TheCooperativeDifference

The foundations for the success of the rural electric cooperative program in America

can be found in the Seven Principles that are the framework of every cooperative.

Seven Cooperative Principles

• Voluntary and Open Membership • Democratic Member Control • Members’ Economic Participation • Autonomy and Independence • Education, Training and Information • Cooperation Among Cooperatives • Concern for Community

Electric Cooperatives

They are doctors. Some are lawyers.Some are teachers. Still others are farmers.But all 400,000 of these people have onething in common — they’re members of the25 independently owned and operatedelectric cooperatives serving Ohio.

From their inception, electric coopera-tives have been guided by one principlethroughout — an emphasis on people, notprofit.

It’s that principle which allows localpeople to ensure for themselves the bestpossible rates and service quality to meettheir needs. These self-determined peopleare in charge of their futures because theyhave their own interests at heart.

Local people who are committed toserving the electricity needs of themselvesand their neighbors: That’s the electriccooperatives of Ohio.

1

Electric

cooperatives

were born of

the exercise of

self-reliance by

people who wanted

the benefits of

electricity.

The CooperativeDifference

Rural People Control Their Energy Futures

It is caring for people that led tothe creation of Ohio’s electric coop-eratives. In the 1930s and ’40s,almost no one living in the Ohiocountryside had electricity. The bigpower companies said the distanceswere too far; serving the rural areaswasn’t economical. So rural folks,partnering with Washington throughloan guarantees, chose to controltheir energy future by forming theirown power companies — the electriccooperatives.

Today, there are 25 electric cooper-atives serving Ohio (one is based inMichigan), with nearly 400,000members. The power lines and generating plants of electric cooper-atives are much like those of otherelectric utilities.

The electric cooperatives’ differ-ence lies in their ownership, whichin turn creates a culture unique inthe utility industry. Because themembers own the cooperative, thegoal of the organization is not tomaximize profitability but only tocover its costs. Revenues that exceedexpenses are returned to the mem-bers in the form of capital credits.

But even more important is thelocal ownership and local controlbuilt into the cooperative structure.The members of an electric cooper-ative are the owners of their utility.

As an owner, you are in a betterposition than anyone else to deter-mine what you want from yourpower company. And you can makeyour wishes known through thedemocratic process of electing aboard of trustees that representsyou. The board is composed of localcommunity leaders who are chosenamong the members at the coopera-tive’s annual meeting. The boardhires the manager who oversees theday-to-day operation of the utility.

All electric cooperative membersare invited every year to their coop-erative’s annual meeting. It is simi-lar to an annual stockholders’ meet-ing. The cooperative notifies allmembers when the meeting will beheld. This is an opportunity forthem to participate directly in theaffairs of their power company, aprivilege only 10 percent of the U.S.population enjoys.

There’s another major difference be -tween electric cooperatives and theirmunicipal and investor-owned coun-terparts. It’s a matter of consumerdensity. This results in a much higherinvestment per consumer because ofthe greater distances between consumers — more than double theinvestment per consumer than Ohio’sseven investor-owned utilities (IOUs).Members of electric cooperatives arespread pretty thin, averaging only 7.4

2

per mile of line, while investor-ownedutilities average 34 customers permile of line.

Their electric use profile also isquite different. Electric cooperativesfind that 57 percent of their elec-tricity goes to residences and farms.Only 43 percent of electric use is bycommercial and industrial establish-ments. It’s just the opposite forinvestor-owned and municipal electricutilities; only 36 percent of theirelectricity use goes to comparativelylow-intensity residential and farmaccounts. Their big business is donewith commercial and industrialaccounts.

The revenue generated per mile ofline is a good illustration of this difference. Nationally, electriccooperatives average about $15,000in annual revenue per mile of line.By contrast, investor-owned utilitiestake in more than $75,500 for eachmile of line — five times as much.

And without a doubt, electric coop-eratives have the toughest servicechallenge of all the state’s electrici-ty providers. They serve nearly 40percent of the land area of Ohio,including some of the most difficultterrain, yet only 6 percent of Ohio’spopulation live in these areas. Theother half of Ohio, the part with 94

percent of the people and most ofthe state’s commerce and industry,is served by the seven investor-owned and 85 municipal electric sys-tems.

