MOHAVE ELECTRIC

OOPERATIVE

Annual ReportPublished June 2019

7 Cooperative PrinciplesVoluntary and Open MembershipCooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership without gender, social, racial, political, or religious discrimination.

Democratic Member ControlCooperatives are democratic organizations controlled by their members, who actively participate in setting policies and making decisions.

Members’ Economic ParticipationMembers contribute equitably to, and democratically control, the capital of their cooperative.

Autonomy and IndependenceCooperatives are autonomous, self-help organizations controlled by their members.

Education, Training, and InformationCooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives.

Cooperation Among CooperativesCooperatives serve their members most effectively, and strengthen the cooperative movement, by working together through local, national, regional, and international structures.

Concern for CommunityWhile focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.

Table of Contents

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Mohave Electric Cooperative 1946-Present ................... 2Board President & CEO Message ................................. 3Board of Directors ...................................................... 4MEC Honors ............................................................... 5Serving Our Members .............................................. 6-7People, Systems, and Technology ............................. 8-9Improving Reliability, Service .................................10-13Renewable Energy ................................................14-15Energy Efficiency ...................................................... 16Legislative, Regulatory Update .................................. 17Proposition 127 ....................................................18-19Supporting the Community ...................................20-23Helping Members ..................................................... 24Co-op Connections ................................................... 25Financial Report ...................................................26-28Service Area Map ..................................................... 29

Explaining electrical safety at the Fire Safety Fair.

Mohave Electric 1946-Present

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On May 1, 1946, a group of citizens met in Kingman, Arizona to explore the possibility of attaining a dependable, affordable source of energy for rural communities near Kingman as well as Big Sandy Valley, Wikieup, and Bullhead City.

Mohave Electric Cooperative was incorporated on July 3, 1946, and the first meters were energized January 1, 1947. After one year, there were 90 meters on five miles of line.

Now in our 73rd year, Mohave’s 78 employees serve 33,737 members, with 1,540 miles of line, and 40,837 electric meters.

Across America in the 1930s, cities had been served with electricity since the late 1800s, but the vast rural areas were still using oil lamps and power from diesel generators. At that time, electricity to sparsely populated rural areas was not economically feasible.

During President Franklin D. Roosevelt’s administration, the Rural Electrification Administration (REA) was created. This paved the way for the Rural Electrification Act of 1936 which provided federal loans for installation of electrical distribution systems to serve isolated farms, ranches, and other rural areas of the United States.

Under this program, in June 1947, Mohave Electric secured an REA loan for $310,000. This loan was to provide power to Bullhead City and to build 12 miles of transmission line into the area

south of Bullhead City, then known as Topock.

Instrumental to the need for electricity and the formation of Mohave Electric Cooperative was the construction of a series of dams along the Colorado River—first Hoover Dam, completed in 1938 and subsequently Davis Dam, located at the adjoining cities of Bullhead City, Arizona and Laughlin, Nevada.

Construction of Davis Dam began in 1942, but was halted when labor and construction materials were prioritized for World War II. In 1946, construction resumed, which brought an influx of workers and their families to the area.

Businesses sprang up in Bullhead City to support the growing communities and they needed electricity for homes, businesses, and farms. The only way to provide electricity was for the people in the community to do it themselves—and they did.

Mohave Electric Cooperative is a locally based, not-for-profit membership form of business created decades ago by friends, neighbors and communities united to deliver on the promise of providing safe, reliable, and affordable electricity to members—not to generate money for shareholders. The core values of Innovation, Accountability, Integrity and Commitment to Community continue to be the foundation of Mohave Electric, as it has been for more than 70 years.

Cooperatives exist throughout many business sectors including energy and utility, credit unions,

food and agriculture, and purchasing. They operate with a common set of business principles and values that put the needs of their members first by providing the highest levels of service at the lowest possible cost, consistent with sound business principles. More than one billion people worldwide belong to some type of co-op and even more support co-ops by buying products produced by farmer-owned cooperatives.

Member-owned and democratically controlled, the members have a voice in how the business is run by electing representatives as their Board of Directors. Board Directors are members of the cooperative themselves and are committed to looking out for the best interests of the members.

At Mohave Electric Cooperative, our heritage was founded on a spirit of community, growth, and determination—a heritage that continues to thrive today with the same focus on members and our local communities.

All photos © Mohave Electric Cooperative.MEC is an equal opportunity employer and provider.

Board President & CEO Message

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Members put a great deal of faith in Mohave Electric Cooperative throughout 2018 to provide accurate information, improve the reliability of service, and rise to the occasion as situations dictate.

This is a level of trust MEC will continually strive to earn and a level of confidence we do not take lightly.

Member engagement was strong in 2018 as the number of available trees for Operation Cool Shade was sold out well before the deadline and staff accepted a record number of applications for 18 available school grants. Educators from 10 different schools in the MEC service territory won a grant.

While those two achievements were impressive, other significant issues were a priority.

Proposition 127 was a proposed addition to the Arizona Constitution to mandate electric utilities be-come at least 50 percent dependent on renewable energy in just 10 years. MEC took to the streets to better inform members about the potential implica-tions.

MEC explained the measure was introduced by individuals with out-of-state interests and how, if passed, it would negatively impact electric bills.

Members placed their trust in MEC and the proposi-tion was soundly defeated by nearly 40 percentage points. In Mohave County, the result was even more lopsided, with nearly 86 percent of voters casting a ballot against the proposition. Your vote mattered.

The trust members placed in MEC to provide accu-rate information to cast a vote knowing their best interests were MEC’s top priority was astounding, and we will continually work to nurture that faith.

When heat and wildfires in California distorted the electricity market, MEC sent out press releases and made posts to Facebook. The situation in California, coupled with MEC’s primary supplier shutting down a generator for emergency service, created both pricing and availability problems.

