for theyears ended May 31, 2008 and 2007, respectively. In this multi-employer plan, which is available to all member cooperatives ofNRECA, the accumulated benefits and plan assets are not deter-mined or allocated separately by individual employer.

Defined Contribution PlanThe Corporation also provides additional employee benefits to sub-stantially all employees through the NRECA sponsored definedcontribution Savings Plan (401-k). In this defined contributionplan, the Corporation’s contributory portion of costs of this plantotaled $638,539 and $566,044 for the years ended May 31,2008 and 2007, respectively.

Postretirement Healthcare BenefitsThe Corporation provides medical benefits and life insurance toqualified retirees and directors. The Corporation had previouslyadopted SFAS No. 106, Employers’ Accounting for PostretirementBenefits Other than Pensions. This standard requires cooperativesto recognize the estimated future cost of providing healthcare andany other postretirement benefits on an accrual basis.

The Corporation also adopted the recognition provisions of SFASNo. 158, Employers’ Accounting for Defined Benefit Pension andOther Postretirement Plans-An Amendment of FASB StatementsNo. 87, 88, 106 and 132(R), as of May 31, 2008, which requiresthat the funded status of defined benefit pension and otherpostretirement plans be fully recognized in the balance sheets. Theincremental effects of applying SFAS No. 158 on individual lineitems in the balance sheets as of that date are as follows:

Accumulated Provision for Postretirement Benefits Other Than Pensions–Noncurrent

Total Noncurrent Liabilities

Accumulated Provision forPostretirement Benefits OtherThan Pensions–Current

Total Current Liabilities

Other Equities

The status of the Corporation’s postretirement healthcare plan as ofMay 31, 2008 is detailed as follows:

Accumulated Postretirement Benefit ObligationsRetirees and Dependents $ 9,922,184Fully Eligible Active Plan Participants 3,772,165Actives Not Yet Fully Eligible 22,973,331

Total Accumulate Postretirement Benefit Obligation 36,667,680

Fair Value of Assets (22,254,072)

Funded Status 14,413,608

Employer Contributions 5,712,739Plan Participant Contributions –Benefits Paid $ 1,140,508

Amounts recognized in the balance sheets consist of:

Noncurrent Liabilities $ 13,498,525Current Liabilities 915,083

14,413,608

Other changes in benefit obligations recognized in patronage capital are as follows:Service Cost $ 2,184,504Interest Cost 2,015,496Amortization of Actuarial Loss and Prior Service Cost 12,483,801

16,683,801Loss on Plan Assets 138,082

Total Recognized in Net Periodic Cost and Patronage Capital $ 16,821,883

For measurement purposes, a 10 percent annual rate of increase inthe per capita cost of covered healthcare benefits was assumed for2008. The rate was assumed to decrease gradually to 5.5 percentby the year 2017 and remain at that level thereafter. The health-care cost trend rate assumption has a significant effect on theamounts reported. Increasing the assumed healthcare cost trendrates by one percentage point in each year would increase theaccumulated postretirement benefit obligation as of May 31, 2008by $8,123,482 and the aggregate of the service and interest costcomponents of postretirement expense for the year then endedby $1,071,300.

The weighted average discount rate used in determining theaccumulated postretirement benefit obligation was 6.00 percentfor the years ended May 31, 2008 and 2007.

Before Applicationof SFAS No. 158

$13,498,525

$434,121,694

$915,083

$54,560,634

$555,761

OtherComprehensive

Income

$ -

$ -

$ -

$ -

$ -

After Application of SFAS No. 158

$ 13,498,525

$434,121,694

$915,083

$54,560,634

$555,761

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Utilizing SFAS No. 71, the Corporation recognized the amortizationof the actuarial loss and prior service cost in the year ended May31, 2008. Revenue related to these costs was received during theyear ended May 31, 2008.

The following benefits are expected to be paid:Year Amount2009 $ 915,0832010 995,8912011 1,056,0642012 1,174,8302013 1,534,6082014-2018 6,138,432

(10) Nonoperating MarginsNonoperating margins are comprised of the following as of May 31:

2008 2007

Interest and Dividend Income $ 4,177,958 $ 5,753,696Gain on Sale of Property (Net) 74,133 39,012Equity Gain of Cooperative

Choice, LLC 1,236,826 809,510Other 214 259

$ 5,489,131 $ 6,602,467

(11) Concentration of Credit RiskFinancial instruments that potentially subject the Corporation toconcentrations of credit risk consist principally of cash and cashequivalents, restricted funds and consumer accounts receivable.The Corporation maintains its cash balances in financial institutions;cash balances throughout the year periodically exceed federallyinsured deposit limits of $100,000.