Despite these economic disadvan-tages, the members of the electriccooperatives in Ohio have realizedsome remarkable benefits. Several ofOhio’s electric cooperatives can boastrates lower than many of the state’sinvestor-owned electric utilities.

3

In the 1930s and ’40s, ruralfolks, partnering withWashington through loan guarantees, chose to controltheir energy future by forming their own powercompanies — the electriccooperatives.

Excellent customer serv ice and cost-of-service based rates continue to be thehallmark of your electric cooperative. Customer satisfaction surveys showcooperatives consistently lead the competition. In fact, recent AmericanCustomer Satis faction Index (ACSI) re sults show Ohio’s co-ops outpace theelectric industry average by 9 to 10 points.

Why do cooperatives consistently top the competition? One primary reason —the members of the cooperative also are the owners of the cooperative.Also, cooperative em ployees live and work in their local communities. Theyoften go above and beyond what is ex pected, not only because they care butalso because they see you as their neighbor.

4

5

The electric utility industry has threemain components:

GENERATIONThe cost of generat-ing electricity atthe power plantrepresents abouthalf of your bill.Your power is pro-duced by BuckeyePower, Inc., a gen-eration and trans-mission cooperativeowned by the 25 distribution coopera-tives serving Ohio.

TRANSMISSIONA long-distancehigh-voltage “grid”moves large vol-umes of bulk powerto your local substa-tion. Transmissioncosts are about 5percent of yourelectric bill.

DISTRIBUTIONThe local lines yousee in your neigh-borhood distributepower from substa-tions to the meteron your house.

Buckeye Power—Your Source of Power

Early leaders had thevision that the Ohio elec-tric cooperatives shouldhave their own generatingplants. Through BuckeyePower, a power generatingand transmission co-opowned by the local distrib-ution cooperatives (likeyours), co-op membersown units 2 and 3 at theCardinal Station, a coal-fired power plant locatedabout seven miles south ofSteubenville.

The two units came online in 1968 and 1977,respectively, and have acombined 1,230 mega-watts (MW) of low-costgenerating capacity. And,thanks to an investment ofnearly $1 billion in envi-ronmental enhancements,the Cardinal units rankamong the cleanest in thecountry.

Through a unique jointownership and operatingarrangement, BuckeyePower contracts withAmerican Electric Power,the owner of Cardinal Unit 1, to operate units 2 and 3.

Additional generation dedicated to serve Ohio’selectric co-ops includesthe Robert P. Mone Plant,dedicated in 2002.Located in Van WertCounty, its 510 megawattsof power, provided bythree natural gas or oil-fired combustion turbines,are there to meet peakelectric demand periods.

Ohio’s ElectricCooperatives’ generationmix also includes:• 55 MW of hydro powerfrom the New York PowerAuthority.• 200 MW of coal-firedgeneration through anownership in terest andassociated rights in theOhio Valley ElectricCorporation (OVEC).• 200 MW of peakingpower from single-cycle,natural gas-fired combus-tion turbines at a plant inGreenville, Ohio.• 9.6 MW from landfillmethane gas at theSuburban Regional Landfillnear Mt. Perry, Ohio, andthe Hancock CountyLandfill near Findlay.• 4.45 MW from agriculturalbiogas projects in Ohio.

6

Technology

important to

the future

Electric cooperatives usecutting-edge technology toserve their members’ needs.And Ohio’s 25 electric coop-eratives are constantly seek-ing new technology applica-tions to improve their indus-try-leading service.

Distribution lines use high-tech instruments to monitorthe flow of electricity andmaintain the power qualitynecessary to run sophisticatedequipment demanded bytoday’s commercial andindustrial customers. Hondaof America manufacturingplants at Marysville, RussellsPoint and Anna are amongthe many high-tech facilitiesthat depend on Ohio electriccooperatives for their elec-tricity.

