PEC QUARTERLY kicks off with system mapping. Commercial rebate program expanded. Rebate incentives

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1 PEC QUARTERLY Pedernales Electric Cooperative business news for member-owners Commercial rebate program expanded LIGHTING HVAC Rebate incentives (based on kilowatts (kw) of reduced summer peak electricity demand) MOTOR CONTROL LEDs Integrated Ballast LED Hardwired CFL Direct Expansion Unitary HVAC Split or Packaged Air Condensers and Heat Pumps Variable Frequency Drives: Pump Motors Fan Motors Linear Fluorescents High-Intensity Discharge (HID) Packaged Terminal A/C Room A/C and Heat Pumps $300/kw Metal Halides $270/kw Air and Water Cooled Chillers $230/kw PEC has expanded the commercial members rebate program to make HVAC and motor equipment upgrades eligible for rebates. The Comprehensive Commercial Rebate Program can provide thousands of dollars of rebates based on kilowatts (kw) of reduced summer peak electricity demand. The purpose of the program is to help our commercial members in upgrading not only lighting, but HVAC and motor equipment to reduce demand and consumption, PEC Vice President of Power Supply Dale Jones told the Board at its November meeting. It will be a full facility efficiency (approach), where we ll have the tools to work with them to accomplish more. Lighting and HVAC account for the majority of commercial sector energy consumption; January 2014 the new program s rebates can help offset initial equipment installation costs for commercial members and shorten the return on those investments. Incentives are available for peak summer demand reduction of up to 50 kw within a single calendar year. Commercial and industrial members that can take advantage of the Comprehensive Commercial Rebate Program include commercial retailers, schools, convention centers, malls and shopping centers, property management groups, quarry operations, manufacturing plants and religious worship facilities. More details and eligibility requirements can be found at /rebates kicks off with system mapping A message from CEO John D. Hewa As PEC ends 2013, I m very pleased with the work of all employees in meeting our organizational goals. I m confident we can accomplish the serious work we ve got planned for One of our foundational projects in 2014 will be an updated and improved system-wide inventory. Contract crews will help the Cooperative update its map of all electric facility assets. Up-to-date mapping data is the heart of our operational system. This project will help us be more efficient in a number of areas, including service installations and area lighting. It also will help provide us the data we ll need to create a realtime outage map available over the web and via mobile devices. With detailed data about how our equipment is connected, we can provide you a better picture of what s going on and be more efficient with restoration efforts. We re excited about the potential benefits this project will help us realize, and we ll work hard to keep you informed of its progress and what you can expect. PEC contract crews may need access to Co-op electric facilities on your property.

2 Pedernales Electric Cooperative business news for member-owners January 2014 Care to serve on the PEC Board? PEC s democratically elected Board of Directors is responsible for setting policy for the largest distribution electric cooperative in the nation. Petition material for members wishing to run for election to the PEC Board will be available by Jan. 21. This material includes the Candidate Application, the Consumer Report Disclosure and Consent Form and forms to gather signatures. PEC Director positions in Districts 2 and 3 will be up for election in District 2 represents the Georgetown, Leander and Liberty Hill areas, while District 3 encompasses Cedar Park and north Lake Travis. am Georgetown Liberty Hill Director candidates are eligible to stand for election after first gathering signatures from PEC members living within the director district for which election is sought. Members in Districts 2 or 3 interested in running for their district s seat may download the materials from / nominations or have the material printed for them at any PEC office. Voting in Board elections and for any other proposed initiatives is a key benefit of PEC membership. Voting typically opens in May. $12.7 million in capital credits distributed in December 2013 PEC capital credits distribution Year Payout (approximate) 2009 $4.0 million 2010 $14.3 million 2011 $13.4 million 2012 $11.9 million 2013 $12.7 million Total distribution $56.3 million PEC is a not-for-profit cooperative owned by the members it serves, and capital credits reflect that ownership. The Co-op uses members capital to fund operating activities and reduce borrowing, with the intent to later repay that capital to members. Current PEC members with capital credits allocated for 1983, 1984 and 2012 received distributions as credits on their December electric bills, while former members with credits of $10 or more received checks. Members with 1983 allocations received a 100 percent distribution in December, while members with 1984 allocations received a partial distribution, with the remainder expected to be distributed in future years. Members with credits allocated in 2012 received a discounted distribution; these members also had the opportunity to opt out of the discounted distribution and receive 100 percent of their allocation sometime in the future. Full distributions are typically on an approximately 30-year cycle. District 2 Lampasas BY THE NUMBERS District 1 Cedar Park District 3 Lake Travis Lake Creek District 5 Blanco Bulverde Johnson City Marble Falls District 6 Wimberley Canyon Lake Bertram District 4 Oak Hill Dripping Springs Georgetown Liberty Hill District 2 Cedar Park Lake Creek District 3 Lake Travis Manchaca District 7 Kyle-Buda Members 216,021 Active accounts 255,421 Average residential bill September $ October $ November $ Average residential use September 1,669 kwh October 1,277 kwh November 932 kwh As of Nov. 30, Bills and kwh figures are averages of all residential members. Your bills and kwh use may vary according to your electric use patterns and billing periods.