At May 31, 2008, commercial paper and medium term notes ofNRUCFC in the amount of $56,300,000 were held by theCorporation. The amount is not secured or otherwise subject tofederally insured deposit liability coverage.

Concentrations of credit risk with respect to consumer accountsreceivable are limited due to the large number of customers com-prising the Corporation’s customer base.

(12) CommitmentsThe Corporation has a wholesale power contract with OglethorpePower Corporation (OPC) through 2050. Under the terms of thecontract, the Corporation is responsible for 11.62 percent of OPC’sfixed costs. The Corporation’s portion of these costs, which totaledapproximately $59,532,700 for the year ended May 31, 2008, areexpected to be at the same level for future years.

The Corporation entered into a power purchase agreement withSmarr EMC for a facility known as the Smarr Energy Facility.Under the terms of the agreement, the Corporation is responsiblefor 9.0310 percent of the Smarr Energy Facility fixed costs. Inaddition, the Corporation has agreed to guarantee 7.4735 percentof the indebtedness of Smarr EMC related to the Sewell CreekFacility. The total indebtedness for the facility as of December 31,2007 was approximately $103,310,700.

The Corporation entered into power purchase agreements datedNovember 1, 2001, related to the Chattahoochee Energy Facilityand the Talbot Energy Facility. These facilities are owned by OPC,and under the terms of the agreements, the Corporation is respon-sible for 10.4453 percent of the Chattahoochee Energy Facilityfixed costs and 2.9633 percent of the Talbot Energy Facility fixedcosts. The Corporation’s portion of these fixed costs, which totaledapproximately $3,562,900 for the Chattahoochee Energy Facilityand $721,000 for the Talbot Energy Facility for the year endedMay 31, 2008, are expected to be at the same level for futureyears. The agreements are in effect through December 31, 2025.

Effective February 20, 2001, the Corporation entered into a powersupply and energy call agreement. The agreement commenced onOctober 1, 2001 and will continue through December 31, 2015.Under the terms of the agreement, the Corporation is required tomaintain a modified debt service coverage ratio of greater than orequal to 1.25. In the event this condition is not met, theCorporation will be required to provide the supplier with accept-able credit support in an amount equal to $65 million. Once thecondition is again met by the Corporation, the remaining amountof credit support will be returned. Also under the terms of theagreement, the supplier will supply 100 percent of all reserverequirements for load obligations.

Under current law, the Corporation has the ability to recover thesecosts from its members; however, any change to existing lawscould adversely affect the ability to recover these costs.a

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Statement of NondiscriminationJackson EMC is the recipient of Federal financial assistance from the Rural UtilitiesService, an agency of the U.S. Department of Agriculture, and is subject to theprovisions of Title VI and Title VII, of the Civil Rights Act of 1964, as amended, CivilRights Act of 1991, Section 503 and 504 of the Rehabilitation Act of 1973, asamended, The Americans with Disabilities Act of 1991 and the rules and regulationsof the U.S. Department of Agriculture and the U.S. Department of Labor, OFCCP,which provide that no person in the United States on the basis of race, color,national origin, age or handicap shall be excluded from participation in, admission oraccess to, denied the benefits of, or otherwise subjected to discrimination under anyof this organization’s programs or activities.The person responsible for coordinating this organization’s nondiscrimination compli-ance efforts is William P. Ormsby, Manager, Corporate Administration. Any individual,or specific class of individuals, who feels that this organization has subjected themto discrimination may obtain further information about the statutes and regulationslisted above and/or file a written complaint with this organization; or the Secretary,U.S. Department of Agriculture, Washington, D.C. 20250; or the Administrator,Rural Electrification Administration, Washington, D.C. 20250, and the Director, U.S.Department of Labor, Office of Federal Contract Compliance Programs, Washington,D.C. 20250. Complaints must be filed within 180 days after the alleged discrimination. Confidentiality will be maintained to the extent possible.

BOARD OF DIRECTORS

Otis Jones, ChairmanGwinnett County

Chuck Steele, Vice ChairmanBarrow County

Rodney Chandler, Secretary-TreasurerMadison County

Bill CarpenterJackson County

Charles GorhamJackson County

Balfour HunnicuttClarke County

Ray JonesHall County

John MitchellBanks County

Lynn Pack PriceGwinnett County

Randall Pugh, President/CEO


2 0 0 8 a n n u a l r e p o r t

Keeping the Lights On Jackson Electric Membership CorporationP.O. Box 38Jefferson, Georgia 30549-0038

jacksonemc.com

Documents

Keeping the LightsOn - Jackson EMCJackson EMC received the highest numerical score among midsize utilities in the South region in the proprietary J.D. Power and Associates 2008 Electric