anniversary edition - iowa lakes electric cooperative · circus” started out in eastern iowa...

I O W A L A K E S E L E C T R I C C O O P E R A T I V E | 2 0 1 5 A N N U A L R E P O R T

CONTENTSA Look Back. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6Board of Directors and Corporate Officers. . . . . . . . . . . . . . . . .7At-a-Glance Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8President/CEO Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Report from Corn Belt Power Cooperative. . . . . . . . . . . . . . . . 11Report from Northwest Iowa Power Cooperative. . . . . . . . . . 13Report from the Iowa Area Development Group. . . . . . . . . . . 15Cooperative Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

2015 FINANCIAL STATEMENTSIndependent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . 24Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . 25Consolidated Statements of Operations . . . . . . . . . . . . . . 26Consolidated Statements of Patronage Capitaland Other Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Consolidated Statements of Cash Flows . . . . . . . . . . . . . . 28Notes to Consolidated Financial Statements . . . . . . . . . . 29

A ST

EP

BACK IN TIME

Iowa Lakes Electric Cooperative was formed by the 1986 consolidation of Buena Vista Co . REC, D .E .K . REC and Pocahontas Co . REC and the 1989 merger with Cherokee Co . REC .

TOGETHER

ANNIVERSARY EDITION

a n n u a l r e p o r t • 2 0 1 5 2

1878 Oct 15 edison electric, first electric light company organized in new York.

1879 Dec 31 the first public demonstration of incandescent lamps by edison.

1880 Jan 27 electric incandescent lamp patented by thomas edison.

1880 Sept 3 electric lights introduced to new York by thomas edison.

1935 April 8 president roosevelt signs emergency relief appropriation act, initiating rural electrification.

1935 May 11 president roosevelt creates the rural electrification administration.

1935 July 22 rea approves first loans to Georgia, Indiana and tennessee.

1936 Feb 15 the first rea-financed rural electric cooperative line is energized in Mississippi.

1936 April 14 125 farmers met at pocahontas’ Hronek Hall to talk about forming an electric cooperative.

1937 Jan 18 Buena Vista Co. reC incorporated.

1937 Jan 23 pocahontas reC was chartered.

1938 Jan 10 Federal Court upholds the right of five distribution cooperatives in Iowa to organize a federated cooperative to generate power for member systems.

1938 Jan 13 a volunteer committee from Dickinson, emmet & Kossuth Counties began steps to form a rural electric system.

1938 April 15 First lines of Buena Vista County reC energized.

1938 Oct 19 Begun as an experiment, “the rea Circus” started out in eastern Iowa demonstrating many labor-saving electric equipment to farmers and their families.

1939 Sept 16 First D.e.K. lines energized.

1940 Sept 12 reC approves loan to serve the one millionth rural electric customer.

1950 Drew Mclay, a free-lance artist for nreCa designed Willie Wirehand as a symbol to portray rural electric as the farmer’s hired hand.

1951 Feb 1

nreCa adopts “Willie Wirehand” as a symbol of rural electric cooperative power use.

1972 Aug 30 president nixon signs rural Development act, providing new credit resources to revitalize rural america.

1972 Dec 29 president nixon issues an executive order to discontinue rea direct loans.

A LOOK BACK

the Battery and Control room in the first edison electric lighting Station at pearl Street in lower Manhattan in 1882 (engraving with modern watercolor).

electric lines taking power to rural americans, ca. 1938 as part of the new Deal rural electric administration.

a meter installed on a rural home to measure the electricity delivered from a tVa (tennessee Valley authority) transmission line, ca. 1943-44.

Workmen installing a generator in the Norris Dam powerhouse. First major project of the Ten-nessee Valley Authority, created during the first 100 days of Franklin Roosevelt administration.

1985 the Iowa area Development Group (IaDG) was formed by Iowa reCs.

1985 Mar30 Board members from Buena Vista Co. reC, pocahontas Co. reC and D.e.K reC met for the first time to discuss consolidation.

1985 April 18 Buena Vista Co. reC, pocahontas Co. reC and D.e.K. reC boards select the name Iowa lakes electric Cooperative for the consolidated cooperative.

