ANNUAL REPORT

2012

TRANSITIONSPreserving the Past While Envisioning The Future

GUNNISON COUNTY ELECTRIC ASSOCIATION

As the president of GCEA’s board of directors, it is mypleasure to report that the association has had anothersuccessful year. As a matter of fact, we’ve had a lot ofsuccessful years as the association looks forward to celebratingits 75th year of being in business this year. Yet, 2012 was alsoa year of transition. Mid-year we said farewell to long-timeGCEA employee and friend, Mike Wells, who retired after 39years of service. And now during this period of change, weare welcoming Mike McBride as the association’s new chiefexecutive officer. Mr. McBride and his family are from LowerValley Energy in Wyoming and are glad to be here inGunnison. We are excited to have Mr. McBride on board andlook forward to working with him as we plan for the futureand engage in new initiatives.

Our biggest challenge is continuing to provide our memberswith reliable, low-cost energy in an environmentallyresponsible manner. Early in 2012, our energy supplier, Tri-State Generation and Transmission, informed us that theywere designing a new rate structure to be implemented in2013. Tri State is facing increasing costs from increased electricdemand, environmental and regulatory requirements and thegrowing need for building new generation. Tri-State is alsofacing a difficult environment in sighting and building newtransmission, which is limiting the utility’s ability tointerconnect traditional as well as renewable generation onour very rural electric grid. Considering these concerns, GCEAwas proactive in conducting a cost of service study whichanalyzed our financial position and helped us determine howto adjust our rates to ensure that any rate changes from Tri-State would be applied equitably across our entiremembership.

In addition to our commitment to operating a financiallysound electric cooperative, GCEA continues to exploreopportunities to meet future challenges in the energy industry,including the potential for generating local distributed

renewable energy in our service area.Our experiment with wind energy isproviding data that can be used bymembers with an interest in thisresource. We are continuing toinvestigate the potential fordeveloping a hydropower project atTaylor Reservoir Dam and we havebegun planning for a communitysolar garden that would allow members to invest in renewableenergy without building panels on their own homes. GCEA isalso prepared to help our members with interconnectingpersonal distributed generation, whether solar, hydroelectric,wind or other qualifying sources, to the electric grid under anet metering program. This program allows members toreceive credit for any excess generation they may producebeyond their own needs.

In terms of giving back to our members, GCEA had thepleasure of being able to send students from our valley to boththe Washington DC Youth Tour and the Youth Camp, wherein addition to learning about electricity the 11th gradestudents learned about leadership, our country’s heritage, andhad fun on the side.

We are very fortunate to have such a strong team at GCEAand I am proud to have the opportunity to serve on yourboard of directors. Our entire team here at GCEA neverforgets that we are owned by you, our members, whom wehave served since 1938.

Sincerely,

Chris Morgan, President

John VaderVice President

Paul HudgeonsSecretary/Treasurer

Greg Wiggins Bart Laemmel Steve Schechter Chuck Cliggett

GCEA BOARD OF DIRECTORS

PAGE 1GUNNISON COUNTY ELECTRIC ASSOCIATION

Message From The President

Chris MorganPresident

At the completion of our 74th year, it’s interesting to look back atsome of the changes we’ve already come to embrace. Seventy-fiveyears ago, most of the area now served by GCEA had no access toelectricity or the modern conveniences powered by it. How times havechanged. Even those “modern conveniences” are infinitely morepowerful, varied and plentiful today. Electricity has become socommonplace and so reliable that we sometimes take it for granted.

A few thousand years ago, an hour of reading lightfrom a sesame oil lamp cost the equivalent of 50 dayslabor for the average worker. Clearly, the averagelaborer did not enjoy that luxury. In the 1800s, atallow candle was equal to six hours work. An hour oflight from a kerosene lamp cost 15 minutes of labor.Today, the average person can acquire an hour of lightfor one-half of one second of labor.

The era of electrification truly has produced many positivechanges, but one thing hasn’t changed. Like thepioneering souls who brought the miracle ofelectricity to our area, GCEA’s dedicatedemployees and directors truly care aboutyou, our members. Our newly adoptedmission statement captures theessence of this reality whenit begins: “Our missionis to serve ourmembers…”