3 PEC QUARTERLY Pedernales Electric Cooperative business news for member-owners 2014 Election: Don t forget to vote! Democratic member control is a foundational principle of PEC s governance and a responsibility of PEC membership. Preparations are now underway for the Co-op s 2014 Board election. Director seats in districts 2 and 3 are up for election. District 2 represents the Georgetown, Leander and Liberty Hill areas. District 3 encompasses Cedar Park and north Lake Travis. Director candidates this year will be reviewed by a newly-formed member qualifications committee to determine whether candidates satisfy all requirements to serve as a Director. The committee was created by the Board as a way to get more members engaged in Director elections and remove Board members from ruling on the eligibility of individual candidates. The 2014 election ballot will also include a voting system referendum choice. This referendum will let PEC members choose between the current at-large system of voting and a single-member district form of election. More details on the referendum can be found in the accompanying sidebar to the right of this story. Voting materials will be mailed to all PEC members May PEC Director Districts 2 and 3 Liberty Hill District 2 Cedar Park Leander Lake Travis 1431 District 3 Lake Creek Election timeline April 7: Director nomination-bypetition period ends Georgetown Round Rock Austin District 5 Blanco Bulverde Johnson City Lampasas Marble Falls District 6 Canyon Lake District 1 Wimberley District 4 Bertram Dripping Springs Oak Hill Liberty Hill District 2 Leander Cedar Park Lake Creek District 3 Lake Travis Manchaca District 7 Kyle-Buda Georgetown Round Rock Austin April 2014 Which voting system do you prefer? Members are being asked this year to vote on the election methodology they prefer for future PEC Board elections. PEC is asking members to choose between the current at-large system of voting and a single-member district system. PEC takes no official position on either system and plans to implement the will of the membership. Visit /election for more information Annual Membership Meeting details PEC s 2014 Annual Membership Meeting will offer members interactive exhibits, safety demonstrations and family activities. April 21: Board director candidates announced April 24: Candidate forum in Johnson City The June 21 meeting at the Leander ISD South Performing Arts Center will be the first held in the northern portion of the Co-op s service territory. May 22-27: Ballots, candidate biographies and notice of annual meeting mailed to members; online voting begins June 13: Online and mail-in voting ends Members at the meeting can vote in the Board election if they haven t yet voted online or by mail. Election results will be announced at the meeting s conclusion. June 21: PEC annual meeting; inperson voting and election winners announced Save the date June 21, 2014 Leander ISD South Performing Arts Center Voting at 8 a.m. / election for details

