UMATILLA ELECTRIC COOPERATIVE 2016 ANNUAL MEETING MINUTESThe 79th Annual Meeting of the members of the Umatilla Electric Cooperative was held at the Hermiston Conference Center at 415 S. Highway 395, Hermiston, Oregon, on April 16, 2016.

President Jeff Wenholz presided, and UEC Attorney Tom Grim confirmed that a quorum was present as required by the UEC Bylaws.

A motion was made, seconded and carried to dispense with the reading of the Minutes of the Annual Meeting held April 18, 2015, and approving the same as written.

Board of Director candidates from Districts 1 and 2 were introduced. A call for casting of ballots from Districts 1 and 2 was made, after which casting of the ballots was closed.

President Wenholz welcomed attendees to the 79th UEC Annual Meeting. This year’s Annual Meeting theme is “Building for the Future” because the year 2015 was one of the most eventful in our history. Umatilla Electric continues to expand and rebuild, at a pace not seen at UEC in 40 years. We also completed our first utility-scale power generating plant and now have six acres of solar panels converting sunshine to electricity. President Wenholz conveyed that the rapid growth is paying its own way and despite the process of refurbishing our aging system, the overall rate increase was limited to less than 2%. Last year was also the final year for our General Manager & CEO, Steve Eldrige, who retired after 44 years of service. Robert Echenrode was named the new General Manager & CEO and has served our members as the Engineering Manager for the last three years. Robert has a significant background in engineering and utility management.

MINUTES

ATTENDANCE

NOMINATIONS

PRESIDENT’S REPORT

Auditor Julie Desimone presented UEC’s 2015 audit report; financial highlights were provided. Auditor Desimone advised that UEC was found to be in compliance with ap-plicable accounting standards, which result-ed in a clean audit.

General Manager & CEO Robert Echenrode gave an overview of his background in the electric industry, beginning in 1988. Robert’s experience has equipped him with knowledge on the peaks and valleys that cooperatives can experience and how to position UEC strategically for the maximum member benefit. Investments in our infrastructure and cooperation with the Bonneville Power Administration on their system improvements means increased reliability for our members. In a year full of growth and accomplishments, our employees also achieved a second straight year without a lost-time accident – the longest stretch in our history.

Tom Grim, UEC Attorney, announced the elec-tion results: Lee Docken was re-elected as Di-rector for District No. 1 and Jeff Wenholz was re-elected as Director for District 2.

President Wenholz announced the floor was open to discuss any new or old business. There was no old or new business.

There being no further business before the membership, the meeting was adjourned at 5:28 p.m.

AUDIT REPORT

GENERAL MANAGER’S REPORT

ELECTION RESULTS

NEW OR OLD BUSINESS

ADJOURNMENT

Directors present were: Jeff Wenholz, Bryan Wolfe, Glenn Rohde, Lee Docken, Robert MacPherson, RoseEtta Ansotegui, and John Otis. General Manager and CEO Robert Echenrode, UEC Attorney Tom Grim, and UEC Auditor Julie Desimone were also in attendance.

ABOUT US OUR MISSIONIncorporated in 1937 through the Rural Electrification Act, Umatilla Electric serves portions of Umatilla, Morrow and Union counties. Over 70 percent of the co-op’s power serves the commercial and industrial sectors, providing a base for ongoing economic development and community improvement.

Umatilla Electric Cooperative is a member-owned business that sells energy and invests in and supports other services to improve the quality of life in our communities.

Hermiston Office: 750 W. Elm, 541 567-6414

Boardman Office: 400 N.E. Eldrige Drive, 541 481-2220

UEC

2016 was another year of transformation for Umatilla Electric Cooperative, and one of the strongest in our history. We began the year opening our Boardman Operations Center and energizing our first solar generating plant, and here are the highlights as the year progressed:

CONTINUED STRONG GROWTH. Our power sales rose 13 percent from the previous year, to 1.8 billion kilowatt hours. Operating revenue rose to $104 million, up from $87 million the previous year.

SYSTEM UPDATES. We have broken ground on our 31th substation, called Hermiston East, which will improve reliability and accommodate growth for UEC and Hermiston Energy Services. We also plan to build a 115-kilovolt transmission line from McNary to our Hermiston Butte Substation to improve reliability, especially during summer and winter peaks. We also completed a three-year project to upgrade service on Weston Mountain.