Members were asked to take simple measures to conserve, such as charcoal or gas grilling outside, turning off lights and fans, and drying clothes out-doors on a line.

MEC members responded and the potential for a cri-sis was averted. The generator repairs are complete and it is available in 2019.

A microburst with hurricane-force winds toppled some utility poles and sheered transmission lines from MEC’s primary power provider, leaving about 39,000 members without electricity. It was a difficult time for everyone, including MEC crews who worked around the clock in the heat and humidity to restore

power. More than anything, members wanted infor-mation, and MEC provided it as quickly as possible.

MEC continues to invest time and funds to improve and strengthen the infrastructure throughout its ser-vice area to improve reliability. In areas identified as vulnerable to wind, line-hardening projects contin-ue, replacing existing wood poles with steel, which are less susceptible to the domino effect.

The damage that led to the large outage was to the transmission provider’s equipment and MEC had to wait for materials before repairs could begin. To hasten response time, MEC invested in the nec-essary materials to allow crews to make repairs regardless of ownership when possible.

Improvements were completed at an eastern area substation to improve reliability, bird deterrents were installed, trees in power lines were trimmed or removed, and members have been continually advised about simple steps they can take to prevent outages, such as bolting down carports and secur-ing lawn furniture during storms.

Members have placed their trust in MEC to keep the lights on and the air conditioning running in the summer.

Trust: it is the hardest thing to earn, yet the easiest to lose.

MEC will continually work to cultivate the trust our members have bestowed upon us.

J. Tyler CarlsonMEC CEO

Joseph AndersonMEC Board President

Partnering with Members toOvercome Adversity/Challenges

, Board President

, MEC CEO

Board of Directors

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Deborah K. JohnsonVice President, District 2

Carlos TejedaTreasurer, District 2

Toni BarbaroSecretary, District 3

Jose “Joe” SolarDirector, District 2

Cynthia A. ChristyDirector, District 1

John B. NelssenDirector, District 1

Richard TempelmanDirector, District 1

Michael BarteltDirector, District 3

Mohave Electric Honors

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Carlson Citizen of the Year, Others HonoredMohave Electric Cooperative staff continue to be recognized for their commitment to, and support of the community.

As a result, several members of MEC were honored with Community Achievement Awards.

Presented by the Laughlin Chamber of Commerce, MEC CEO Tyler Carlson was named Citizen of the Year while Fred Fischer, former network operations administrator, and Jerry Hardy, supply chain manager, accepted the Community Social Service Organization award for Mohave County Sheriff’s Office Search and Rescue’s Bullhead City Unit.

Carlson was involved with the beginnings of River Fund, Inc., volunteered with the Bullhead Area Chamber of Commerce, collaborated with MEC’s Board of Directors to implement many community programs, and partnered with the Legacy Foundation on the new Veterans Center.

Hardy and Fischer, both search and rescue volunteers, accepted the award on behalf of MCSO SAR. The volunteers serve the needs of over 200,000 residents and nearly five million visitors annually.

Steve Bouman, MEC energy management specialist, is the school board president for the Academy of Building Industries High School, which won Green Business of the Year. Students are using Smart Bee technologies, solar panels, and wind turbines to operate the climate-controlled greenhouse.

Opalka Wins Prestigious AwardFor Lyn Opalka, there were many special moments over the course of 35 years as a Mohave Electric Cooperative board member, 27 of which were spent as president, but, it all culminated with the passage of SB 1412, which keeps assigned capital credits local.

In recognition for her effort, Opalka received the National Rural Electric Cooperative Association Paul Revere Award, which was accepted on her behalf by current board president Joe Anderson at the NRECA annual meeting.

Opalka played a vital role in MEC’s “Call to Action” outreach to members that resulted in getting the bill passed unopposed in both the Arizona House and Senate before it was signed into law by Gov. Doug Ducey in March 2018.

The award is in recognition of an outstanding achievement in the mobilization of an electric cooperative grassroots effort on an issue of importance.

“I want to thank our members for the trust they placed in me to represent them and for their efforts to help make positive changes in

our community,” Opalka said.

Under Opalka’s leadership, MEC members approved a bylaw provision allowing assigned capital credits to be used for community programs, but without the protection of SB 1412, MEC could have been forced to stop its support for community programs and organizations.

Serving our Members

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Service OrdersMohave Electric Cooperative’s Operations, Engineering and Member Services teams averaged 7,214 service orders per month in 2018. This work includes requests for new service, service changes, utility locate requests (Arizona 811), meter reads, and construction contracts.

Connecting our Members Requests for design and new construction included new services or service upgrades at several retail locations in Golden Shores, Bullhead City, and in our eastern service area near Kingman. In Bullhead City, improvements were made to system reliability by upgrading existing wood poles to stronger steel poles on essential sections of our subtransmission lines. Other major milestones included the establishment of electric service to the Anderson Auto Group Fieldhouse and the highly anticipated Hobby Lobby. In our eastern service area, we completed a multi-year project resulting in the upgrade of over 14 miles of line to accommodate load growth,

including recent requests for multiple irrigation and water system operations.

Member Requests for Service in 2018

New service requests: ................................................... 105Service changes: .......................................................79,923Utility locator requests: ............................................... 5,501Job orders and construction: ....................................... 1,148

2018 Total service requests: ..............................86,677

Serving our Members

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Mohave Member Bills Still Lower Than a Decade AgoMEC’s Board of Directors and employees have been working hard to control costs. Wholesale power costs are the largest part of member bills and MEC is subject to favorable and unfavorable conditions in the wholesale power market. Even with the unforeseen and unfavorable events in the summer of 2018 affecting wholesale power prices, MEC member bills are lower than they were in 2008. We will continue to practice cost-effective strategies to maintain the lowest possible costs to members, based on sound business principles.