4 Pedernales Electric Cooperative business news for member-owners April 2014 Collaboration strengthens community ties I ve had a number of meetings with various elected officials from the cities and counties in our service area. I intend to make this a part of PEC s forward movement to ensure we re collaborating well with local officials around the region.... it s critical to initiate and maintain a high level of coordination and planning with all of our communities. PEC s system inventory to last about 12 months PEC s system-wide inventory project, begun in March, will help increase the Co-op s reliability and resiliency and reduce power interruption response times. Contractors from Davey Resource Group (DRG) will be gathering comprehensive data on each piece A message from CEO John D. Hewa These meetings have already been very productive, and we ve received some important feedback about the way the Co-op has served our member communities and what we can do to improve our service. PEC s service area is demographically and geographically diverse, home to some of the fastest-growing cities and counties in the nation. The Co-op knows it s critical to initiate and maintain a high level of coordination and planning with all of our communities. We re committed to hearing ideas and working with them to help provide the infrastructure they need to grow and prosper. These have been beneficial discussions so far, and our engineering and operations teams are analyzing and discussing new facility and infrastructure planning approaches we might take. I hope to have more information to present to the Board and our members in the near future. of PEC equipment. To effectively perform this inventory, contractors may need access to equipment on members property. The Co-op will use phone calls, postcards and local media to inform members when DRG technicians will be in the area. PEC fills two key positions Tracy Golden and Brad Hicks have joined PEC as Chief Financial Officer and Vice President of Engineering & Energy Innovations, respectively. We welcome Tracy and Brad to the PEC family, said PEC Chief Executive Officer John D. Hewa. Both of these gentlemen have outstanding credentials and experience, and I m confident their proven leadership skills will help move the Co-op forward. We re looking forward to their ideas. Tracy Golden comes to PEC from Southwest Arkansas Electric Cooperative, where he served as Vice President of Accounting, Finance, and Member Services. Before that, he was a partner with a CPA firm. Golden expanded the firm s client base to include several electric cooperatives; he began his career with an investor-owned utility. Golden is a CPA, a Certified Fraud Examiner and a Certified Cooperative Financial Professional. Brad Hicks joins the Co-op after working with Schneider Electric in South Carolina and has experienced first-hand the challenges facing distribution cooperatives and municipallyowned utilities. He will lead the Cooperative s engineering staff as they evaluate and implement new technology that will increase system reliability and resiliency and help meet PEC s reliability, cost and renewable goals. Hicks is a licensed professional engineer in multiple states and holds an undergraduate degree in electrical engineering and a master s degree in business administration. BY THE NUMBERS Members 217,860 Active accounts 257,214 Average residential bill December 2013 $ January 2014 $ February 2014 $ Average residential use December ,450 kwh January ,610 kwh February ,503 kwh As of Feb. 28, Bills and kwh figures are averages of all residential members. Your bills and kwh use may vary according to your electric use patterns and billing periods.

5 PEC QUARTERLY Pedernales Electric Cooperative business news for member-owners July 2014 Annual meeting shines light on future Annual meeting attendees learned about the Co-op s forthcoming software system and posed for photos as a lineman. Cooperative members have elected one new and one incumbent director and kept the current at-large voting system. PEC welcomed almost 700 attendees to its annual meeting June 21 at Cedar Park High School. The meeting, which is PEC s largest annual event, concluded the Co-op s election process. Before the business meeting started, members had a chance to cast their votes, visit with Co-op staff and learn useful information about topics such as renewable energy, energy efficiency, PEC history, electrical safety and other initiatives, subjects and programs. Emily Pataki was elected to the Board seat in District 2, and Kathryn Scanlon was re-elected to the Board position in District 3. Members also voted in support of the current at-large voting system for future PEC Board elections. During the meeting, Board President Dr. Patrick Cox acknowledged the Co-op s history and the importance of PEC s enduring core values: Safety, Trust, Accountability & Integrity, Respect and Service. In his remarks, PEC Chief Executive Officer John D. Hewa congratulated Co-op employees on their dedication to the membership and discussed PEC s strategic initiatives, while also illustrating Co-op achievements in service reliability, member service and community support. I want you to know this is your co-op, Hewa said. We want to always make sure we re focusing on that. Hewa also explained PEC s plans to use technology to increase service reliability while improving the member experience. He noted the Co-op s efforts to review rates, explore different renewable options and effectively manage costs, and he listed plans to reflect efficiencies in specific areas. Members interested in a full recap of the meeting can go to /annualmeeting PEC Board election results Total votes cast 17,813 Online 5,731 By mail 11,753 In person 329 Meeting attendence 691 Voting referendum results At-large system 9,219 Single-member district system 7,957 District 2 Director Emily Pataki 8,943 William D. (Bill) Boggs 8,393 District 3 Director Kathryn Scanlon 7,966 Don Zimmerman 4,488 Arnold LeVine 3,037 Judy Lawler Pokorny 1,794 Emily Pataki (L) was elected District 2 director, with Kathryn Scanlon (R) re-elected director in District 3.