TECHNOLOGY UPGRADES. We have fully converted to a digitized map of our system that our linemen and other staff can access by mobile devices in the field. Because it instantly depicts thousands of meters, poles and other devices on our system, we can pinpoint outages and other issues with greater speed and accuracy.

As a member-owned cooperative, our profits, called margins, stay right here in the community as we work to return them to you each year. In a mailing sent in mid-December, UEC returned about $3.6 million to our membership, which represents the remaining 1998 and 1999 margins. This April, we returned another $1 million to members who received power in 2015, representing a portion of 2015 margins.

Since we paid our first Capital Credits in 1960, more than $60 million has returned to members.

As we celebrate our 80th Anniversary, we look forward to many more years of “keeping the lights on” for you!

7 Cooperative Principles

Voluntary & Open

Membership

Democratic Control

Members’ Economic

Participation

Independence

Educations, Training &

Information

Cooperation

Community

Powered By The

Robert EchenrodeGeneral Manager & CEO

Robert MacPhersonBoard President

REACHING NEW HEIGHTS: Celebrating 80 years

A N N U A L R E P O R T 2 0 1 6

S U M M A R Y

Welcome to our 2017 Annual Meeting! Thank you for your interest and investment in Umatilla Electric Cooperative.

U M A T I L L A E L E C T R I C C O O P E R A T I V E

In March 2016, Robert Echenrode, a Columbus, Ohio native who had served as UEC Engineering Manager since 2013, became the fourth general manager in UEC history. The previous general managers were Ray Woolley, hired in 1939; Russ Dorran, promoted in 1971; and Steve Eldrige, promoted in 1990.

Newly-retired General Manager Steve Eldrige received the Northwest Public Power Association’s Paul J. Raver Community Service Award. He received similar honors from the Oregon Rural Electric Cooperative Association and National Rural Electric Cooperative Association.

RETIRING EMPLOYEES IN 2016:• Steve Eldrige, 44 years of service• Pam Martin, 40 years• Vicki Zumwalt, 26 years• Cindy Finlayson, 11 years• Arla Smith, 9 years

OPERATIONS & ENGINEERINGUEC maintained 99.964% reliability for the year, which equates to just over 15 minutes more than the previous year. UEC’s reliability is based on strong preventative maintenance programs for our substations and power lines, and an aggressive tree trimming schedule. In 2016, UEC trimmed or removed more than 6,347 trees away from power lines and cleared 1,110 spans of conductor.

UEC’s newly implemented Outage Management System (pictured below) improves our restoration process by predicting the location of an outage. The system provides a near “real-time” outage map available to viewers online at umatillaelectric.com, a convenient way to see the location and status of an outage.

UEC received a $250,134 federal grant in July to help offset the cost of our $2.5-million solar array at Umatilla. UEC received the second largest of more than 800 grants awarded by the U.S. Department of Agriculture for projects in every state.

ENERGY EFFICIENCYUEC completed 115 free home energy audits, and 118 residential members took advantage of rebate, heat pump or weatherization programs; and 45 members participated in commercial, industrial or irrigation programs.

Overall, energy savings totaled 18,015,831 million kilowatt-hours, or about 1,072 average-sized homes for one year.

“Such a significant investment on the part of the USDA shows we are on the right track with our solar development program.”

- Robert Echenrode

“UEC’s reliability is based on strong preventative maintenance programs for our substations and power lines, and an aggressive tree trimming schedule.”

- Steve Ferraro, Operations Manager

OUR YEAR AT A GLANCE CELEBRATING 80 YEARS OF SERVICE

UEC energizes its first 157 miles of power lines in July

1938

UEC helps create PNGC Power; acquires share of

Boardman coal-fired plant

1975

UEC constructs headquarters building on North First Street, Hermiston

1955

UEC promotes home weatherization and irrigation efficiency programs

1982

Windstorm knocks out most of UEC

system with over 80 mph winds

1990

First member-owned solar array energized2016

New Boardman office opens2016

UEC begins buying wholesale power

from Bonneville Power Administration

1942

UEC merges with Eastern Oregon Electric Cooperative1965

Umatilla Electric Cooperative

created in June

1937

UEC helps city create Hermiston Energy Services2001UEC creates Eastern Oregon Telecom, NoaNet

broadband, and Lightspeed Networks

2000

1993UEC offers satellite television service to members

Pictured Above: A collection of art celebrating the anniversary of the National Rural Electric Cooperative Association. These pieces honor the first artwork created for electric cooperatives originally by Lester Beall, a renowned Midwest graphic designer, in 1937.