ADMINISTRATIONMike McBride – Chief Executive Officer

Sherry Booth – Administrative Assistant

ACCOUNTING/ MEMBER SERVICES

Marcia Wireman – Chief Financial Officer

Paula MacLennan – Financial Assistant

Kelley Willis – Accounting Assistant

Cindy Muirhead – Accounting Assistant

Jo Anne Bateman – Accounting Assistant

Erica Soerensen – Billing Supervisor

Holly Palmer – Billing Assistant II

Chastity Miller – Billing Assistant I

Tracy Wheeler – GunnisonConsumer Services Representative I

Jeff Stanley – GunnisonConsumer Services Representative I

Chris Schodorf – System Administrator

Dan McDonough – Consumer Services Supervisor

Cynthea Gunderson – Crested ButteConsumer Services Representative II

Marni Joslyn – Crested ButteConsumer Services Representative II

Vicki Spencer – Manager of External Affairs

Alantha Garrison – Member Services Representative

ELECTRIC OPERATIONS Roger Grogg – Chief Operations Officer

Josie Casebolt – Operations Assistant

John Stoeber – Gunnison Lead Foreman

Ron Copenhaver – Gunnison Working Foreman

Todd Fuller – Gunnison Journeyman

Dustin Cadwell – Gunnison Journeyman

Tom Carl – Lake City Lead Lineman

Jerry Sharpe – Lake City Journeyman

Jeff Hanggi – CB Working Foreman

Andy Holsteen – CB Lineman

Dan Oberosler – CB Journeyman

Nick Jones – CB Journeyman

Roger Lambert – Warehouseman

Wally Baker – Meter Technician

Greg Katheiser – Fleet Maintenance/Equipment Operator

Carol Townsend – Line Locator

ENGINEERING Rocky Ferran – Staff Engineer

Bruce Stephens – Engineering Analyst

Mike Young – GIS Technician

Chico Dominguez – Engineering Technician

Brian Muth – Engineering Technician

Vic Dean – Meter Reader/AMR Technician

The Times, They Are A Changin’

Mike McBrideChief Executive Officer

N U M B E R S

Our mission

is to serve our members

by providing safe, reliable energy

with a strong cooperative tradition

and a vision for the future.

In the future, new technologies powered by electricity will continue to emerge. Othertechnologies will enable us to manage the electric grid more effectively and empower eachof us to manage our use of electricity more efficiently. You will have greater access to toolsand information.

Through it all, we will continue to draw inspiration from the pioneering spirit of those whofounded The Gunnison Rural Electric Association as we continue striving to bring greater valueto our members and our communities.

At GCEA, we are excited about the future, and grateful forthe opportunity to serve our members and communities.

Mike McBride, CEO

OUR VALUES — We believe in:• Safety first • Being honest • Acting with integrity • Being responsive to our members • Listening •

• Striving for fairness • Treating others with respect • Being innovative • Providing choices •

• Being socially responsible • Being environmentally responsible • Being financially responsible •

By the

1/2 secondLabor needed fromthe average personto acquire one hour

of reading light.

ANNUAL REPORT 2012PAGE 2

PAGE 3GUNNISON COUNTY ELECTRIC ASSOCIATION

Continuing A Tradition Of Excellence

GCEA is unique in having the second highestpercentage of underground cable of any cooperativein Colorado. Underground cable has bothadvantages and disadvantages. For example, it ismore reliable during wind and snow storms; butexperiences more losses and is more expensive toinstall. There are many places in our serviceterritory where we cannot install undergroundlines because of the geography or terrain. Overheadlines are more susceptible to outages due to their

exposure to wind, snow, and lightning, andthey are often damaged by falling treebranches. In spite of the harsh conditions inour mountainous region, GCEA succeeded inkeeping the power on 99.977% of the time in2012. We are proud to have kept outages to aminimum in 2012 – an average of only 1.44hours per consumer – which exceeds the RuralUtility Service standard of no more than 200minutes per meter by 56.8%.

Behind The Scenes

GCEA’s system administrator ChrisSchodorf works behind the scenes tomaintain the network of informationtechnology that supports the systemdelivering electricity to all our members’homes and businesses. Essential to Chris’work is the Network Operation Center, orNOC. This is the main hub for technologyat GCEA. Located in a secure, climate-controlled room, the NOC houses ourcommunication array, servers, phone and security systems andmany other high-tech gadgets that are responsible for ensuring thedelivery of quality power to meet our members’ needs. ChrisSchodorf’s work is indispensable to GCEA’s operations.

