2016 ANNUAL REPORT

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To enhance our members’ quality of life by providing exceptionalservices that are reliable, affordable and safe.

Our mission

To our membersThe merger of the former Hickman-Fulton Counties Rural Electric CooperativeCorporation with Gibson Electric Membership Corporation has created great op-portunities for our cooperative. Combined, our members will benefit from long-term cost savings resulting from financial, operational and contractual economiesof scale. Members also will benefit from the expansion of resources and expertise.Some of these benefits already have been realized, while others will come tofruition over time.

During our first year as a unified cooperative, we have decreased our Kentuckymembers’ rates and cumulatively saved this group more than $1 million. Movingthese members’ rates closer to our Tennessee members’ rates has been part of astrategy to achieve rate parity between our Kentucky and our Tennessee mem-bers, as required by TVA, our regulator and power supplier. We are pleased to alsoreport that 2016 was the seventh consecutive year with no distribution rate in-crease for our Tennessee members.

In 2016, we also did a tremendous amount of work to enhance the member serv-ice experience and service reliability. Every employee contributed to a successfulintegration of the cooperatives’ systems and dedicated themselves to completingimportant projects. As always before, they pulled together and pushed them-selves to deliver for our member-owners. We all sincerely appreciate the supportyou give us and we will continue to work hard to earn it.

Steve SandersBoard Chairman

Dan RodamakerPresident and CEO

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On January 1, 2016 we mergedwith the former Hickman-FultonCounties Rural Electric CooperativeCorporation (HFCRECC). Since then,we have focused our efforts on uni-fying our members, our employeesand our board. The relationships al-ready in place between our co-ops’boards and employees and ourshared purpose - to enhance ourmembers’ quality of life by provid-ing exceptional services that are re-liable, affordable and safe – haveenabled us to quickly transforminto a single, stronger cooperative.

A top priority was to begin movingour Kentucky members’ and our

Tennessee members’ rates to-gether, a process required by ourregulator, TVA. On January 1 welowered the distribution portion ofour Kentucky members’ bills. Dur-ing the first 12 months, our Ken-tucky members cumulatively savedmore than $1 million. In October2016, we took the second step to-ward one rate when we imple-mented a revenue-neutral ratechange for our Tennessee mem-bers, increasing our member accesscharge to $21.50 (matching ourKentucky members’ access charge)and proportionately decreasing thecost of energy.

Gibson EMC plans to continue theimplementation of a gradual, rev-enue-neutral change to our ratestructure until we are collecting 75-

80 percent of our fixed coststhrough the member accesscharge. Making this structuralchange to our rates will not in-crease revenue for Gibson EMC, butit will enable us to recover thebasic cost of deliveringelectricity to eachmember. Ultimately,this ap-proachgets uscloserto

The past year has beenan extraordinary one forGibson Electric Member-ship Corporation.

Gibson EMC’s app provides secure and easy one-touch accessto view your bill, make payments, report outages, analyze yourenergy use, schedule alerts, receive push notifications and viewreal-time outage information. Search for “Gibson EMC” in theApple App Store or Android Market.

Information at your fingertips

At right is Alamo First Class LineworkerJohn Spence.

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each member pay-ing his or her fairshare and makesthe cooperativeless vulnerable torevenue fluctua-tions caused by ex-tremely hot andcold temperatures.

Knowing that reliability is also ex-ceedingly important, we havemade a number of improvementsto our physical electric system dur-ing 2016. We added equipmentmonitors and controls in our Ken-tucky substations, as well as linedevices throughout our twelve-county system. This substation andline equipment communicateswith our Supervisory Control andData Acquisition (SCADA) system toautomatically alert us of problems,helping us to more quickly identify

outage locationsand restore servicefaster.

System enhance-ments are an on-going job forGibson EMC. Wecontinually analyzeoutage data and

replace aged or faulty equipment.Large and important projects com-pleted during the past year in Ten-nessee included upgrades to ourRutherford and Trenton substationsand line upgrades in Samburg,along Armstrong Road east ofWoodland Mills, along Nowell Roadnear Three Way and along circuitsexiting the Mt. Zion substationnear Medina.