2013

SmartHub is launched allowing members to track and pay bills online

UEC begins using automated meter technology

2009

UEC headquarters move to current building on W. Elm Ave. in Hermiston1981

NEW PROGRAMSNo more guesswork. No more due dates, late fees or deposits. The new PowerUp Prepay Program is the latest option for paying your electric bill. Pay in advance for the electricity you will use and choose when and how you make your payments. Sign up for SmartHub to set up alerts and monitor your usage anytime, anywhere.

Visit one of our office locations for more information.

PresidentRobert MacPhersonStanfield, District 4

Director since 1999: Robert MacPherson, in addition to serving as the UEC Board President since 2016, has been Secretary-Treasurer of Oregon Rural Electric Cooperative Association, which serves all 18 Oregon electric co-ops. He and wife Serena live near Feedville Road, Stanfield, and have three grown children. He is a former teacher and school administrator with the Stanfield Schools.

Vice President Jeff WenholzIrrigon, District 2

Director since 2004: Jeff Wenholz, an Irrigon businessman, attended schools in Irrigon and Boardman and majored in accounting at college. Married to Melanie, he has served on the Morrow County Planning Commission, Oregon Citizens Advisory Commission for the Umatilla Chemical Depot, the Morrow County Solid Waste Advisory Commission and Irrigon Multi-Cultural Arts Center.

Secretary-TreasurerRoseEtta AnsoteguiPendleton, District 6

Director since 2005: RoseEtta Ansotegui has lived in the Pendleton area since 1969 and on the Umatilla Indian Reservation since 1971. RoseEtta has 38 years of work experience, and spent 24 years as the Academic Assistant for science, math and computer science departments at Blue Mountain Community College. A mother to two grown daughters, she has volunteered with the United Way Campaigns and Pendleton Roundup.

Lee DockenBoardman, District 1

Director since 1986: Lee Docken has lived in Boardman since 1970. He and his wife, Pam, have two grown children and have been active as members of the Boardman Chamber of Commerce, Kiwanis Club of Boardman and The Elks. Docken served for a number of years as chairman of the Boardman Planning Commission. He owns and operates Mountain Valley Land Company Realtors.

Bryan WolfeHermiston, District 3

Director since 1997: A Wallowa native, Wolfe and wife Lou Ann moved to the area in 1975, raising four boys, and operating an irrigated farm and custom feedlot north of Hermiston. Wolfe represents Oregon as a National Rural Electric Cooperative Association board member and has served as president of the state association board. He currently serves on the Oregon Hanford Cleanup Board and Farmers Ending Hunger, and has served on the governor-appointed Oregon Energy Facility Siting Council.

Glenn RohdeEcho, District 5

Director since 1990: Glenn Rohde’s grandparents settled land near Echo and built a farmhouse in 1912. Rohde has worked the mostly dry-land wheat farm since being discharged from the Army in 1959. He and his wife Joyce have three children. Glenn has served on the boards of Echo School Board, Umatilla Chapter of the Oregon Wheat League and Echo Rural Fire District.

BOARD OF DIRECTORS2017

John OtisHermiston, District 7

Director since 2008: John Otis of Hermiston works as an insurance agent and previously worked for Pendleton Grain Growers. He and wife Connie, who have two grown children, will celebrate their 50th wedding anniversary in October. An Army veteran and member of the American Legion, Otis is a member of the Gideons International, past director of Eastern Oregon Missions (Agape House), and past president and current board member of the National Association of Insurance and Financial Advisors.

"I thank Umatilla Electric and its directors for their generous donation for the Cinco de Mayo celebration. UEC has been a great supporter of this event and our large Hispanic community since it started in Hermiston several years ago. This celebration has gone a long way toward making ours an inclusive community."

- George Anderson, Hermiston Community Member

2016 H IGHLIGHTS

MEMBER SERVICES & COMMUNITY INVOLVEMENTThe UEC Board made contributions to Farmers Ending Hunger, Boardman Pool and Recreation Center, Eastern Oregon Women’s Coalition, American Cancer Society Relay for Life, Desert Arts Council, Farm-City Pro Rodeo, SAGE Visitor Center, Umatilla and Morrow County Fairs and NRECA International. More than 100 agencies and groups received funding during the year.