6 Pedernales Electric Cooperative business news for member-owners July 2014 PEC Power Outage Center now online PEC system inventory running smoothly PEC s system inventory project is central to the effectiveness of many planned automated systems that will give members and employees more real-time information. The system inventory project documenting all PEC facilities continues, with 33 staffers from project contractor Davey Resource Group (DRG) currently in the Junction, Bertram and Marble Falls districts. Over the next year, DRG crews will be identifying every piece of Co-op equipment. The crews are noting the location of the equipment with GPS coordinates and photographing each item. Contract crews may need access to equipment on members property to perform the inventory. DRG crews are clearly identified and carry a letter of authorization from PEC. The Co-op continues to use postcards, phone calls and local media to let members know when DRG technicians will be in their area. The PEC Power Outage Center gives members current information during service interruptions. PEC s Power Outage Center, now live at /outage, provides a host of information to members experiencing interruptions in their electric service. Created in response to member requests for more information during outages, the heart of the page is a listing of all outages in the PEC service area affecting 50 meters or more. The listing provides a general description of the affected area, number of members affected and length of time members have been without power. The Outage Center also provides resources to help members prepare for and report service interruptions. A set of safety FAQs and information on the danger of downed power lines and what goes on during power restoration efforts are also included. The online dashboard updates every 15 minutes, giving members up-to-date information after they refresh their web browsers. Capital credits info being sent to members PEC s Board allocated more than $45 million to members for electricity purchased during PEC is a not-for-profit corporation, so when revenues exceed expenses, the Co-op earns margins. These margins are assigned to members in proportion to the amount billed for electricity during the year and are returned to members as capital credits. Letters explaining this year s allocation and capital credits process are being mailed in July and August. For more information, go to /capitalcredits. BY THE NUMBERS Members 219,292 Active accounts 259,416 Average residential bill March 2014 $ April 2014 $ May 2014 $ Average residential use March ,156 kwh April kwh May kwh As of May 31, Bills and kwh figures are averages of all residential members. Your bills and kwh use may vary according to your electric use patterns and billing periods.

7 PEC QUARTERLY Pedernales Electric Cooperative business news for member-owners PEC a strong performer, report shows An industry report shows strong gains in PEC s equity position, debt service coverage, bad debt reduction and electric service reliability. The report, known as a Key Ratio Trend Analysis, was given by Jeff Kilpatrick, regional vice president of the National Rural Utilities Cooperative Finance Corporation, a major lender for electric cooperatives. The report compared the Co-op s 2013 performance with cooperatives across the nation. As you look at some of the trends you ve set, Kilpatrick said, I believe you ll be amazed, as I am, at some of the numbers you re seeing. Among these were increased equity, a reflection of tighter financial controls, and a high debt service coverage ratio. Debt service coverage measures a system s ability to generate enough revenue to cover its debt payments. This report presents a strong, comprehensive overview of PEC s performance the past few years, said PEC Board President Dr. Patrick Cox. This gives us a clear picture of our successes and is the culmination of a number of sound, strategic business decisions. Adding to the strong financial performance was tremendous improvement in reducing the Co-op s bad debt and writeoff amounts. PEC s writeoffs now compare favorably with peer cooperatives and meet national standards. While the Co-op grew more than 3 percent in 2013, electric service reliability continued to be a major strength. PEC has some of the lowest average outage times in the country among cooperatives, and the Co-op is maintaining those low outage times while building infrastructure in some of the fastest-growing counties in the nation. I m very pleased with the results of the report and the Co-op s overall standing, PEC Chief Executive Officer John D. Hewa said. The KRTA provides operational and growth October 2014 information and a heavy emphasis on financial statistics. It s a valuable tool to help us see our progress and plan our activities for continued future improvement. Hewa said the Cooperative will continue to look for additional ways to reduce controllable expenses and said the ultimate goal is to maintain PEC s hallmark service while reducing the price members pay for electricity. We have a strong financial foundation for exploring rate reductions, Hewa said. Members can view the report at pec.coop/docs/krta2014. New website supports economic development PEC has launched an economic development website marketing the Hill Country, one of the first cooperative-run ventures of its kind in Texas. The new website com showcases available properties in the region that could be used for purposes such as office space, retail, warehouse or manufacturing locations. Corporate site selectors can use the website to more easily find properties that best fit their needs, sorting choices by population density, education level or proximity to airports. The Co-op s Community and Economic Development staff will maintain the website at no cost to the featured communities. A regional website is more practical than each community creating their own, said PEC Community and Economic Development Supervisor Trista Fugate. When the cities in our service area partner up on a site like this, we can be more attractive to corporations considering the region. Commercial property owners who would like to have their property listed on the site should CED@peci.com for more information.