Roger GroggChief Operations Officer

Chris SchodorfSystem Administrator

2 ouncesEstimated weight of informationtraveling around the internet viaelectrons. Although calculating theweight of these electrons can vary atany given moment, scientists figure theinternet’s weight is about the size of astrawberry. The question is whether thetrue weight of the Internet should bemeasured by electrons or by ideas. N

UMBERS

By the

LINEMEN/OPERATIONS DEPARTMENT — Top: Tom Carl, Nick Jones, Dan Oberosler, Jerry Sharpe,Todd Fuller, Dustin Cadwell, Ron Copenhaver. Bottom: Greg Katheiser, John Stoeber, Jeff Hanggi,Roger Grogg, Wally Baker, Josie Casebolt, Carol Townsend, Roger Lambert

ANNUAL REPORT 2012PAGE 4

Building For The Future

All of us have benefited over the past few years from ARRAfunds designated for our community. One project ofsignificance to GCEA during 2012 involved improvements toCounty Road 742 which runs along Taylor Canyon. Theproject was a coordinated effort of the State of Colorado,Gunnison County, GCEA and CenturyLink. Although theprimary purpose of the improvements was to straightendangerous curves and widen sections of the road, GCEAbecame involved because our underground utility lines weregoing to be affected by the construction. We took advantageof this opportunity to replace older underground line – someof which was 30 years old and near the end of its lifeexpectancy and to upgrade our system so as to improve ourreliability and response time to outages.

More specifically, the Taylor Road project started at Wilder onthe Taylor and ended 8 miles up at Gandys’ Hill. The directburied single-phase line was originally installed undergroundin 1981 to replace the overhead line that was installed from1973-1975. GCEA installed 42,240 feet of 2½-inch conduit withnew 1/0 cable replacing the old #2 cable which served the load.

In the process of the rebuild two newVFI switchgears were installed tohelp isolate faults and maintainservice in the canyon. This projectrequired 31 new junction boxes forgrounding and switching purposes,and 18 transformers were moved due to the road relocation. Secondaryservice lines (1,618 feet in length)that needed to be relocated wereinstalled in conduit under the roadway. With a view towardsthe future, we also installed 126,720 feet (or 24 miles) of 2-inch conduit down the eight miles of road for a potentialfuture 3-phase line out of Taylor Reservoir.

To summarize, the benefits to our members of the summer-longconstruction project are that GCEA upgraded undergroundline without having to pay for road demolition and repaving;we are now able to switch out faulty transformers more easilyso as to minimize outage times; and we reduced future costsfor the proposed Taylor hydroelectric project.

Rocky FerranStaff Engineer

ENGINEERING DEPARTMENT — Mike Young, Rocky Ferran,Vic Dean, Chico Dominguez, Brian Muth, Bruce Stephens

50%Cost savings in

trenching for the Taylor Rebuild Project

due to partnership with CenturyLink.

N U M B E R SBy the

201

GCEA

members

participating

in our

energy

efficiency

programs.

16,979 kWh net generation of renewable

energy provided to GCEA by 50 net

metering members whose systems

generated more energy than they used.

GCEA’s Doyleville wind turbine

provided additional net generation

of 2,752 kWh to our system.

PAGE 5GUNNISON COUNTY ELECTRIC ASSOCIATION

A Big Year For Rate Design

Financial & Statistical Information

In 2012, GCEA staff worked extensively with an independent rate consultant to develop aCost of Service Study in preparation for the Tri-State G&T wholesale rate structure changewhich became effective January 1, 2013. This process took several months and required thecombined efforts of all departments at GCEA. It was important for GCEA to undertake thiscomprehensive study in order to fully understand the impact of the rate structure change,both to the GCEA system as a whole and to individual rate classes (e.g. residential,commercial, industrial). The benefit of a well-developed rate study is that it assists us indesigning rates that are fair, cost-based and non-discriminatory.

Marcia WiremanChief Financial Officer

Residen�al67%

Small Commercial27%

Large Power5%

Other 1%

2012 GCEA

Opera�ng Revenues

5%

mercial

RResid67

Opera�ng31%

Deprecia�on 8%

Interest 4%2012

GCEA

Opera�ng

Expenses48%

nses

Cost of Power

57%

CCost ofPower

57%

Balance Sheetas of as of

12/31/2012 12/31/2011

Assets:

U�lity Plant - Net 27,705,064$ 27,225,433$ Long Term Investments 10,496,459 10,156,948 Cash & Short Term Investments 1,832,913 2,222,450

250,452,1selbavieceR 1,557,787 Materials & Supplies 659,431 609,706 Other Current & Deferred Assets 312,605 112,174

425,062,24latoT $ 41,884,498$

Equity and Liabili�es:

Margins & Equi�es 26,005,679$ 25,294,239$ Long-Term 676,901,31tbeD 13,033,512 Current Mat. Long-Term Debt 384,592 316,229

640,462,1selbayaP 1,262,747 Consumer 048,236stisopeD 625,091 Other Current & Deferred Liab. 863,691 1,352,680

425,062,24latoT $ 41,884,498$

$-

$10

$20

$30

$40

$50

2009 2010 2011 2012

Mill

ions

Total Assets

Plant Investments Current/Deferred Assets

$0

$10

$20

$30

$40

$50

2009 2010 2011 2012

Mill

ions

Total Liabili�es & Equi�es

Equi�es & Margins Long-Term Debt Current & Deferred Liabili�es

S

1

1

1

N U M B E R SBy the

84New meters installed in2012. This represents asignificant decrease from anaverage of 245 meters peryear during the high growthyears early in the millennium.