Two students received an all-expenses-paid trip to Washington, D.C. in June as part of the National Rural Electric Cooperative Association’s Youth Tour. The high school juniors from Boardman and Hermiston joined 1,700 other students from across this U.S. for the 52nd annual event.

UEC awarded more than $30,000 in college scholarships in May. Our summer Hydromania Camp marked its 19th anniversary. Six students represented UEC at the Idaho Youth Rally in July.

More than 90 local businesses now offer discounts through UEC’s Co-op Connections Card.

UEC redesigned and launched a new website designed to be mobile device responsive.

HUMAN RESOURCES In 2016, UEC employees worked 142,786 consecutive hours without a lost-time injury and received a safety achievement award from the Northwest Public Power Association based on safety performance.

HR facilitated the hiring of 11 new employees and introduced a streamlined online application process. UEC now has 83 employees.

ASSETS 2016 2015UTILITY PLANT

Electric Plant in Service $173,976,119 $148,775,292 Construction Work in Progress 12,019,957 22,454,903Retirement Work in Progress 209,053 29,744Electric Plant Acquisition Adjustment 109,028 109,028

TOTAL UTILITY PLANT 186,314,157 171,368,967Less Accumulated Depreciation 60,954,196 58,105,179NET UTILITY PLANT 125,359,961 113,263,788

NON UTILITY PLANT 10,511,257 9,929,611Less Accumulated Depreciation 5,794,157 5,050,423NET NON-UTILITY PLANT 4,717,100 4,879,188INVESTMENTS Investments in Associated Organizations 7,168,612 6,785,826 Other Investments 4,634,326 4,290,453TOTAL INVESTMENTS 11,802,938 11,076,279CURRENT ASSETS Cash and Cash Equivalents 3,554,022 2,667,985 Accounts Receivable 12,741,944 9,850,624 Materials and Supplies 4,377,585 3,398,263 Other Current and Accrued Assets 885,823 1,976,801TOTAL CURRENT ASSETS 21,559,374 17,893,673

OTHER ASSETS Contracts Receivable 2,882,907 2,515,990 Deferred Tax Asset 0 175,000 Deferred Debits 2,106,948 2,338,962 Receivable from EOH Minority Interest 115,303 110,825TOTAL OTHER ASSETS 5,105,158 5,140,777TOTAL ASSETS $168,544,531 $152,253,705

LIABILITIES & MEMBERS’ EQUITY 2016 2015MEMBERS’ EQUITY Membership Fees $50,165 $49,400 Member Capital Credits 63,928,840 55,416,667 Other Equities 12,945,352 12,831,518TOTAL EQUITIES AND MARGINS 76,924,357 68,297,585

MINORITY INTEREST 1,475 141

LONG-TERM DEBT, LESS CURRENT MATURITIES RUS Mortgage Loans 55,676,120 45,411,897 CFC Mortgage Loans 10,210,982 10,901,236 Other Notes Payable 3,352,707 3,490,069TOTAL LONG-TERM DEBT 69,239,809 59,803,202OTHER NON CURRENT LIABILITIESDeferred Tax Liability 1,991,809 0Post Retirement Obligation 1,056,224 1,005,973TOTAL OTHER NON CURRENT LIABILITIES 3,048,033 1,005,973

CURRENT LIABILITIES Accounts Payable 8,548,757 7,782,089 State Revenue Tax Payable 1,477,930 1,210,316 Accrued Interest 366,231 41,495 Other Current and Accrued Liabilities 3,973,689 7,212,603 Current Maturities of Long-Term Debt 2,832,189 2,789,312TOTAL CURRENT LIABILITIES 17,198,796 19,035,815DEFERRED CREDITS 2,132,061 4,110,989TOTAL LIABILITIES AND MEMBER EQUITY $168,544,531 $152,253,705

UEC CONSOLIDATED BALANCE SHEET

FINANCIAL STATEMENTSREVENUES 2016 2015

Industrial $61,807,000 58.70% $43,950,914 49.90% Irrigation 14,958,411 14.20% 16,156,358 18.30% Commercial 12,656,479 12.00% 12,271,317 13.90% Residential 12,573,088 11.90% 12,562,610 14.30% Seasonal/Domestic 1,234,099 1.20% 1,127,011 1.30% Other Income 965,437 0.90% 957,800 1.10% Patronage Capital 706,655 0.70% 547,391 0.60% Interest Income 276,366 0.30% 284,365 0.30%

