The RED ZONE is a period when electricity costs the most. The RED ZONE is

BOARD OF DIRECTORSRON SEYFERT, PRESIDENT

JAMES CHRISTOPHER, VICE PRESIDENTBRIAN LANG, SECRETARY/TREASURER

DANE CLARK, GYPSUMDOUG LINDAHL, ENTERPRISEKEN HEDBERG, MARQUETTEDEAN ALLISON, DELPHOS

DAVID BUTLER, JUNCTION CITYDAVID MUELLER, TAMPABRUCE SPARE, ASSARIA

STAFFTIMOTHY J. POWER, CEO

MIKE OLBERDING, OPERATIONS MANAGERRANDY TRITT, LINE SUPERVISOR

JUDY BARTEN, ASSISTANT MANAGERDERRICK RUTHERFORD, COMMUNICATIONS MANAGER

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SOLOMON, KS 67480

OTHER PAYMENT LOCATIONSPROPANE CENTRAL

2618 CENTRAL DRIVE • JUNCTION CITY, KS 66441

FARMERS STATE BANK447 HARRISON • LINDSBORG, KS 67456

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Last October DS&O asked Cooperative Finance Corporation (CFC) to begin a cost of service study, which included a revenue requirements assessment, cost of service study, and eventually rate design recom-mendations.

The Cost of Service Study (CSS), which looked at each rate class, showed a combined 4% deficit in revenue. The Board of Directors (Board) decided to focus on the Residential rate classes this year, since these classes bring in approximately 70% of the cooperative’s revenue. It is our plan to look at the Commercial rates in 2017. The CSS showed that all Residential rate classes had a monthly cost to serve close to $50.00. This is at least $22.50 more than we currently charge for any of our Residential rate classes.

Every month we are billed by our power supplier (KEPCo) for the electricity we use and for the demand we put on the transmission system. KEPCo recently changed how it will bill for demand by specifying a time period where we will be billed demand charges. Beginning in June 2016 our demand charges will be determined by our demand reading at the time KEPCo sets its peak, Monday – Friday from 3:00 p.m. to 6:00 p.m. These demand charges (namely, the highest of KEPCo’s July or August peak) determine over half of DS&O’s annual power bill. This is the reason the cooperative is switching to a time of use rate structure. The new rate structure doesn’t necessarily mean higher bills for you, but it will encourage our members to reduce their usage during that three hour window in July and August. We are calling this the RED ZONE. Every dollar we save in demand costs is a dollar we don’t have to bring in with higher rates.

DS&O is consolidating the existing six residential rate classes into the three rate classes shown below. All of these rates were designed to ensure that the rate is bringing in enough revenue to cover the cost to serve that rate. At its April 18 meeting, the Board approved the elimination

of the Domestic, Domestic – All Electric, Urban, Urban – All Electric, and Apartments – All Electric rate classes. The Board approved the creation of the two new rate classes below, changes to the Prepay rate class and the Power Cost Adjustment (PCA).

Residential – Rural Monthly Availability Charge: $37.50Energy Rate (off-peak): $0.094 per kWhEnergy Rate (on-peak): $0.2248 per kWh (applies to all energy consumed between the hours of 3:00 p.m. and 6:00 p.m., Monday through Friday, in the months of July and August, excluding July 4th)

Residential – Urban Monthly Availability Charge: $25.00Energy Rate (off-peak): $0.109 per kWhEnergy Rate (on-peak): $0.318 per kWh (applies to all energy consumed between the hours of 3:00 p.m. and 6:00 p.m., Monday through Friday, in the months of July and August, excluding July 4th)

Residential – Prepay Monthly Availability Charge: $38.00Energy Rate (off-peak): $0.122 per kWhEnergy Rate (on-peak): $0.142 per kWh (applies to all energy consumed in the months of July and August)

The new rate tariffs are on our web site and will take effect June 1, 2016.

If you would like to see how the rate change may affect you, we can run an analysis by applying the new rate structure to your 2015 usage. Just give us a call at 800-376-3533.

M AY 2 0 1 6

NEWR AT E S

RESIDENTIAL

E L E C T I O N RESULTSDirectors Jim Christopher, Doug Lindahl, and Brian Lang all ran unopposed and were re-elected to three year terms. The members also voted in favor of a bylaw change to dispense with voting for a board of director candidate if that candidate runs unopposed.

JIM CHRISTOPHER DOUG LINDAHL BRIAN LANG

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HERE ARE A FEW CO-OP CONNECTIONS CARD PARTICIPANTS

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MAY HOLIDAYS1ST - MAY DAY8TH - MOTHER’S DAY21ST - ARMED FORCES DAY30TH - MEMORIAL DAY

Q. There are over $4 million in Deferred Assets on the Balance Sheet. This is approximately $2 million more than last year. What makes up that number?