1986 Jan 1 Buena Vista Co. reC, pocahontas Co. reC and D.e.K. reC consolidate to form Iowa lakes electric Cooperative.

1986 Aug 6 national rural telecommunications Cooperative (nrtC) formed.

1986 Aug 27 Iowa lakes holds its first annual Meeting as a newly formed cooperative.

1987 Sept 30 rural tV C-Band service is launched.

1988 Nov 22 Cherokee County reC decides to bring a vote to the membership to merge with Iowa lakes.

1989 April 1 Cherokee County reC approved merger with IleC.

1989 May 1 Iowa lakes adopts the new national reC logo, symbolizing rural electrification.

1989 Iowa lakes Development Corporation (IlDC) was created to enhance employment and business expansion opportunities within Iowa lakes’ service territory.

1998 touchstone energy, the national branding for rural electric cooperatives was introduced.

1991 Oct 31 Freezing rain and snow in northwest Iowa toppled 80 poles in Iowa lakes’ service territory and left many without power.

1991 Nov 29 Iowa lakes suffers its worst storm damage ever with 1,000 broken poles and system-wide outages.

Touchstone Energy

Touchstone Energy

Touchstone Energy

Touchstone Energy

touchstone energy® became the national branding for rural electric cooperatives in 1998

3 I o W a l a K e S e l e C t r I C C o o p e r a t I V e

aug. 21, 1985, record-Democrat, pocahontas: It was an historic moment as Mike Joynt, reC attorney from Des Moines, opened the ballot box in the reC merger elections. Members of the three rural electric cooperatives — voted in favor of merging.

THROUGH THE YEARS — A LOOK BACK

1992 April 15 Hughes electronics and nrtC reach agreement for rural DBS distribution.

1993 Dec 16 First digital direct broadcast satellite, DBS-1 is launched.

1994 Iowa lakes began selling DIreCtV.

1997 Iowa lakes launches its first website on the Internet www.ilec.org.

2000 Nov 21 Iowa utilities Board (IuB) grants waiver of IaC20.4 (2) for bills to be delivered electronically — Iowa lakes presented the initial request before the IuB.

2001 Jan 1 Iowa lakes offers e-billing (Click-to-pay) services.

2001 Sept 1 remaining rural tV subscribers (less than 200) were sold to Federated rural electric, Jackson, Minn.

2001 Dec 1 Iowa lakes began offering DIreCWaY high-speed satellite Internet service.

2002 June Iowa lakes refunds $5 memberships and discontinues requiring a $5 membership fee.

2002 Oct 4 Iowa lakes moves into a new headquarters building.

2002 Dec 11 open house at Iowa lakes’ new headquarters facility - 702 South 1st Street, estherville.

2002 Dec 23 nrtC invests $29 million in WildBlue Communications.

2003 Dec 19 the Federal Communication Commission approved the merger of news Corporation and DIreCtV.

2004 June 2 DIreCtV & nrtC jointly agree to end nrtC’s exclusive DIreCtV distribution agreement.

2004 June 30 IleC sold DIreCtV franchise business.

2004 Sept 4 Iowa lakes’ Board of Directors approves to proceed with the conversion to an automated meter reading (aMr) system.

2005 May 1 Iowa lakes began offering WildBlue high-speed Internet service.

2005 Aug 31 Iowa lakes terminates nrtC Service Management Model (nSMM) agreement (Servicer agreement).

2005 Oct 1 First aMr bills rendered.

2006 Mar 1 Iowa lakes terminates nrtC retailer agreement.

the new headquarters facility in estherville, Iowa, 2002.

s Iowa lakes began selling DIreCtV in 1994.

the lakes Business park offers economic develop-ment opportunities through the Iowa lakes Development Corporation, created in 1989.

automated Meter reading (aMr) deployment began in 2005

a n n u a l r e p o r t • 2 0 1 5 4

Headquarters Groundbreaking

Construction on the massive wind turbine foundations began in 2008

a tight fit! the nearly 50-year old service center in emmetsburg became inadequate to house the larger utility trucks and equipment of the day. a new service center was completed in 2009.


1986-2011

FIRST IN THE NATION

THROUGH THE YEARS — A LOOK BACK

2007 Dec Iowa lakes was awarded $43 million in CreB financing from the IrS for the development of two renewable wind projects.