MEC monthly residential electric bill for 910 kilowatt hours (kWh) average residential usage. 2008 $127.69 – includes $9.59 in taxes.2019 $111.02 – includes $8.21 in taxes.

People, Systems, and Technology

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Mobile Work ForceWe continue to see the benefits of our Mobile Work Force program. Using electronic documents in the office, and crews using tablets in the field, substantially reduced the need for paper copies and streamlined the process.

Members benefit by our ability to respond quicker, with better tracking of service orders, and improved communication between departments. Service requests are automatically routed to crews in the field, which helps prevent errors compared to a manual system. In 2018, our work order estimation and staking sheet tracking procedure was adapted to utilize electronic documentation. Open orders can be tracked to confirm completion and documents, such as green tags, agreements, and easements, are stored electronically without the risk of lost paperwork.

Mobile Work Force also provides a more complete history of member needs and can help spot a potential problem before it escalates.

Mohave PrepayThe Mohave Prepay “pay-as-you-go” plan continues to grow in popularity with residential members. Residential and small commercial members who choose to prepay can avoid having to pay a deposit and avoid disconnect or reconnect fees provided the account remains active.

The number of members participating in prepay has grown since the program’s inception in late 2012 and currently welcomes an average of 114 new residential members per month. Since it expanded in June 2017 to include small commercial businesses, 84 accounts have elected

this optional program.

Recent system communication upgrades have expanded the availability for prepay throughout all areas of MEC’s river service area.

There are two possible locations for the reset button on meters installed by Mohave Electric Cooperative . One location is on the under side of the meter as shown to the right.

Another location for a reset button may be on the face of the meter.

People, Systems, and Technology

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Members Benefit by Using Automated Outage ReportingMEC continues to experience an increase in the number of members reporting an outage by using the toll-free automated reporting number.

Calling 1-844-MEC-COOP (1-844-632-2667) is the best, and fastest, way to report an outage and is most effective when members call the outage reporting number from a phone number listed on their MEC account. The Outage Reporting and Management System directs the information to linemen and field crews, which expedites response time and restoration of power.

Members who sign up for SmartHub® can also set up notification features to receive an email or text message for outage notification, updates, and power restored.

A member calling in about a kite in the lines helped avert a potential outage.

Improving Reliability, Service

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Improving our Reliability and ServiceMEC continues to focus on reliability projects to minimize the number of members affected by outage events, reduce the number of outages, and help shorten outage duration. The continuing effort to install additional sectionalizing equipment throughout the electric system is a large component in the process.

Protective devices – such as fuses, breakers, and reclosers – stop the flow of power when a fault or short occurs, protect system equipment from damage, and allow MEC crews to quickly identify a specific section of line that has an outage-causing problem. Identifying the line section enables MEC to troubleshoot a smaller area, leading to faster repairs and a shorter outage duration. The installation of additional sectionalizing equipment can reduce the number of members affected by isolating the outage to a smaller area. MEC has also begun to install Fusesavers®, a “smart” device that can differentiate between a temporary line fault that will clear itself (such as a tree limb or wildlife momentarily touching a power line) and a permanent line fault. The Fusesaver® protects the fuse from operating due to the temporary fault, keeping member lights on.

Reliability from the Source Mohave Electric Cooperative receives wholesale power and other services from Arizona G&T Cooperatives, which includes Arizona Electric Power Cooperative. Like MEC, AEPCO is a not-for-profit cooperative, owned by its members. MEC and five other electric distribution cooperatives in Arizona and California own AEPCO.

AEPCO operates natural gas and coal electric generation units at Apache Station, near Benson, Arizona. In recent years, AEPCO significantly

reduced emissions and continues to fully comply with environmental regulations. In addition, AEPCO generates renewable energy through the 20-megawatt Apache Solar Project and is exploring cost-effective ways to transmit wind energy and implement battery storage.

AEPCO is MEC’s major power and transmission provider and continues to meet MEC’s changing needs at affordable rates.

In 2018, AEPCO upgraded its supervisory control and data acquisition system and emergency management system, integrating networks that run faster and more effectively and improve electric reliability.

Replacing wood with steel poles improves overall reliability. Among the benefits is that steel poles are less susceptible to the domino effect.

Improving Reliability, Service

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Steel Poles Strengthen Lines MEC is continuing with line-hardening projects to strengthen portions of the 69 kilovolt subtransmission lines by replacing wood poles with steel. The locations chosen are known to be prone to system damage due to severe storms and high winds. Installing steel poles will help prevent the domino effect of the more vulnerable wood poles breaking and falling during storms.

MEC continues a $4 million project to reinforce the existing 69 kV subtransmission lines in the river area. A line-hardening project to replace wood subtransmission poles with steel poles on the main feeder in central Bullhead City was completed in 2018. Engineering and material acquisition began on another line-hardening project for the sub-transmission line between the transmission provider substation and MEC’s distribution system in late 2018, with construction slated to be completed in the second quarter of 2019.

In late 2018 engineering work began on a conductor upgrade and line-hardening project for approximately 8 miles of 69 kV subtransmission line in the southern portion of Mohave Valley. The conductor upgrade will enhance MEC’s capability to shift loads between the northern and southern portions of the river area system, while the line-hardening will strengthen the line. In addition, 3 miles of distribution conductor will be added to the line to provide a circuit tie between three substations. Construction of the project is expected to occur in 2019/2020.

Cable Replacement StrengthensUnderground Lines MEC had another year of success with underground electric cable replacement projects in 2018. In several areas of our service territory, underground cable has deteriorated and is subject to faults that cause outages. MEC completed the assessment of the aging underground

cable system and performed cable injection, an underground cable rejuvenation process, where possible. In areas where cable injection is not an option, the cable must be replaced.