Computerized mapping systems guide crews quickly

and efficiently. GPS systemsare used to pinpoint loca-tions for crews respondingto calls. SCADA (SupervisoryControl and Data Acquisition)systems are capable of auto-matic and constant report-ing of distribution line con-ditions, including voltageand amperage, among otherthings. Computerizedswitching systems provideinstantaneous backup forloop-fed substations.

Advanced metering infra-structure (AMI) is an excitingtechnology used by many ofOhio’s cooperatives. AMIbrings special services toindividual consumers,including automatic outagereporting, meter readingand, in some cases, the abil-ity to monitor their ownenergy use.

7

It has long been said that the elec-tric cooperatives, having been bornin politics, would die in politics.

Over the years, electric coopera-tives have developed an effectivegrassroots political outreach toconvey the rural electric con-sumer’s interests to their govern-mental representatives. The OhioLegi slature has responded with apublic policy of endorsing the coop-eratives’ rights to self-determina-tion.

A good example of grassroots politi-cal advocacy in action was the wayelectric cooperative consumer voic-es came together in opposition toplans that would regulate carbondioxide emissions from powerplants.

After the U.S. EPAannounced its plansto implement regula-tions affecting howelectricity could beproduced, electriccooperatives acrossthe state and thenation asked theirmembers to speakup for affordable,reliable electricity.

The regulations would threatenboth of those priorities.

More than 122,000 Ohio electriccooperative members and support-ers of affordable electricity sentcomments to the EPA asking it towork with electric cooperatives inrecrafting the proposals in a waythat kept the American consumer inmind. Nationally, more than 1.2million comments were sent in byelectric cooperative members.

Co-op members also have theopportunity to be politically activeby joining ACRE Co-op Owners forPolitical Action®, the politicalaction committee for electric coop-erative members. Ohio leads thenations in the number of memberswho have joined Co-op Owners.

GrassrootsIn Action

8

“Cooperation

among

cooperatives”

is one of

the seven

cooperative

principles

Ohio’s cooperatives arepart of the largestnational network ofelectric utilities inAmerica. Electric coop-eratives distribute elec-tricity over 47 statesand 75 percent of thegeographic territory ofthe United States.

The friendly atmosphere of rural Ohio carries

over to the attitudes of electric cooperative

employees. A member is seen as an individual

with specific needs, and cooperative

employees respond to you in a personal way.

The rates of Ohio’s electric cooperatives are,

on the average, lower than those of the

investor-owned utilities in Ohio.

Local People, Affordable Electricity

Buckeye Power and Ohio Rural Electric Cooperatives, Inc., the serviceassociation for the state’s electric cooperatives, were created by Ohiodistribution cooperatives. These two co-ops and your distributioncooperative have links with many national organizations that provide

resources beyondwhat any one organi-zation might easilydo on its own.

The National RuralElectric CooperativeAssociation (NRECA),headquartered inArlington, Virginia,provides training andeducation programs,and legislative, pub-lic relations andmanagement ser-vices, as well as

other programs that benefit electric cooperative consumers acrossthe country.

But there’s another, sometimes unmentioned, characteristic of electricco-ops that has allowed them not only to survive but prosper and beregarded today as industry leaders: our ability to “network,” to freelyand efficiently share among one another the best ideas, programs andpractices that allow us to meet the challenges of serving the members’interests.

®®

®

®

®

®

®

®

®

®

®

®

®

®

®

® ®

®

®

®

®

®

®

®

®

®

®

®

® ®

®

®

®

®

®

®

®

®

®

®

®

®

®

®

9

Not-for-profit Utilities Put Focus OnInnovation, Cooperation

Ohio has made many contributions to the cooperative net-work when it comes to both new ideas and our willingnessto share them. From the Cardinal Station agreement in the1960s to a lineman apprentice training program, we arecontinuing a tradition of innovation and cooperation thathas benefited rural Americans everywhere.

10

11

All funds that electric coopera-tives get areloans, and thecooperativeshave an excellenttrack record ofpaying them back.

The electric utility business is capital intensive,meaning it requires a great deal of expensiveequipment, such as power plants, poles, trans-formers, substations and lines to do business.Because of these costs, electric cooperativesneed ready sources of money. Basically, coopera-tives have three choices: They can obtain loansfrom the Federal Financing Bank (FFB), whichare guaranteed by the Rural Utilities Service(RUS); from cooperative lenders, such as CFC orCoBank; or from private resources like banks.