2008 Jan Iowa lakes returns $750,000 in margin rebates to the member- owners which is the largest margin rebate in the history of the Cooperative.

2008 Feb 27 Iowa lakes long time attorney, Harold White, passed away unexpectedly.

2008 April Iowa lakes breaks ground on two wind energy projects.

2008 June Iowa lakes enhanced its logo by adding three “green” wind turbines.

2008 July Iowa lakes begins construction on its new emmetsburg Service Center in the new industrial park in emmetsburg.

2009 Mar 6 at 12:45 p.m. the first kilowatt hours were generated on wind turbine #5 at the lakota site.

2009 Mar 20 8:30 a.m. — the first turbine came online at the Superior site and began generating.

2009 Mar 31 Sold CreBs through CoBank. the $43 million in bonds sold at 0% interest for a 15 year term.

2009 April 13 Iowa lakes finished the construction on its new service center in emmetsburg.

2009 Aug 20 Dedicated the completion of the wind projects with a ribbon-cutting ceremony.

2009 Sept 1 Corn Belt power becomes a Class a Member of Basin electric.

2011 Iowa lakes celebrates its 25th anniversary.

2011 June 20 Iowa lakes creates a Facebook page

2011 Dec Iowa lakes launches its system wide load management program.

2011 Dec 1 Iowa lakes and the Spirit lake Development Corp. purchased 130 acres east of Spirit lake along Hwy. 9 & 71 to create the east lake Industrial park.

2011 Iowa lakes is awarded the 2011 Wind Cooperative of the year award from the uS Department of energy.

2012 Construction began on the first 25,000 sq. ft. facility in the new east lake Industrial park.

2012 the estherville Service Center expansion was completed at a cost of $500,000.

2013 April rick olesen is selected as the new president/Ceo.

2013 the Federal emergency Management agency (FeMa) dramatically changed its policies retroactively on how rural electric cooperative’s received federal disaster assistance.

2014 April l. Kirby range, IleC board chairman since it formed in 1986, retires.

2014 Iowa lakes selected as one of Iowa’s top 100 workplaces based on input from an employee survey.

2015 Sold Cherokee and Storm lake Service Centers.

2015 Oct Basin electric joins Spp.

2015 Nov Iowa lakes completes construction on the new, combined service center in alta that will house the former Storm lake and Cherokee crews and equipment.

the official dedication and ribbon-cutting ceremony of Iowa lakes electric Cooperative’s $43 million wind farms; aug. 20, 2009.

Iowa lakes was selected as one of Iowa’s top 100 workplaces in 2014.

a n n u a l r e p o r t • 2 0 1 5 6


A ST

EP

BACK IN TIME

Board Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Jerry Beck

Board Vice Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Craig Diem

Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trent Will

Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alan Madden

Corn Belt Power Cooperative Representative . . . . . . . . . . . . . . . Jerry Beck

Northwest Iowa Power Cooperative Representative . . . . . . . . . Trent Will

Jerry Beck Craig Diem Trent Will Alan Madden Spencer Swea City Spirit Lake Ringsted Chairman Vice Chairman Secretary Treasurer

Bruce Amundson Paul Benson Chad Boysen David Friedrich Peter Hansen Larrabee Spencer Pocahontas Alta Ruthven

Neal Heldt Crystal Pluth Gary Rouse Steven Williams Daniel Winterhof Mallard Estherville Ayrshire Storm Lake Aurelia

dISTRICT IJerry Beckpaul Bensonpeter Hansentrent Will

dISTRICT IIBruce amundsonDavid FriedrichSteven WilliamsDaniel Winterhof

dISTRICT IIIChad Boysenneal HeldtGary rouse

dISTRICT IVCraig Deimalan MaddenCrystal pluth

THE BOARd OF dIRECTORS OF IOwA LAKES ELECTRIC COOPERATIVE PHOTOGRAPHEd ON APRIL 26, 1990: Sitting (left to right) - Dale Larsen, V.P.; Floyd Zimmer, Marvin Simons, Paul Fassler, NIPCO Rep.; Dale Bodholdt, Marlowe Feldman, Philip Simonson, Treas.; Larry Lago, Kirby Range, Pres. Standing (left to right) - Sherm Nelson, Sec.; Sam Elsen, Al Swart, Rodney Meyer, Darwin Will, Larry Timmerman, Ed Toomer, Richard Hanson, Alan Madden, Dennis Larson, Corn Belt Rep.; Bob Torrey, Larry Barglof, Willard Schmidt, Donald Todd, Neal Anderson, Dick Nelson, Kent Schmillen, Marlin Runksmeier, Harold Halverson. Absent: Darrel Bishop, Kenneth Herum