The multiphase Holiday Shores Tract 133 cable replacement project was completed in 2018. This project has improved reliability for members in this Bullhead City area.

In 2018, MEC continued with various cable replacement projects and the installation of new underground tie lines in Willow Valley, Tierra Verde, and Bullhead City. The new tie lines provide loop feeds between the underground circuits. Loop feeds improve outage restoration times by providing a way to reroute power using circuit switching equipment.

In addition, MEC continues with planned improvements in the Valle Vista area with the engineering of more tie lines and additional cable replacements in progress.

Improvements to Overhead Systemin Mohave’s Eastern System Working with a transmission provider and a neighboring utility, MEC secured an alternate 69 kV feed to a substation serving members in the eastern service area. This new feed connects near the midpoint of an existing 19-mile subtransmission line and was completed in 2018. If MEC experiences trouble in the first 9-mile section of the line, circuit switching equipment can be used at this alternate connection to restore service. This connection will also enable line maintenance in the first 9-mile section without requiring an outage.

Improving Reliability, Service

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New EquipmentStrengthens SubstationsMEC upgrades and maintains system equipment at substations throughout its service territory. At the eastern service area’s Nelson substation, planning, engineering and material acquisition began in the second half of 2018 for a substation transformer upgrade, installation of an oil containment system, a new substation control building, and other substation improvements; construction on the project commenced in early 2019. One of MEC’s neighboring electric cooperatives generously loaned a mobile substation to facilitate the substation work with minimal interruption to members’ electric service.

In the river service area, new reclosers have been installed at two substations, and preventive maintenance was performed on the reclosers at a third substation. Other substation improvements include two circuit switcher interrupter replacements and

substation transformer upgrade.

Trees and Power Lines Don’t MixTrees and vegetation growing near power lines can be a safety hazard and are a leading cause of power outages. Power lines are easy to overlook and can pose serious electrical hazards. Strong winds and storms can topple trees or shatter branches that pull-down power lines and cause outages. Sometimes, even if heavily damaged, lines remain energized with the potential to electrify trees and nearby objects.

To “cut back” on potential tree-related problems, MEC maintains a comprehensive vegetation management/tree trimming policy.

Many MEC members have recognized trees on their property as a potential hazard resulting in a possible outage. Since 2014, MEC has received member approval to remove more than 987 trees and performed trimming maintenance on 11,834. This is a credit to members, helping MEC improve electric service reliability.

To continue improving reliability, MEC participates in an aggressive tree-trimming program to keep limbs out of power lines and informs members about the best tree-planting practices.

Mohave Maintenance ProgramImproves Reliability MEC continues its ongoing scheduled program to test poles throughout portions of the system to ensure they meet the criteria to remain in service.

Systemwide, 11,766 poles have been tested since 2014 and 179 identified and replaced.

The dry environment of the MEC service territory provides a much longer lifetime for poles when compared to environmental conditions such as high levels of moisture common in other areas.

In late 2018 planning began for a pole inspection and maintenance project on the “70 Mile Line”, a power distribution line from Nelson, Arizona to Long Mesa on the Havasupai Indian Reservation. The line provides electric service to Supai Village, considered to be one of the most remote communities in the contiguous United States; the village is accessible only on foot, by mule, or by helicopter. Beginning in early 2019, inspection, maintenance, and repairs were performed on over 800 distribution poles. The size and scope of the project required that a cellphone application be developed to track the work. The line maintenance project will be followed by a pole replacement project scheduled in the second quarter of 2019.

Wildlife Protection andMitigation ProgramsIn coordination with MEC projects for replacing wood poles with steel, and upgrades

to distribution and sub-transmission overhead lines, MEC crews installed a substantial number of wildlife protection covers and guards. These devices improve reliability by helping to protect components of the overhead electric system from bird droppings and reduces contact with equipment by birds of all sizes, small rodents, and other wildlife.

In some undeveloped areas of the MEC service territory, such as parts of the eastern area, where larger birds are more common, specialized protection guards were installed to help prevent wildlife-caused outages.

Long Range System Plan andFour-Year Construction Work PlanIn late 2018 MEC staff began the process of updating the 10-year Long Range System Plan and completing our 2020-2023 Four-Year Construction Work Plan. These plans are components of an ongoing integrated plan to improve reliability and meet the electrical needs of future growth. Potential projects are identified and submitted to a planning group by the Operations, Engineering, Warehouse, and IT departments.

The project list is prioritized by need and budget. The projects assigned the highest priority are moved from the Long Range Plan to the Four-Year Work Plan, and a target year for completion is assigned to each project. Typical projects in a Four-Year Work Plan include new distribution and subtransmission power lines, upgrades of existing power lines, underground cable replacements, distribution substation transformer upgrades, substation rebuilds and improvements, office facilities, communication infrastructure upgrades, and additions/upgrades to our fleet and other utility equipment and vehicles.

Improving Reliability, Service

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Renewable Energy

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Emphasizing Cost-effective Renewable EnergySolar/Energy Efficiency/Energy Saving MeasuresRenewable Energy ProgramsEach year, Mohave Electric Cooperative’s Renewable Energy Plan is submitted, as required by the Arizona Corporation Commission. The plan outlines MEC’s program to meet its renewable energy goals.

MEC’s 2018 renewable energy resources are currently at 15.8 percent of kilowatt hours sold and are substantially ahead of the 3.5 percent 2018 goal approved by the ACC.

The Renewable Energy Standard and Tariff surcharge on member bills, required by the ACC, is the funding mechanism for the programs.

Programs include incentives for residential and small commercial solar, wind, and solar water heating installations, as well as MEC’s “Solar Initiative for the Community” that provides funding for solar energy systems at schools, fire stations, government buildings, and non-profit facilities.