8 Pedernales Electric Cooperative business news for member-owners October 2014 Energy News section now on PEC website New system will pinpoint PEC vehicle locations PEC now has an Energy News web page to showcase Cooperative news events. The new section is accessible from the PEC website s home page. The Energy News web page gathers all Co-op news items in one place, accompanying each with a photo or graphic illustrating the story. Recent PEC Twitter posts are also on the page, along with links to electric industry news releases and the Co-op s online Power Outage Center. PEC s Energy News page gathers PEC news stories, Twitter posts and other industry news in one location. Our Energy News page gives our members one convenient spot to learn what s going on in the PEC service territory and in the electric industry, said PEC Vice President of Communications and Business Services Michael Racis. All the news items we post are easy to share on social media or by , and we encourage our members to do so. The Energy News page is regularly updated as events unfold across the Cooperative. PEC is installing an automatic vehicle location (AVL) system in every PEC vehicle. The new system will potentially improve safety and efficiency at the Cooperative, saving money and improving outage restoration times. Co-op staff will be able to see where PEC resources, from sedans to service vehicles, are at all times. The system ties into a vehicle s main computer, returning information about the location, driving behaviors, mileage, idling time, bucket and boom use and mechanical trouble codes. The AVL system will provide the Co-op a wealth of data about resources in the field. This will help PEC manage its vehicle fleet more efficiently, tracking everything from fuel consumption to maintenance costs. Because the system is tied into the vehicle s computer, the AVL system will also transmit alerts for mechanical problems, helping to save money by addressing these issues before they become more costly. In the future, the AVL system will be integrated with the new Outage Management System to create a seamless user experience. System inventory project continuing smoothly Davey Resource Group (DRG) contractors continue to document PEC s facilities to help increase electric service reliability. The contractors providing this service are continuing their survey work in the Bertram, Blanco, Canyon Lake, Horseshoe Bay, Johnson City, Junction, Kyle and Marble Falls portions of the PEC service area. They are in clearly marked vehicles and carry letters of identification from the Co-op. PEC continues to use postcards, phone calls and local media to alert members as to when DRG personnel are in the area. BY THE NUMBERS Members 221,542 Active accounts 262,179 Average residential bill June 2014 $ July 2014 $ August 2014 $ Average residential use June ,218 kwh July ,539 kwh August ,703 kwh As of Aug. 31, Bills and kwh figures are averages of all residential members. Your bills and kwh use may vary according to your electric use patterns and billing periods.

9 Spotlight on Excellence Entry Form #498 NRECA Voting Member Classification * Category * Distribution Cooperative: more than 90,001 meters 6. Best Special Publication Entry Title * I wish to receive Judges' comments on this entry Entrant's Name * Cooperative * PEC Quarterly Yes David Munoz Pedernales Electric Cooperative Mailing Address P. O. Box 1 Johnson City, TX United States * david.munoz@peci.com Phone Number * (830) Names of others (freelancers or organizations) involved in the project, if applicable Describe your/the co-op's role in the The newsletter is a quarterly bill insert produced in-house by staff

10 project * Describe others role in the project (Reference outside sources of material, including templates; pre-existing Web tools and apps; information from outside groups, such as Straight Talk or Touchstone Energy; stock photos and music, etc.) * Circulation or Number of People Reached * with the goal to keep information brief, succinct and easy to understand. A designer, Rachelle Baker, and writer, David Munoz, team up to decide what is best conveyed through an infographic, chart, box or story. Printing is contracted out as is insertion. 221,000 members quarterly Number of Attendees * Project s Budget * Target Audience(s) * Approximately $32,000 annually for printing and insertion. The target audience is PEC members. Project's Objective * PEC serves suburban Austin, one of the fastest-growing regions in the country; the Co-op added nearly 10,000 members in New members moving into PEC territory are unaware of the cooperative business model unaware PEC is their business. PEC Quarterly is dedicated to informing members about business decisions and business news and to reinforcing the Cooperative Difference to PEC members. PEC Quarterly contains short, precisely-focused information that aligns with any of eight messaging keys underlying the publication. The keys are: Expertise, Member Focus, Service Excellence, Corporate Information, Business Information, Industry News, Employee Interest and Web Features. Information is presented in easy-to-digest blocks, oftentimes accompanied by infographic elements to portray content quickly and easily. Restrictions/Limitations * Because the publication only goes out four times a year, it is not always available as a vehicle to promote or deliver fast-moving information. Describe why you chose this type of social media and how you used it * Provide a brief summary that states the purpose of the event, how the program was implemented, and results and how they were measured * Provide a brief summary that states the purpose, how the program was implemented, and results and how they were measured using the RACE framework. Each component has its own word limit noted below. Research * Action * Communication * Evaluation *