County Line Local Service Centers

Kossuthdickinson

Clay Palo Alto

Buena Vista Pocahontas

Emmet

Cherokee

2015 BOARd OF dIRECTORS

a n n u a l r e p o r t • 2 0 1 5 8

8-county service territory

$891,200load management savings

1.017total outaGe HourS

per ConSuMer (InCluDInG MaJor StorMS)

4,200 SQUARE MILES SERVICED

4,842 MILES.OF.LINE

$291,200IN ENERGY EFFICIENCY REBATES

623 million electric kWh sold

79million kilowatt-hours in wind generation

$3.7 MILLION wINd REVENUES

12,544

$1,002,000

64% CoMMerCIal& InDuStrIal aCCountS

OF KwHSALES

87aCSI SCore

67 employeesFull-tIMe eQuIValentS

$161 MILLION in total utility plant

MARGIN REBATES (Largest rebate ever returned)

$59million in electric sales revenue

METERS

AT A GLANCE2015

TOGETHER

Nearly eight decades ago, groups of farmers came together with a common purpose to improve the quality of their lives by bringing electricity to rural homes, farms and businesses. Today, Iowa Lakes Electric Cooperative continues to work with our member-owners toward improving the quality of their lives and our communities. The theme of this year’s annual report is “Stronger Together” which recognizes that 30 years ago, three small rural cooperatives elected to merge with the purpose of becoming one stronger, lower-cost electric cooperative system. The theme also marks our path forward, as we need to be Stronger Together. Now more than ever, we need to work together to keep your electric bills affordable and your power reliable. As you have probably heard, the Environmental Protection Agency’s (EPA) regulation to limit greenhouse gas emissions from power plants will have a big impact in Iowa. Labeled the Clean Power Plan, it aims to reduce nationwide carbon dioxide emissions from coal-fired power plants by 32 percent below levels recorded in 2005. Iowa’s goal will be a 42 percent reduction. And your Cooperative, along with other electric cooperatives in Iowa, will have to work with other utilities in the state in partnership with stakeholders to formulate a state implementation plan to meet the EPA’s Clean Power Plan regulations. The Iowa Department of Natural Resources (DNR), will implement and enforce the regulations. More than likely, power plants, especially those that use coal, will be forced to shut down before they have been fully paid for. In these situations, electric co-op members will have to continue paying for

a power plant that no longer operates while also paying for electricity. The plan proposes to reduce greenhouse gas emissions largely by cutting the use of coal to generate electricity. And that could hit some electric cooperative utilities hardest. Electric cooperatives rely on coal for an average of 70 percent of their energy needs. The national average of coal generation for all utilities is less than 40 percent. What does that mean for you, our member-owners? Unfortunately, it probably will mean higher electricity bills. But we’re still crunching the numbers. The Clean Power Plan is a complex and far-reaching regulation. In fact, it’s probably the single most complex regulation co-ops have ever confronted. In addition, there is great concern that the Clean Power Plan will hurt electric reliability. An especially significant concern came from the organization responsible for making sure our electricity stays on. The North American Electric Reliability Corporation (NERC), reacting to a 2014 draft of the EPA plan, said in April 2015 that the electric utility industry “needs more time to develop coordinated plans to address shifts in generation and corresponding transmission.”

NERC cited concern about the electric transmission grid, noting that some of the emission reductions would begin in the year 2020, even though, NERC said, “transmission projects require between six and 15 years to engineer, site, permit and construct.” We believe the EPA has overstepped its legal authority with the Clean Power Plan, and, along with many other interveners, have challenged the EPA’s rules in the courts. If the legal challenge is successful, then perhaps we can get the EPA to write regulations that address more than just environmental concerns, something that will consider economic impacts to consumers and not threaten the electric grid’s reliability. We’re keeping up the fight and working for legislative and legal solutions in partnership with co-ops from around the country because we are Stronger Together. Our top concern remains providing you, our members, with safe, affordable and reliable electricity.