Also, included in the plan is a voluntary renewable energy program where members can sign up and support the purchase of renewable energy.

The renewable energy programs funded by the surcharge are intended to stimulate the renewable energy industry so it may one day be cost effective to the point of standing on its own without subsidies.

Mohave’s Renewable Energy ResourcesContinue to Produce Clean EnergyMohave Electric Cooperative has secured the purchase of renewable energy from three utility-scale solar facilities through Purchased Power Agreements.

MEC purchases all the energy produced by two solar farms located in southeast Fort Mohave, Arizona. Both projects – Mohave Sunrise Solar I and Mohave Sunrise Solar II – are owned and operated by Constellation, a subsidiary of Exelon Corporation. The terms of the agreements with Constellation provide periodic options for MEC to purchase the facilities.

MEC’s management and Board of Directors have worked hard to find cost-effective renewable energy that can be purchased at a cost without having to raise rates.MSSI is a 5-megawatt solar array completed in April 2015, and the 11 MW MSSII project was energized in October 2016. Together the systems are performing as expected and generated approximately 39,900 MW hours of electricity in 2018, enough to power about 4,000 homes in MEC’s service territory, according to U.S. Environmental Protection Agency data for the region.

MEC also purchases 1 MW of renewable energy from the Apache Solar, a 20 MW project owned by Arizona Electric Power Cooperative, MEC’s major wholesale power and transmission provider.

MEC practices a balanced, cost-effective purchased power strategy, while maintain-ing the reliability our members count on.

Traditional power generation resources such as coal remain the lowest cost and largest amount of MEC’s purchased power portfolio. EPA regulations require an in-

creasing reliance on energy generated from natural gas, which historically has been more volatile in price. Coal and natural gas generated electricity are relied upon when solar production is intermittent, such as at night or during weather events.

Renewable Energy

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39 Solar Projects SaveEnergy Dollars and Benefit MembersMEC’s “Solar Initiative for the Community” continues with a focus on solar at fire stations throughout MEC’s service territory. As a locally-based utility, helping the community is an important commitment.

Energy dollars are already being saved at 20 schools, including: elementary, junior high, high schools, and the Bullhead City campus of Mohave Community College; nine fire stations; five government facilities, and; five non-profit facilities. Qualifying projects are selected from those operating primarily from collected taxes. Reducing the operating costs for such essential services benefits our members collectively as taxpay-ers.

This year solar projects were completed at Fort Mo-jave Mesa Fire Department Station #92, Bullhead City Fire Department Station #6, and the Golden Shores Civic Association. Additional locations will be selected

for solar project funding in the future.

Energy saved by the projects is a sustainable benefit that continues over the 25-year lifetime of the solar energy systems.

Renewable Energy Grant ProgramA $5,000 SunWatts Education Grant enabled the Academy of Building Industries in Fort Mohave to complete the School Bus Greenhouse Project in 2018. Students now enjoy a free salad bar with food they grew themselves. There is just one grant available per year for a school in the MEC service area, which requires a curriculum focused primarily on renewable energy.

“MEC believes in supporting the communities it serves,” said Rick Campos, manager of Engineering, Operations, and Energy Services at MEC. “We can choose from a number of programs, but we always look for those that best support our members.”

Energy Efficiency

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Energy Saving Opportunities for MembersMohave Electric Cooperative’s Demand Side Management and Energy Efficiency Implementation Plan, approved by the Arizona Corporation Commission, funds several energy-saving programs through a Demand Side Management surcharge on member bills, as required by the ACC. These programs are intended to help members reduce their energy us-age and save energy dollars.

In 2018, a total of 869,225 kilowatt hours was saved collectively by par-ticipating MEC members.

MEC supports energy-saving practices that help stabilize the need for additional purchases of wholesale power in the near term and can help delay the need to acquire new power generation resources.

This YearCommercial Lighting Program RebateWeatherization programs extended

The Commercial Lighting Program offers businesses a rebate for con-verting from their existing lighting sources to LED lighting.

Our weatherization program for income-qualified members has been re-newed to include applications approved through the City of Bullhead City and the Western Arizona Council of Governments. Now members may have two programs to choose from as we continue to fund weatheriza-tion measures approved through these home repair programs.

Helping Members Use Energy WiselyIn 2018, MEC provided a coupon members used for discounts on any LED light bulb purchased at ACE Hardware stores in Bullhead City, Fort Mohave, and Kingman.

Operation Cool Shade, MEC’s popular program, offers members the opportunity to purchase low-cost, desert-adapted trees to plant on the east, west, and south sides of their homes. By shading the sunny sides of a home, mature shade trees help reduce the need for air condition-ing and save energy dollars. MEC’s Energy Efficiency Program funds a portion of the cost of the trees. Volunteer resources from the City of Bullhead City, MEC employees, and community organizations help defray costs for tree sales and delivery. Member interest in the program has always been strong, but in 2018 MEC had pre-sold all 1,800 available trees well before the deadline.

The LED giveaway program provides a free energy-saving lightbulb with each tree purchased through Operation Cool Shade. New members receive an LED bulb when they sign up for service and when attending MEC’s Annual Meeting and Coop Connections© Expo. In 2018, 4,704 LED’s were distributed.

MEC also helped thousands of members use energy wisely and save energy dollars through activities and programs including education and outreach, energy review phone conversations, in-home reviews, and heat pump rebates.

Ace Hardwarde in Fort Mohave became the first business to take advantage of the Commercial Lighting Rebate, converting the entire store to LED lighting.

Legislative, Regulatory Update

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An Advocate for Cooperatives,but Criminal Justice in the Future

Just seven months removed from Mohave Electric Cooperative sponsoring Monica Houltram for the 2018 Washington Youth Tour, she was speaking to state lawmakers at the 2019 Grand Canyon State Electric Cooperative Association annual meeting and legislative conference in Phoenix.