We also made significant improve-ments to our radio communica-tions system. We installed new

Gibson EMC supports events andprograms aimed at improving thelives of people living in our localcommunities. The WashingtonYouth Tour and Scholarship pro-gram provides a once in a lifetimeexperience and post high schooleducation assistance to highschool juniors throughout ourarea each year. We annually helpsponsor local students’ participa-tion in 4-H Electric Camp, providesafety demonstrations in ourschools and much more.

Impacting ourcommunity

System enhancementsare an on-going job forGibson EMC. We continu-ally analyze outage dataand replace aged orfaulty equipment.

Interesting fact Gibson EMC has an average investment of almost $5,000 for eachmeter served. This sizeable investment is necessary to providecoverage to all members. It’s also why Gibson EMC is making agradual revenue neutral change in its rate structure to collectmore through a member access charge and less through electricsales. The investment is there regardless of the number of kilowatt-hours sold and sharing this cost equally is more fair to all member-owners.

The 2016 Washington Youth Tour participantswere from left: Gibson EMC CommunicationsSpecialist Jenni Lynn Rachels, Emily Bargery,Matthew Watson, Bailey Burden, Anna Gor-man, Ashton McCage, Halley Stewart, JennanDial and Tucker Pounds.

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radio towers in Arlington and Hick-man, Kentucky and built fiber tothose sites. The fiber serves a dualpurpose – for voice radio commu-nication and for monitoring ourelectric distribution system. Wealso expanded our radio system toinclude the Kentucky area in 2016,a project that has yielded nearly100 percent communications cov-erage and automatic vehicle loca-tion (AVL) technology throughoutour 12-county service area. Thecommunications coverage and AVLare critical to the safety of our em-ployees. The equipment in con-junction with our OutageManagement Systemalso enables ourpersonnel todispatch

crews efficiently and restore servicequickly.

While our technology enhancesour ability to provide good service,it also can create challenges. Gib-son EMC always has made cybersecurity a priority, but during thepast year we have amplified our ef-forts. Working with our national as-sociation, the Kentucky Associationof Electric Cooperatives and oursoftware provider, we have allo-cated resources and launched aninitiative to further safeguard thesafety and security of our memberinformation and of our electric dis-

tribution grid.

Another way in whichwe look out for our

members is by

staying on top of legislative issuesthat can either positively or nega-tively impact our members. GibsonEMC recently asked its membersand the public to support Ten-nessee Governor Bill Haslam’s Ten-nessee Broadband AccessibilityAct. The Act will provide $45 mil-lion in grants and tax credits overthree years for service providers toexpand broadband access in un-served/underserved areas andmakes grant funding available tothe state’s local libraries to help res-idents improve their digital literacyskills. Of particular interest to Gib-son EMC, the plan will also permitTennessee’s electric cooperatives toprovide retail broadband service,something that has been restrictedby state law. Governor Haslam has

Aaron Webb has the largest solar array on Gibson EMC’s sys-tem. For information about renewable energy systems foryour home or business, contact the energy experts at GibsonEMC.

Powerful Solutions

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said that electric cooperatives areuniquely situated to assist in bridg-ing the broadband accessibilitygap considering our experienceserving areas with lower popula-tion densities and providing uni-versal service throughout theirterritories. We agree.

A more direct way in which GibsonEMC supports its communities isthrough the payment of ad val-orem/property taxes. For 2016,Gibson EMC paid $1,440,441 to ourlocal governments. Our taxes help

communities fund local schoolsand pay for important services likesheriff departments, ambulancedepartments, emergency manage-ment, fire prevention, senior citi-zens centers and much more. Theseuses align seamlessly with our mis-sion – to enhance our members’quality of life.

Gibson EMC also takes an activerole in spurring economic growthand opportunity by workingclosely with area chambers of com-merce, industrial development

boards, elected officials, the WestTennessee Industrial Association,the State of Tennessee, the Com-monwealth of Kentucky and TVA torecruit new businesses and indus-tries to our service area and to pro-mote the stability and expansion ofexisting businesses and industries.

Now, just as in the earliest days ofthe cooperative, we are committedto undertaking the big projectsand small ones meant to change,improve and optimize our commu-nities. Enhancing the quality of lifefor us all is the purpose that contin-ues to power us.

As we look back on 2016 we aregrateful to all those who haveplayed a role in our progress. Muchcredit for the merger goes to the

Interesting fact

Gibson EMC serves 11 membersper mile of electric line. The av-erage municipal electric systemserves 47 customers per mile ofelectric line. Consumer densityis a driving factor in utility oper-ational costs.