A STEP BACK IN TIME

TOGETHER

COMMENTS FROM THE PRESIdENT/CEO

FIRST HEAdqUARTERSOF d.E.K. REC IN ESTHERVILLE, IOwA

Rick Olesen, president/Ceo

a n n u a l r e p o r t • 2 0 1 5 1 0

26.12%

0.37%

0.11% 18.46%

45.30%

0.04%

0.40% 9.19%

Residential

Seasonal

Irrigation

Small C&I

Large C&I

Public Street

Public Other

Sales for Resale

‘04 ’05 ‘06 ’07 ‘08 ’09 ‘10 ’11 ‘12 ’13 ‘14 ’15 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

kWh Sold by Revenue Class

2015 Expenses as a Percentage of Revenue

Purchased Power Cost Per kWhPower Costs as a Percentage of Revenue

TOGETHER

IN REVIEw2015

Cost of Power 71.7%

Cons. Accts. 1.8%

Maint. Exp2.2% Oper. Exp

4.7%

Cust. Svc. 1.0%

Sales Exp 0.9%

A&G Exp 3.3%

Depr. Exp 6.4% Tax Exp

0.2%

Interest 2.9%

Other Deductions 0.1%

Operating Margins 5.0%

Other 28.3%

‘04 ’05 ‘06 ’07 ‘08 ’09 ‘10 ’11 ‘12 ’13 ‘14 ’15 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

’05 ‘06 ’07 ‘08 ’09 ‘10 ’11 ‘12 ’13 ‘14 ’15


As a cooperative, Corn Belt Power Cooperative must take action that has a long-range vision. Although many short-term challenges exist, our board believes making long-term commitments that help us reduce risk will be beneficial far into the future. In 2015, the Corn Belt Power board approved extending its contract with Basin Electric Power Cooperative, our wholesale power supplier, with our commitment to membership in Basin Electric as a Class A member now out to 2075. Our member cooperatives also signed extensions to their wholesale power contracts with Corn Belt Power, lengthening the date from 2050 to 2075. Electric cooperatives operate in a capital-intensive industry that requires long-range planning. Extending the contracts to 2075 allows us to extend depreciation on generating units, transmission lines and other infrastructure. Agreeing to the contract extension with Basin Electric makes Corn Belt Power eligible to receive rate credits. We will pass Basin Rate A credits on to our member cooperatives. Corn Belt Power, along with Basin Electric, joined the Southwest Power Pool (SPP) in 2015. Membership allows Basin Electric to buy and sell power more economically in the SPP market. We support Basin Electric’s SPP membership as a means for holding down members’ cost and reducing risk. Our philosophy has always focused on keeping Corn Belt Power’s transmission system strong and reliable. The ongoing multi-value projects (MVPs) will rebuild

almost 140 miles of Corn Belt Power’s 161-kilovolt line, as two investor-owned utilities (IOUs) tear down our H-structure wooden poles and replace them with new steel monopoles that will carry the IOUs’ 345-kilovolt conductor on one side and Corn Belt Power’s 161-kilovolt line on the other. These projects demonstrate how valuable right-of-way is today. Funded entirely by the IOUs, the MVPs will strengthen Corn Belt Power’s system at no cost to the cooperative. Our board of directors continues to balance the desire to improve our infrastructure with the need to contain costs. We know members today expect the highest in reliability standards. Tolerance for any type of power interruption is low. In 2015, we continued to improve our system, adding new switching stations, upgrading substation facilities and reconductoring power lines. With the release of the final Clean Power Plan from the Environmental Protection Agency (EPA) in August 2015, Corn Belt Power and its member cooperatives face complying with the new regulations while keeping our power supply reliable and affordable. Corn Belt Power is concerned the Clean Power Plan regulations will dramatically increase electric bills member-owners pay each month. The EPA’s regulations are especially burdensome on utilities in the Midwest that depend on coal generation. Some calculations suggest that our member co-ops could see their power supply costs increase 30 to 40 percent.