The Mohave High School senior was appreciative of both opportunities.

“I enjoyed being there,” she said of the conference. “It was cool being able to see the things our legislators do throughout their day. I met with different senators and representatives and spoke to them about cooperatives and what they mean to me.

“I talked about my trip to Washington D.C. and how the bill they passed helped send me there and will allow others to go in the future.”

The bill, SB 1412, which keeps assigned capital credits local, was unopposed in both the House and Senate and was signed by Gov. Doug Ducey on March 23, 2018.

Assigned capital credits are used for a variety of purposes, including programs that benefit MEC members, such as the River Fund, Northern Arizona Veterans Resource Center, MEC’s Classroom Grants, and the youth tour.

Without the passage of the bill, the fund would have likely been absorbed by the Arizona Department of Revenue.

For an 18-year-old high school student, it was an occasion to be

cherished.

“It was a moment of inspiration,” Houltram admitted. “Before meeting Representative Cobb, I was told she and Senator Borrelli were the power team. They are like a family when working out issues.”

Although the last half year has been a whirlwind for Houltram, the future holds more adventures.

After nearly eight years of living along the Colorado River, Houltram will be packing warmer clothes for a move to the high country in the fall when she begins college at Northern Arizona University.

While the visit to the state capitol was impactful, politics has yet to entice her to abandon her dream of fighting crime, pursuing a degree in criminology and criminal justice.

Monica Houltram with MEC boards members, MEC CEO Tyler Carlson, back left, Arizona Rep. Regina Cobb, left, and Arizona Rep. Leo Biasiucci, far right.

Proposition 127

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The “Vote No” campaign against Proposition 127 was successful in large part because of the relationship rural cooperatives have with their members, including Mohave Electric Cooperative.

The proposition would have mandated at least 50 percent of the power generated by/for electric utilities in Arizona come from renewable resources, such as solar and wind, but discounted other sources such as hydro and nuclear.

And it needed to happen in just 10 years.

MEC is already ahead of the curve, purchasing approximately 15 percent of its power from renewable resources. The proposal, introduced by an individual with out-of-state interests, would have been written into the Arizona Constitution. With so much on the line, it became the most

expensive ballot measure in Arizona’s history.It was important for members to be clear on the impact of mandates on the cost of electricity.

As a result, MEC spoke to the media and took to the streets to get the facts out about Proposition 127, which would have increased electricity costs by approximately 40 percent. Concern for members was of utmost concern as initial polls indicated the proposal might pass and members would be faced with difficult financial decisions as rates climbed.

Word spread and the potential impacts of such a proposal became more widely known and better understood.

Statewide, Arizonans voted the proposal down by nearly 40 percentage points, but the defeat was more pronounced in Mohave County, where

Proposition 127 Defeated by Arizona Voters

MEC produced a host of material to spread the word about Proposition 127.

Proposition 127

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nearly 86 percent voted against the measure.

It was a win for all MEC members.

If a measure such as this reaches the ballot in the future, MEC has confidence its members will cast their votes by making educated decisions based on facts.

MEC Efforts Included:

u A town hall meeting.u Meeting with numerous local civic organizations.u Distribution of information at events and during Member Appreciation Days in October.u Designing and distributing magnetic bumper stickers.u Designing banners and electronic billboard displays.u Traveling to different service areas to spread the facts.u Posting information onto MEC website and Facebook.u Placing ads in local publicationsu Speaking to local media.

Mohave Electric Cooperative CEO Tyler Carlson speaks to members about Proposition 127 at a town hall meeting in September 2018. The Suddenlink Community Center was nearly standing room only for the presentation.

Supporting the Community

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OperationCool Shade

Giving Back is the MEC WayCooperatives across the United States adhere to the same Seven Cooperative Principles that guide all decisions, from how a co-op is run, to engagement with local communities. Concern for community is the seventh principle, and it is one all employees of Mohave Electric Cooperative value year-round.

MEC employees have a proud tradition of giving back. Staff is proud to participate in great events such as Backpack Buddies, the Fire Fighters Holiday Toy Drive, Relay for Life-American Cancer Society, and many other local non-profit and service orgnizations. Some can be found chairing community organizations and commissions, attending meetings before

breakfast and well into the evening, and volunteering for search and rescue on weekends.

MEC members help us give back, too. Through the Operation Round Up and From the Heart programs, members can round up or donate on their energy bills, and the extra change helps those in need, right here in our community.

A lot of utilities provide reliable, affordable energy, but MEC doesn’t want to be just a utility. We do whatever possible to improve the lives of the members we serve.

Every time we give back, we strengthen our community.

Mohave ElectricTrack & Field Invitational

Supporting the Community

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A.B.A.T.E Mohave chapter AOBI AYSOBackpack BuddiesBoy Scouts of America Troop 104Bullhead City Chamber of CommerceBullhead City ElksBullhead City Lions ClubColorado River Clean-UpColorado River Women’s CouncilFirefighters Holiday Toy DriveFriends of the Bill Williams RiverHavasu National Wildlife RefugesKiwanis of the Colorado RiverLaughlin/Bullhead International Airport Authority Military Mom’sMohave Community College Foundation Mohave County Employee Benefit Trust

MCSO Search and RescueMohave Valley Little League Operation Cool ShadePlanning Zoning CommissionRelay for LifeRiver Valley Center Senior CenterSalvation ArmyShop with a CopSoldiers Best FriendSpecial OlympicsSt. John Lutheran ChurchSt. Margaret Mary Catholic ChurchSunrise Rotary Club of Fort MohaveVeteran’s Treatment Court of Bullhead CityVeterans Day ParadeWestern Area Regional Medical Center Women of the MooseWounded Warriors ProjectZach’s Toy Chest

Mohave Electric Cooperative Employees Volunteer

Left, Mohave Electric staff donated hundreds of toys for those in need, which were on display at the Boom Box Parade. Right, MEC participated in, and served as host site, for National Night Out.