The lion’s share of borrowing is done throughRUS. Here, money is borrowed from the FFB atan interest rate based on the cost to the U.S.Treasury plus one-eighth of 1 percent. Congresshas authority to impose ceilings on FFB lending.

CFC is the National Rural Utilities CooperativeFinance Corporation. It is an independent, self-help financing institution created by electriccooperative systems across the country to pro-vide supplemental loans.

CoBank specializesin providing finan-cial solutions andleasing services tocooperatives,agribusinesses, farmcredit associations,and rural communi-cations, energy andwater companies.The bank alsofinances agriculturalexports.

Access to financial resources

They are close to their members andalways will offer services that enhancetheir members’ lives. You can be sureyour cooperative’s not-for-profit statushelps it keep its focus on your needs.Your cooperative’s years of buildingtrust and dependability will continueto reassure you that it has your bestinterests at heart, even as the electricindustry changes.

The future is

bright for

Ohio’s electric

cooperatives.

12

Edition: 11/15

Ohio’s Rural Electric CooperativeService Areas

1 — North Western2 — Tricounty3 — Paulding-Putnam4 — Hancock-Wood5 — North Central6 — Firelands7 — Lorain-Medina8 — Midwest9 — Mid-Ohio

10 — Darke11 — Pioneer12 — Logan13 — Union14 — Consolidated15 — Holmes-Wayne16 — Carroll17 — Frontier18 — The Energy Co-op

(Licking)

19 — Guernsey-Muskingum20 — South Central21 — Washington22 — Butler23 — Adams24 — Buckeye25 — Midwest Energy

(based in Michigan)

I77

I70

I70

US33

US33

I70

I70

I71

I71

SR32SR32

SR50

SR32/124

US35

US35

US35

US35US35

I75

US30

I77US30

I77

I71

I71

I75

US30

US23

US23

US23

US23

US33

US30

US33

I75

I75

SR15

I80/90

I80/90

I90

I90

I80I80

WILLIAMS FULTON LUCAS

DEFIANCEHENRY

WOOD

OTTAWA

SANDUSKY

PAULDING

PUTNAM

VAN WERT

ALLEN

MERCER

DARKE

AUGLAIZE

HANCOCK

HARDIN

LOGAN

SHELBY

MIAMI CHAMPAIGN

UNION

MARION

SENECA

WYANDOT

HURON

CRAWFORD

ERIELORAIN

MORROW

DELAWARE

PREBLE

GREENEMONTGOMERY

BUTLER

HAMILTON

WARREN

CLERMONT

BROWN

CLINTON

HIGHLAND

ADAMSSCIOTO

PIKE

ROSS

LAWRENCE

FAYETTE

PICKAWAY

FAIRFIELD PERRY

HOCKING

VINTON

JACKSON

GALLIA

MEIGS

ATHENS

CLARKMADISON FRANKLIN

LICKING

KNOX

MUSKINGUM

WASHINGTON

MONROENOBLE

MORGAN

GUERNSEY BELMONT

HARRISON

JEFFERSON

TUSCARAWAS

CARROLL

COSHOCTON

HOLMES

RICHLANDASHLAND

WAYNE

MEDINA

STARK

COLUMBIANA

MAHONING

TRUMBULL

ASHTABULALAKE

GEAUGA

PORTAGESUMMIT

CUYAHOGACLEVELAND

TOLEDO

CINCINNATI

DAYTON

COLUMBUS

1

2

3 4

425

5 67

8 9

14

18

15

17

16

10 1112

13

1920

20

2221

2324

Cardinal Generating Station

Kyger Creek Generating Station

Clifty Creek Generating Station

Biodigester

Biodigester

Biodigester

Landfill

Robert P. Mone Peaking Plant

Greenville ElectricGenerating Station

6677 Busch Blvd.Columbus, OH 43229

“Touchstone” is a sign of quality.The brand name conveys a promise of

Accountability

Innovation

Integrity

Commitment to community

Electric cooperatives have created a national brand image for electric cooperative service.