In 2015, coal generated approximately 65 percent of the electricity Corn Belt Power’s member co-ops delivered to their member-owners. Currently, no commercially available technology exists to control carbon emissions from fossil fuel combustion. Corn Belt Power and its member cooperatives have demonstrated their commitment to a sustainable environment by making substantial investments to promote energy efficiency and renewable energy, both of which help reduce carbon emissions. Most recently, Corn Belt Power converted its Wisdom Unit 1, Spencer, Iowa, from burning coal to operating on natural gas with fuel oil as a backup. Also, Corn Belt Power and its member co-ops have invested millions of dollars in load management systems to help reduce peak demand and delay addition of new generating sources. Demonstrating commitment to renewable fuels, Corn Belt Power’s member cooperatives have connected 100 small renewable projects to their lines, including 50 wind projects, 42 solar projects and eight projects that generate electricity with both wind and solar. Additionally, Basin Electric has installed new technologies to meet or exceed environmental regulations. Basin Electric has invested almost $1.1 billion in environmental controls and spends about $125 million annually for operation and maintenance of those technologies. We know that the most inexpensive form of generation is the kilowatt-hour that is not used. It also represents generation with zero emissions. Throughout 2015,

REPORT FROM CORN BELT POwER COOPERATIVE

Jerry Beck, representative

a n n u a l r e p o r t • 2 0 1 5 1 2

Corn Belt Power and its member cooperatives offered energy efficiency programs to members. Corn Belt Power will work with Basin Electric and the National Rural Electric Cooperative Association to evaluate and challenge the new regulations to make sure electric cooperative member-owners continue to have affordable, reliable electricity. We were pleased to have Kroll Ratings Services confirm our “A” financial rating in December and look forward to receiving the rating from Standard & Poor’s in early 2016. In the future, it may be difficult for Corn Belt Power to borrow from the Rural Utilities Service as the agency focuses more on distribution cooperatives rather than generation and transmission cooperatives. The time is coming when we will likely obtain all of our financing from a private source, making our financial rating an increasingly important metric. In 2015, we continued to promote economic development efforts, helping our communities grow and offer more job opportunities to members. The devastation caused by the avian influenza in 2015 served as a reminder of how quickly disaster can strike an industry. Our economic development efforts help us diversify the industries in our member cooperatives’ service territories to broaden our base and reduce risk. It is with commitment, dedication and focus that Corn Belt Power looks toward the future and continuing to serve members reliably and affordably with integrity, accountability, innovation and commitment to community.

A ST

EP

BACK IN TIME

Through the years, Iowa Lakes Electric Cooperative has made headlines with a progressive membership, motivated employee team and forward-thinking leadership. Here’s a look back at just a few stories from the archives...

TOGETHER


This past year of service on the board of Northwest Iowa Power Cooperative, representing Iowa Lakes Electric Cooperative, has been a busy one and rewarding one of contributing to decisions that impact our Cooperative’s wholesale power supplier and, ultimately, Iowa Lakes Electric Cooperative. It is an honor to represent you at the board table, along with six other directors from rural electric cooperatives and a municipal electric cooperative in northwest Iowa. There have been several areas of focus for us, this past year, and all of them deal, in some form or fashion, with connectivity. The obvious assumption when we talk about connectivity is the NIPCO transmission system. Iowa Lakes depends on NIPCO to provide optimal service reliability and a dependable power supply. During 2015, NIPCO spent a considerable time and investment on upgrades across its 10-county service territory to support increased system strength, power reliability, accessibility and communication. Three substation tap switches were relocated from the center of sections of land, which were difficult to access, to sites adjacent to main roads and provide easier access. One such tap switch, Afton Tap, specifically serves members of Iowa Lakes in Cherokee County. The move ensures that, during storms or routine maintenance, crews will be able to get to the switch more safely and quickly, without having to maneuver through crops, mud or snow.

Two substations, J5 near Onawa and Salix Junction, each received improvements that will ensure years of reliable service. Improvements included upgraded infrastructure and technology connecting with the rest of the power grid. At J5, an older and smaller capacitor bank was replaced with a new, more powerful 69-kV unit. Salix Junction received new foundation work and a second 161-kV line and switch, a valuable means for increasing high voltage electric transmission service from a generation source to the substation. Transmission circuit breakers in both locations were replaced with newer, lower maintenance SF6 gas breaker technology, expanded steel support bus structures, and upgraded protective relays and control buildings for strengthened communications with NIPCO’s control center operators. Two telecommunications towers, each nearly a half-century old, were replaced with new towers. The change makes the towers compliant with current structural strength specifications and better connects NIPCO members and customers through digital communications. These towers, one located at the J3 switching station serving Iowa Lakes Electric Cooperative members in Cherokee County, will play a vital role in supporting necessary load management system upgrades over the next several years.