Supporting the Community

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Mohave Electric Cooperative staff were excited about setting a record with 50 Classroom Grant application submissions. Eighteen winners were selected to receive a $200 grant.

Mohave Electric Cooperative supports the communities in which it serves through many programs, sponsorships, and donations that make a difference in the lives of our members.

ACRE “Action Committee for Rural Electrification”AOBIAYSOBoys & Girls Clubs of the Colorado RiverBullhead Area Chamber of CommerceBullhead City Fire Department Fire Prevention and Life Safety FairBullhead City Little LeagueBullhead City Middle SchoolBullhead City Police Department National Night OutCity of Bullhead City WinterfestClassroom GrantsColorado River Clean-UpColorado River Unified High School District College and Career ExpoColorado River Women’s Council Boombox ParadeColorado River Women’s Council Western AuctionColorado River Women’s Council Leadership ProgramColorado River Historical SocietyColorado River Republican WomenCommunity Achievement AwardsFriends of the Bill Williams River and Havasu National Wildlife RefugesHualapai Tribe Housing FairJerry Ambrose Veterans Council of Mohave County Veterans Stand DownKiwanis Club of the Colorado River

Supporting the Community

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Los Matadores de Bullhead City“Making Accidents Disappear” Electrical Safety Program in Elementary SchoolsMilitary Mom’sMohave Community College Foundation Workforce DevelopmentMohave Community Federal Credit Union Kicks for KidsMohave Electric Cooperative Track and Field InvitationalMohave County Sheriff’s Office Search & Rescue-Bullhead City UnitMohave Valley Contractors AssociationMohave Valley Little LeagueMontessori Preparatory AcademyNewspapers in EducationPunta Gorda Belize Mission Team – The United Methodist ChurchRelay for Life-American Cancer SocietyRiver Cruizers, Inc.River FundRiver Valley Senior CenterRotary Club of Bullhead CitySalvation ArmySpirit Life ChurchSt. Margaret Mary’s ChurchSunrise Rotary Club of Fort MohaveVeterans United, Inc.Veterans of Foreign Wars AuxiliaryWashington D.C. Annual Youth Tour

MEC employees volunteer their time for many community events, such as Backpack Buddies. Leticia Lopez Arevalo, right, and RoJeana Wymbs, below, help students find the right fitting sneakers.

Helping Members

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Committed to Helping our MembersMohave Electric Cooperative supports our community with initiatives to help members in need. River Fund, Inc., a local non-profit social service agency administers several co-op-sponsored programs.

From the Heart with River Fund/Operation Round Up ®MEC offers two ways for members to give from their hearts and help families in need. From the Heart with River Fund is a voluntary $1 donation that

members can add each month with their electric payment. Members can also donate by signing up for Operation Round Up and rounding their electric bill payments to the next whole dollar. In 2018 members donated $14,765 through these two programs.

Each year, on behalf of River Fund, Mohave Electric applies for a CoBank “Sharing Success” matching grant. CoBank, one of MEC’s lenders, matches $5,000 in donations from MEC members.

Collectively, these donations to River Fund helped income-qualified families with their electric payments.

Mohave “Members Helping Members” Energy Assistance ProgramEach year MEC’s Board of Directors recommends a contribution to River Fund to help members who are facing

a crisis through no fault of their own. Funding is provided through assigned capital credits, as approved in the MEC bylaws. In 2018 River Fund received $35,000 to help families with their electric bills.

Utility Deposit and Appliance Repair/Replace ProgramThis program is funded with abandoned deposits, under Arizona state statue guidelines, and without cost to the cooperative. In 2017, $32,206 was allocated to River Fund, which used a portion of the funds to help members with utility deposits and with repair or replacement of utility-related appliances such as air conditioners and refrigerators.

Mohave Employees Donate Through Payroll Deduction Mohave Electric employees generously donated $4,927 to River Fund in 2018. These dollars help fund a variety of community programs administered by River Fund.

Co-op Connections

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Co-op Connections AppMakes it Easier to SaveMohave Electric and Touchstone Energy cooperatives continue an ongoing effort to make saving money easier for members with the introduction of the Co-op Connections Card® app.

Since its inception, the Co-op Connections program has benefited its members with savings.

The free app can be downloaded from the App or Play stores, depending on a member’s choice of smartphone. Once the app is on the phone, a member will need to complete a simple registration process.

Members should use a unique password and not one tied to other accounts. But, once the member is done registering, saving money is at their fingertips.

The app can be used to find the participating Co-op Connection businesses in any given area. Members can also search for specific offers in-or-around their current location. If you like an offer, you can safe it for future use.

While it is suitable for Rx prescription discounts, there are a lot more savings to be had. Members who don’t use the card

may be spending more than necessary for specific goods and services.

Available discounts range from auto repairs and tires to custom t-shirts, trophies, and food.

There are currently over 130 local Co-op Connections businesses offering deals to MEC members, not to mention thousands more nationally when travelling or on the internet. The program teams up with coupons.com to offer hundreds of opportunities to save and the Cash Back Mall offers rewards for online purchases with major retailers.

NOTE: Because offers can change throughout the year, it is always a good idea to call a business prior to making a special trip.

Mohave Electric Cooperative members have saved $2.2 million in Rx prescriptions since 2011 by simply using their Co-op Connections Card.

Financial Report

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Mohave Electric Cooperative operates as a not-for-profit corporation cooperatively owned by its members and rates are set to cover the cost of doing business, not to generate a profit for stockholders. MEC is regulated by the Arizona Corporation Commission and rates and rules and regulations are all approved by the ACC.