Service Charges 171,859 0.20% 172,245 0.20%

Street Lights 55,996 0.10% 55,511 0.10%

TOTAL REVENUES $105,405,390 $88,085,522

EXPENSES 2016 2015 Purchase Power PNGC $67,474,125 73.00% $57,744,120 72.30% Purchase Power PRC 0 0.00% -748,265 -0.90% Operations and Maintenance 6,404,037 6.90% 6,317,369 7.90% General Administration 5,312,634 5.70% 4,476,066 5.60% Depreciation 4,922,002 5.30% 4,792,565 6.00% Interest and Other Expenses 3,415,413 3.70% 2,930,497 3.70% Billing and Member Services 3,170,030 3.40% 2,701,050 3.40% Taxes 1,797,823 2.00% 1,602,454 2.00%

TOTAL EXPENSES $92,496,064 $79,815,856

UEC REVENUE AND PATRONAGE

Purchasing Power from PNGC73%

Operations6.9%

Administration5.7%

Taxes2%Interest/Other

3.7%

Billing 3.4%

Depreciation5.3%

How it Was Used

Power Sources

79% Large Hydro

15% Non-Specified

5% Nuclear1% Other

Kilowatt-Hours Sold

2016

2010

2000

1990

1980

1970

1960

1,791,883,697 kWh

883,081,000 kWh

796,131,000 kWh

536,180,000 kWh

702,239,000 kWh

105,287,000 kWh

30,300,000 kWh

Miles of Powerlineby Decade

1937 1947 1957 198719771967 2017

157306 408

948

1,468

1,735

2,257

Industrial58.7%

Irrigation14.2%

Residential11.9%

Commercial12%

Other/Street Lights3.3%

Where it Came From

ASSETS 2016 2015NET NON-UTILITY PLANT $4,246,453 $4,391,901INVESTMENTS - At Cost

Investments in Associated Organizations 138,150 197,824Other Investments 4,036,562 3,711,678

TOTAL INVESTMENTS 4,174,712 3,909,502

CURRENT ASSETSCash and Cash Equivalents 384,221 65,680Accounts/Contracts Receivable 630,490 653,719Materials and Supplies 220,467 131,716Other Current and Accrued Assets 102,406 168,855

TOTAL CURRENT ASSETS 1,337,584 1,019,970OTHER ASSETS 479,707 548,835TOTAL ASSETS $10,238,456 $9,870,208

LIABILITIES AND MEMBERS’ EQUITY 2016 2015MEMBERS’ AND STOCKHOLDERS’ EQUITY

Capital Stock 3,500,171 3,500,171 Retained Earnings (774,409) 685,221

TOTAL MEMBERS’ AND STOCKHOLDERS’ EQUITY 2,725,762 4,185,392MINORITY INTEREST 1,475 141LONG-TERM DEBT, LESS CURRENT MATURITIES 3,875,217 4,060,626DEFERRED TAX LIABILITY 1,991,809 0CURRENT LIABILITIES

Accounts Payable 82,994 80,992Other Current and Accrued Liabilities 916,199 838,057Current Maturities of Long-Term Debt 645,000 705,000

TOTAL CURRENT LIABILITIES 1,644,193 1,624,049TOTAL LIABILITIES AND EQUITY $10,238,456 $9,870,208

RURAL SERVICES COMPANY (RSC)CONSOLIDATED BALANCE SHEET

MARGINS (LOSSES) FROM SUBSIDIARY OPERATIONS 2016 2015

Revenue (expense) - net - from RSC activity ($93,086) ($75,541)Revenue (expense) - net - from EOT's operations 113,433 (250,499)Revenue (expense) - net - from NEON’s operations 3,561 (5,171)Minority interest in net margins (14,846) 157,171

9,062 (174,040)

Patronage Capital Credits 0 53Interest Income 14,346 15,991Gain on Equity Investments in LightSpeed Networks 683,771 676,846Net Margins Before Income Taxes 707,179 518,850

Provision for Deferred Income Taxes (2,166,809) 0Net Margins for the Year (1,459,630) 518,850

Accumulated Deficit at Beginning of the Year 685,221 166,371ACCUMULATED DEFICIT AT END OF THE YEAR ($774,409) $685,221

RSC CONSOLIDATED STATEMENT OF REVENUE AND RETAINED EARNINGS