Another kind of connectivity which has impacted NIPCO operations is its Oct. 1, 2015, entry into Southwest Power Pool (SPP). After months of careful study, and determining that nearly 80 percent of its transmission facilities were qualified to enter SPP, NIPCO’s Board of Directors approved joining SPP as a Transmission Owner (TO). Operationally, while NIPCO handed over the functional control of its qualifying facilities to SPP, the physical control, operations and regular maintenance of NIPCO’s system will continue to be performed by NIPCO personnel. Entry into a regional transmission organization (RTO) ensures reliable supplies of power, adequate transmission infrastructure, and access to a competitive wholesale electricity marketplace. Joining an RTO means NIPCO and other members of the system will have the benefit of generation and transmission assets that are integrated into the entire system. In addition, it is a means of gaining access to the power supply market to buy or sell power. The ability to buy or sell power within the RTO ensures stabilization of rates that are shared among all system members. By becoming a TO in SPP, NIPCO will receive an annual transmission revenue requirement, or ATRR. This ATRR, currently under review by the Federal Energy Regulatory Commission, will provide the membership a new revenue stream. The new projected revenues were incorporated into the recently approved, and lower, 2016 wholesale power rates.

REPORT FROM NORTHwEST IOwA POwER COOPERATIVE

Trent will, representative

Most important is NIPCO’s connectivity with its members. Nearly 30,000 member-owners living in northwest Iowa are connected by the six rural electric cooperatives and one municipal cooperative that own NIPCO. While NIPCO’s primary responsibility is to provide reliable, affordable and environmentally responsible wholesale electric power to its Class A Members, such as Iowa Lakes Electric Cooperative, connectivity across the region isn’t just through poles and wires. Connectivity is through advocacy on issues of safety, regulatory compliance with The Clean Power Plan, and engaging with candidates by asking them their plans to ensure reliable, affordable power for the future. Connectivity is through programs that support energy efficiency and economic development. Connectivity is through putting members first in operational decisions made from a new generation of NIPCO leadership who is dedicated to a long-range strategy including innovation, accountability, integrity and commitment to the communities they serve.

NORTHwEST IOwA POwER COOPERATIVE HONORS FORMER dIRECTOR VERNON wINTERHOF

a n n u a l r e p o r t • 2 0 1 5 1 4

Northwest Iowa Power Cooperative (NIPCO) presented the prestigious “N Award” to former Director and Board Treasurer Vernon Winterhof at its 2015 Annual Meeting, held April 7, in Sioux City, Iowa. Elected to the Northwest Iowa Power Cooperative board of directors in 2001, Vernon Winterhof of Aurelia joined the NIPCO Board as the director representative from Iowa Lakes Electric Cooperative, where he had served since 1998. Winterhof ’s dedication to the NIPCO board soon led to his being appointed as the NIPCO representative to the Iowa Area Development Group in 2007. He served in that position until his retirement from the NIPCO Board in 2014. In his final year on the NIPCO Board of Directors, Winterhof also served as NIPCO’s Treasurer. His dedication to NIPCO and the cooperatives of Iowa was evidenced by his involvement and participation in local, state, and regional organizations. In addition to his career in the electric cooperative industry, Winterhof gave of his time and talents in other areas including service on the Iowa Guernsey Association and the local county Farm Bureau. Vernon is active in his church, as well as in his community through such programs as the Hanover Historical Board.

Accepting the award, Vernon Winterhof thanked his industry colleagues and the NIPCO Board and staff but gave special recognition to his wife, Suzanne, for her years of support. Vernon Winterhof ’s many years of service to the cooperative industry, to the Iowa Lakes Electric Cooperative Board and to NIPCO epitomize the essence of the “N Award”, which is to recognize outstanding contributions and achievements within the electric cooperative industry.