The 2018 Financial TrailTotal revenues for 2018 were $80,970,854, a 4.66 percent increase from 2017 revenues. The amount of power consumed increased 3.44 percent. The increase in revenue is a result of an increased demand for power from residential and business members during the summer heat of 2018. The increased demand, coupled with unforeseen summer events in the wholesale purchased power market that forced MEC to purchase power at a higher rate than anticipated, resulted in a 10.67 percent increase in power costs.

Over the course of the last five years, the Board of Directors has approved a Purchased Power Adjustor credit on member bills. The adjustor credit was first implemented in January 2014 and it increased incrementally to a credit of 1.75-cents per kilowatt hour by November 2015 and remained in place through

2017. The PPA was changed to a credit of 1.50-cents per kilowatt hour in 2018. Because of changes in the wholesale purchased power market the PPA has been lowered to a credit

of .75 of a cent (.0075) per kilowatt hour in 2019. At year-end 2018, the adjustor credit resulted in over $47 million in reduced energy bills to members since the PPA credit began.

Power costs have moved slightly upward in 2018. MEC’s directors and management work with power supply management partners to develop strategies to maintain rate stability based on financial and delivery considerations of the wholesale power resources available to serve MEC’s load. A summer power supply shortage resulted in over $3.2 million in increased power costs.

One of the benefits of being a member of MEC is that members share in any earned margins. The members’ share of those margins is called “capital credits” because margins originate with what the member pays, also called “capital,” when purchasing electricity.

Money received from MEC’s sale of electricity to members is used to pay operating expenses, make payments on loans, purchase operating equipment, and construct additional electrical system infrastructure to provide additional and more reliable service. Any amount remaining from the revenues after deducting the costs of operating expenses and financing interest and depreciation is called “margins.” These margins are allocated annually to the members based on the amount of each member’s annual electricity purchases. These allocated margins

are assigned to a capital credit account that is established for every member. Until these capital credits are retired, MEC uses the funds to help reduce the need for borrowing, thus keeping interest costs down.

If MEC has a positive margin at the end of a year and has met the performance requirements of its lenders, the Board of Directors may vote to retire, or pay out a portion of available capital credits to members, but only if doing so will not harm the cooperative financially.

In March 2019, Mohave’s member-elected Board of Directors authorized a general capital credits retirement of $1,722,313.15. All of 1987 and a portion of 2018 capital credits were retired. In addition, a portion of the capital credits from the year 2000 from our generation and transmission cooperative, AEPCo, were retired.

Financial Report

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How it was EarnedResidential revenues continued to constitute the largest portion of MEC revenues at 58.36 percent.

Commercial revenues accounted for 37.05 percent of total revenues.Other Revenues accounted for the remaining 4.59 percent.

MEC makes use of revenue in a manner that balances short-term operating expenses with long-term strategic planning.

How it was SpentElectric power cost 75.41 percent of revenue received.

Wholesale power cost expenditures comprised the largest portion of the member’s energy dollar. MEC purchases power from Arizona Electric Power Cooperative, Inc., and additional wholesale power resources from other market providers. The amount paid for purchased power consumed by members amounted to over 75 cents of every member dollar of revenues.

Expenses ....................... 14.77 percentDepreciation .................. 4.35 percentInterest ........................ 2.41 percentMargins ......................... 3.06 percent

Remaining costs included expenses for day-to-day operations and administration of MEC, interest on long-term borrowing, and depreciation, leaving a margin of 3.06-cents of every member dollar of revenues.

In 2017, MEC had the lowest controllable operating expense totals among electric cooperatives in Arizona, as well as among the cooperatives who purchase power from AEPCo, according to the industry Key Ratio Trend Analysis report issued by the National Rural Utilities Cooperative Finance Corporation. The same ratings are expected for 2018 once the study is released later this year.

The 2018 margins were allocated to the members in April.

Condensed Statement of OperationsAs of December 31, 2018

OPERATING REVENUES ........................................ $80,970,854

OPERATING EXPENSESElectric Power Cost ....................................................... $61,060,053Operating Expenses ........................................................ 11,804,946Depreciation Expense ....................................................... 3,525,417Interest on Long-Term Debt ............................................ $1,947,447Other Expenses ................................................................... 157,051TOTAL OPERATING EXPENSES ...................................... $78,494,914

MARGIN FOR OPERATIONS .................................... $2,475,940

Non-Operating Income ...................................................... $531,814Patronage from Associated Organizations ........................... 2,727,782

TOTAL MARGINS .................................................... $5,735,536

Financial Report

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ASSETS

PLANTPlant Cost ...................................................................$131,878,396Provision for Depreciation ............................................... 48,337,091Net Utility Plant ............................................................ $83,541,305

OTHER ASSETSCash and Equivalents.................................................... $23,756,531Accounts Receivable ......................................................... 2,877,159Equity Investments in Associated Organizations ................ 52,500,174Notes Receivable .................................................................304,068Other Property and Equipment ...............................................80,000Materials and Supplies ...................................................... 1,507,032Other Current Assets ...................................................... 10,893,963Deferred Charges ............................................................. 7,632,988

TOTAL ASSETS ....................................................$183,093,220

Condensed Balance SheetAs of December 31, 2018

EQUITIES AND LIABILITIES

EQUITIESMemberships ....................................................................$173,375Patronage Capital ........................................................... 99,517,557Other Equities ..................................................................6,606,557Total Equities ..............................................................$106,297,489

LONG-TERM LIABILITIESLong-Term Debt ........................................................... $50,251,120

CURRENT LIABILITIESAccounts Payable ..........................................................$10,867,417Member Deposits ............................................................. 3,269,067Other Current Liabilities .................................................. 12,408,127

Total Current Liabilities ................................................. $26,544,611

TOTAL EQUITIES AND LIABILITIES ................... $183,093,220