1,786CFL bulbs sold to members through ourBuck-a-Bulb program.

ANNUAL REPORT 2012PAGE 6

27,225,433$ L

4

25,294,239$ L

4

Statement of Opera�onsFor Year For Year

2012 2011

Revenue:

Opera�ng Revenue 15,320,309$ 15,211,917$

Expenses:

Cost of 027,544,8rewoP $ 8,517,554$ Opera�ons & Maintenance 1,900,369 2,087,577 Consumer Accts. & Consumer Info. 1,201,046 1,202,298 Administra�ve & General 1,445,707 1,403,186

347,812,1noitaicerpeD 1,126,748 520,385tseretnI 543,500

Total Cost of Electric Service 14,794,610$ 14,880,863$ Opera�ng Margins 525,699$ 331,054$

Interest 278,56emocnI $ 54,485$ Income (Loss) from Equity Invest. -$ -$ Non-Opera�ng Margins Other 14,302$ 7,668$ G&T & Other Capital Credits 469,526$ 640,000$

Non-Opera�ng Margins 549,700$ 702,153$

Total Margins 1,075,399$ 1,033,207$

GCEA System Sta�s�cs

2012 2011 2010

Meters 573,01devreS 10,340 10,297 Miles of 460,1eniL 1,062 1,059 Total kWh 356,802,911desahcruP 126,090,673 123,682,989Average Residen�al Monthly Use - kWh's 635 685 677 Average Residen�al Monthly Bill 95.57$ 101.33$ 92.31$ GCEA System Coincident Peak 28,012 28,676 29,211 Month of High rebmeceDyraurbeFrebmeceDkaePFull-Time 04seeyolpmE 41 40 Wholesale Power Costs/kWh 0.07085$ 0.06755$ 0.06870$ Retail Power 00511.0hWk/stsoC $ 0.11500$ 0.11279$ Availability of Service 05.22egrahC $ 22.50$ 16.00$

$355,073.98 Funds returned directly to GCEA members by retiring 100% of the 1990 capital credits.

N U M B E R S

N U M B E R S

By

the

By the

36,280 Kilowatt hours saved at GCEA’s headquarters building due to energy efficiency improvements.

By the

ACCOUNTING DEPARTMENT (above) —Jo Anne Bateman, Cindy Muirhead, Paula MacLennan, Kelley Willis

BILLING DEPARTMENT (left) — Erica Soerensen, Holly Palmer, Chastity Miller

N U M B E R S40

employeesproviding safe, reliable electricity andcustomer care with a personal touch to

10,375s e r v i c e s

Gunnison CountyElectric AssociationP.O. Box 180Gunnison, CO 81230-0180

Presort Std.

US Postage

PAID

Permit #154

Gunnison, CO

Notice of GCEA 74thAnnual Meeting of the Members

TUESDAY, JUNE 25, 2013HEADQUARTERS BUILDING — 37250 W. HWY 50 GUNNISON, COLORADO

toll free 800-726-3523 • www.gcea.coop • 970-641-3520

COOP – ERATIONA special presentation by local writerand rancher Polly Oberosler on thecooperative philosophy and why it hasbeen and will continue to be significantfor the vitality of our community.

Notice of GCEA 74thAnnual Meeting of the Members

TUESDAY, JUNE 25, 2013HEADQUARTERS BUILDING — 37250 W. HWY 50 GUNNISON, COLORADO

toll free 800-726-3523 • www.gcea.coop • 970-641-3520

5:00 pm Registration, Annual BBQ,Safety, Energy Efficiency, and Renewable Energy Displays

6:00 pm Polly Oberosler – Invited speakerBusiness Meeting, Affirmation of Election, Raffle (Members must be present to win)

7:00 pm Adjournment

5:00 pm Registration, Annual BBQ,Safety, Energy Efficiency, and Renewable Energy Displays

6:00 pm Polly Oberosler – Invited speakerBusiness Meeting, Affirmation of Election, Raffle (Members must be present to win)

7:00 pm AdjournmentMinutes of the 2012 Annual Meeting are available on our website

68Residential and commercial energyefficiency audits provided as a free service to GCEA members.

N U M B E R S

NUMBERS

By the

“Owned By Those We Serve”