Gibson EMC worked with South Gibson County High School officials toinstall a more effective and efficient lighting system for the school.Shown is Principal Phil Rogers and the school’s parking lot. Gibson EMCalso performed work in preparation for the new South Gibson CountyElementary School being built in Medina.

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former HFCRECC board for theirselfless actions in their members’best interest. Credit also goes toGibson EMC’s board for having theforesight and courage to embracethe merger and support service en-hancements for our new Kentuckymembers. We thank our employeeswho have embraced the mergerwith positive attitudes and a deter-mination to serve our memberswell. Of course, without the affir-

mative votes ofboth the Kentuckyand Tennesseememberships themerger would nothave happened, sowe sincerely thankyou for your trust and continuedsupport.

As anticipated, all of our membershave benefited from the merger.Our Kentucky members have seen

savings in energycosts and en-hanced service reli-ability while all ofour members havebenefitted fromoperational effi-

ciencies and synergies. Unified, weare stronger and better prepared toimprove our members’ quality oflife. It is the purpose that contin-ues to power us.

Gibson EMC surveyed our members who participate inPay-Go in 2016. On a scale of 1 to 10, with 10 beingbest, 63% gave the program a “10” and more than 86%rated it 8 or higher. A full 70% indicated that they orfamily members have improved their energy efficiencyand more than 86% said they would recommend Pay-Go to friends. Member Service Representative SuzannePigg, right, talks with Anna Connell about Pay-Go.

Innovative Service

We completed a sectionalizing study for the Kentuckyportion of our service area and purchased the equip-ment the study recommended. Used in conjunction withour Outage Management System and SCADA, the coop-erative can now pinpoint outage locations anywhere onour system and dispatch crews more efficiently. At leftare Data Management Coordinator Quenton Mitchelland VP of Engineering and Technical Services CharlesPhillips in our dispatch center.

Investing in Reliability

As we look back on 2016we are grateful to all whohave played a role in ourprogress.

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CrockettDyerGibsonHaywoodLakeLauderdaleMadisonObionTotal

CarlisleFultonGravesHickmanState of KYTotal

2016 TAXES

Tennessee

Kentucky

$263,80538,076

526,0471,866

133,42336

31,119293,814

$1,288,186

$12,98553,364

70234,56950,635

$152,255

$1, 440,441

Ad Valoremand PropertyTax Payments

Each year Gibson EMC pays ad valoremand property taxes to the towns andcounties in which the cooperative hasinfrastructure. The amount of taxespaid is based on the assessed value ofthe infrastructure, including buildings,substations, transformers, poles andlines. The 2016 ad valorem and prop-erty taxes paid are outlined below.

Gibson EMC by the numbersCo-op Fast Facts

38,660METERS IN PARTS OF 12 COUNTIES

IN TENNESSEE AND KENTUCKY

99.97%THE AVERAGE GIBSON EMC

MEMBER WAS WITHOUT POWERFOR LESS THAN 2.7 HOURS

IN 2016

RELIABILITY

OUR 3,529 MILES OF LINE WOULDSTRETCH FROM MIAMI TO SEATLE

TAXES PAID TO LOCAL GOVERNMENTS EQUAL TO ONE YEAR STATE COLLEGE TUITION (KY/TN AVERAGE) FOR ABOUT

185 STUDENTS

77 CENTS77 CENTS OF EACH DOLLAR

RECEIVED BY GIBSON EMC IS USEDTO PURCHASE ENERGY FROM TVA

1,319AVERAGE MONTHLY KWH USE BY

GIBSON EMC MEMBERSInteresting fact Gibson EMC spends $2.25 millionannually on vegetation manage-ment. Nationwide, trees are re-sponsible for about 15% ofelectric power outages each year.

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Rana BuchananDistrict 7

Tony BargeryDistrict 3

Keith ForresterDistrict 10

Wray PulliamDistrict 5

Keith HeglarSecretary-TreasurerDistrict 2

Larry HicksDistrict 4

Don LeathersVice Chairman District 11

Bob McCurdyAssist. Secretary-Treasurer District 8

Joan MouserDistrict 6

Steve SandersChairmanDistrict 1

Richard SkilesDistrict 9

David KimbellDistrict 12

Dan RodamakerPresident and CEO

Jim RyalAttorney

President And CEOand Attorney

Members of the Board of Trustees

Below, Gibson EMC First Class LineworkersJamie Moore (bucket), Daniel Hazlewood (ladder) and John Spence restore service following a storm in Friendship, Tennessee.