A. After looking over the finances, I found the bulk of the $4 million in Deferred Assets came from paying off our debt in the federal government’s RUS program. We paid a $2.5 million penalty for paying off the RUS debt before the loans matured. This was offset by the $3 million we had set aside in the RUS’ high interest cushion of credit “savings” account. This “savings” account was used to pay the penalty and to pay some of our RUS debt. The rest of the RUS debt was refinanced through Cooperative Finance Corporation. The refinancing improved our cash flow and reduced administrative time by not borrowing from the federal government. As you might expect, there are a lot of regulations to comply with when borrowing money from the government.

Q. There is a line titled Investments – Economic De-velopment for $1,000,000. What is this and should we be investing in economic development with our current financial situation?

A. The US Department of Agriculture has a program entitled Rural Development Loan and Grant Program (REDLG) in which entities who meet the requirements are eligible to receive a zero interest loan

through their local electric cooperative. DS&O received a request from Bethany Home of Lindsborg. The loan was to be used solely for the construction of building an assisted living facility. This investment is a pass through. DS&O borrowed the money from RUS and gave it to Bethany Home. Bethany Home will pay the $1,000,000 off over the next ten years. DS&O’s only financial liability with this program is the reflection of the loan on the financials as an investment which reduces our financial ratios for that ten year period.

Q. Why was there a one million dollar increase in the Administrative & General account? A. This increase was due to a variety of factors; the main ones being a $250,000 increase in Depreciation and a $300,000 increase in Interest, both due to the new building. There was also over $100,000 in expenses related to our bid to purchase Ft. Riley’s distribution system along with Bluestem Electric and Flint Hills Electric. We will be writing more about the Ft. Riley project when we hear if we were successful in our bid, which should be later this year or early next year. If so, it will be a nice addition to our system and a positive to our finances. Finally, there was over $100,000 in labor expenses that were formerly accounted for in other accounts, like Operations and Maintenance.

DS&O’S ANNUAL MEETINGA member asked a few questions relating to DS&O’s yearend financial report. While we didn’t have the details to fully answer the ques-tions at the meeting, we promised to research the questions and publish the answers in this newsletter. The questions were as follows:

Last month we held our annual meeting at the Webster Conference Center on the north side of Salina. Thank you to all our members for taking the time to attend this important event in the life of the coop-erative. We had a great turnout with a little over 400 in attendance. The master of ceremony was our Communications Manager, Derrick Rutherford. He did a great job! Prior to the meeting Mike Olberding, Operations Manager and Journeyman Linemen Mike Ecton and Mikael Gfeller did a wonderful job of presenting safety demonstrations. We heard many positive remarks from these demonstrations. Directors Jim Christopher, Doug Lindahl, and Brian Lang all ran un-

opposed and were reelected to three year terms. The members also voted in favor of a bylaw change to dispense with voting for a board of director candidate if that candidate runs unopposed.Over 20 door prizes were distributed throughout the meeting. The

grand prize of $1,000 went unclaimed, but three members won $100 each. Congratulations to all the winners and thank you to all those companies that supported our meeting and donated the gifts!Secretary Jim Christopher presented the 2015 financial report, which

was followed by a few questions from a member. While we were not able to provide complete answers to the questions at the meeting we promised to follow-up in this newsletter. Please see the article titled “Q&A from DS&O’s Annual Meeting” for detailed answers to the questions posed. President Bruce Spare reported to the membership that the coop-

erative will present safety demonstrations using the mobile safety trailer to any organization who requests such a demonstration. He informed the membership of the development of the Member Advisory Committee and how of the board of directors uses this committee for suggestions and comments on new programs. He encouraged any member that had a desire to serve on this committee to contact a director or staff member. President Spare also spoke about the recently completed cost of

service study. He was followed by CEO Tim Power, who presented the new proposed residential rate structures. Mr. Power then presented a lamp to Jimmy Mike Alexander, lineman,

as a thank you for his 29 years of service with DS&O. Mr. Alexander

ANNUAL MEETING RECAPBY JUDY BARTEN, ASSISTANT MANAGER

retired earlier this year.Finally, Mr. Rutherford presented video presentations of the

Government in Action Trip and Youth Leadership Camp, two trips the cooperative gives to high school juniors who qualify. This year’s winner is Riley Sleichter of Abilene. He has chosen to attend the Leadership Camp in Steamboat Springs, Colorado.

Thank you again to all the members who attended the meeting. If you have any comments or suggestions on how we can improve the meeting,

please do not hesitate to contact a board member or the DS&O office at 800-376-3533. We would love to hear from you.

Q&A F R O M