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$173,801,533 (73,520,042)100,281,491

15,399,092 9,741,4615,611,511

$131,033,555

$11,886,387 922,045259,786

23,221,46294,743,875

$131,033,555

$93,080,600 68,204,447

9,468,3085,134,4026,104,1721,616,030

$2,553,2411,325,1091,561,753

$2,316,597

2016 Financial Statement

Electric PlantDepreciationNet PlantReserve & Cash FundCurrent & Accrued AssetsDeferred DebitsTotal Assets

Current & Accrued LiabilitiesDeferred CreditsMembership InvestmentLong-Term DebtEarnings Reinvested in System AssetsTotal Liabilities

Operating RevenuePurchased Power ExpenseOperations ExpenseMaintenance ExpenseDepreciation ExpenseTax ExpenseNet Margin from OperationsNon-Operating IncomeInterest ExpenseNet Margin

ASSETS

LIABILITIES

REVENUE AND EXPENSE STATEMENT

Gibson Electric Membership Corporation’s books were audited by the firm of Alexander, Thompson, Arnold,PLLC, Certified Public Accountants, Union City, Tenn. Copies of the audit report are on file at Gibson EMC’s Corporate Office, 1207 S. College St., Trenton, Tenn., 38382.

Auditor’s Statement

2016

2016 Expenses Per $1Gibson EMC buys powerfrom the Tennessee Valley Authority. In thefiscal year that endedDecember 31, 2016, we spent 77% of ourelectric sales revenue to pay our TVA powerbill. The other 23% wasused for operations,maintenance, deprecia-tion, interest and tax expenses.

2016 Revenue Per $1Gibson EMC received$93,080,600 in revenuesin the fiscal year thatended December 31,2016. Our revenues camefrom several sources: resi-dential members, com-mercial & industrialmembers, miscellaneousincome, lighting and fiber.

Residential Members: 59¢Commercial & Industrial Members: 34¢Miscellaneous Income: 3¢Lighting: 2¢Fiber: 2¢

Purchased Power from TVA: 77¢

Operations, Maintenance, Depreciation,

Interest & Tax Expenses: 23¢

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Number of MetersMember EquityLong-Term DebtInterest PaidTotal Kilowatt-Hours SoldAverage Monthly Residential Kilowatt-Hour Consumption Number of Full-Time EmployeesMeters per MileMiles of LineInvestment per MeterAd Valorem and Property TaxesWholesale Power Cost as % of Electric Sales Revenue

Statistical Information

The column for 2014 reflects pre-merger information. The columns for 2015 and 2016 reflect post-merger information.

2016

38,660$94,743,875$23,221,462

$1,561,753895,457,491

1,31997

11.03,529

$4,973$1,440,441

77%

2014

34,949$76,609,369$21,976,679

$1,539,616841,457,266

1,41187

12.22,867

$4,005$1,165,943

78%

2015

38,728$92,427,278$24,364,084

$1,630,935896,777,662

1,34199

11.03,528

$4,327$1,343,473

75%

Below is Apprentice Lineworker Jonathan Petty.

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Corporate | P.O. Box 47 | 1207 S. College St. | Trenton, TN

(731) 855-4740

Alamo | 402 Egghill Rd. | Alamo, TN(731) 696-5961

Hickman | 1702 Moscow Ave. | Hickman, KY(270) 236-2521

Medina | 201 Hwy 45 E North | Medina, TN(731) 855-4660

Tiptonville | 1515 Church St. | Tiptonville, TN(731) 253-7181

Trenton | 1207 S. College St. | Trenton, TN(731) 855-4660

Troy | 602 C.C. Gurien Drive | Troy, TN(731) 536-5920 | (731) 885-5501(731) 894-5920 | (731) 643-6046

Front Cover: Gibson EMC employees from our Hickman, Tiptonville and Troy Member Service Centers work to restore service in Hickman, Kentuckyfollowing a storm. From left, Service Crewleader Jackie Curlin, Line Crewleader Bob Nerren, First Class Lineworker Jason Mills, First ClassLineworker Trent Cary, Line Crewleader Mark Perry and Line Crewleader Jimmy Williams.

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