TOGETHER


Happy Anniversary! Congratulations to Iowa Lakes Electric Cooperative (ILEC) on three decades of leadership, innovation and service. Iowa Area Development Group (IADG) is devoted to assisting and supporting Iowa’s rural electric cooperatives with business and community development services. As such, our organization has forged an enduring economic development partnership with ILEC directors, staff and members. From its very formation, ILEC has been steadfastly committed to cooperative policies and programs supporting economic development. Your Cooperative leaders have rightfully recognized that investing in and supporting business and community development efforts is much more than just good public relations. ILEC involvement in economic development has been both values-based, as well as business-oriented. As a member-owned electric cooperative, locally governed and guided, ILEC is uniquely positioned to be a leader and partner in business and community development. While helping to build healthier and wealthier communities and families is a cooperative value, it is also a sound and important business strategy. Economic development helps your Cooperative strengthen and diversify its power sales, create jobs and income opportunities, and generally enriches the quality of life for coop members and area residents. With this being true, it’s not surprising that supporting and investing in economic development has emerged as a cornerstone of ILEC’s mission, and its 30 years of growth and service to its member-owners.

What you might find surprising, is just how much your Cooperative has benefited and contributed to economic development throughout its 8-county footprint. Consider that ILEC:

n has been a key player in developing eight industrial parks creating 684 acres of prime commercial real estate.

n was the first cooperative in Iowa to build a speculative building – a 30,000 square-foot building that is now a part of the huge GKN complex in Estherville.

n has supported the construction of 10 speculative buildings which have added more than 255,250 square feet of new industrial space to the area.

n continues to play an active role in supporting business and community growth initiatives which increase energy sales and have created hundreds of local jobs in northwest Iowa.

n helped garner 11 USDA Rural Development loans and grants totaling $1.1 million to support business growth.

n operates a revolving loan fund that has made 17 business expansion loans totaling over $2.4 million.

These highlights and accomplishments are just a few examples of the extraordinary economic development contribution ILEC has made in northwest Iowa. With a strong 30-year foundation and tradition, the economic prospects for the businesses, communities and members of the ILEC territory remain bright. Iowa Lakes Electric Cooperative members can take pride in knowing their Cooperative is a national leader in economic development, and has taken its place among the most accomplished and highly regarded electric cooperatives in the nation.

IOwA LAKES ELECTRIC COOPERATIVE…A NATIONAL LEAdER IN ECONOMIC dEVELOPMENT

REPORT FROM IOwA AREA dEVELOPMENT GROUP

Rand Fisher, president

a n n u a l r e p o r t • 2 0 1 5 1 6

Directors Pete Hansen of Ruthven and Steve Williams of Storm Lake re-ceived their Director Gold Certificates from the National Rural Electric Coop-erative Association (NRECA). The Director Gold is a new NRECA certificate program geared toward direc-tors who are committed to continuing their education. To earn Director Gold, directors must first earn NRECA’s Cre-

dentialed Cooperative Director Certif-icate and Board Leadership Certificate plus three additional credits from the Board Leadership courses. Director gold demonstrates to co-operative member-owners a director’s ongoing commitment to advancing their knowledge and performing their fiduciary duty to the best of their ability. Congratulations, Pete and Steve!

JONES FAMILY dAIRY HONOREd wITH IOwA VENTURE AwARd

HIGHLIGHTS

2015COOPERATIVE

IADG is the business and community development leader for Iowa’s rural electric cooperatives, municipal utilities and independent telecommunication companies. Since 1985, the Powerful Partnerships and economic development efforts of IADG and their sponsors have assisted with more than 2,000 projects, generating in excess of $10 billion of capital investment and over 50,000 new or retained jobs for Iowa.

dIRECTORS EARN GOLd CERTIFICATES

The Iowa Area Development Group (IADG), on behalf of Iowa’s rural electric cooperatives, municipal utilities and independent telecommunication companies, honored eight distinguished Iowa companies with the Iowa Venture Award at a luncheon held in conjunction with the Iowa Association of Electric Cooperatives’ annual meeting at the Sheraton West Des Moines. Jones Family Dairy, located on a family century farm near Spencer, has operated since 1996. Their herd consists of 1,100 cows that are milked daily. Their farm also has 1,100 acres of forages for the dairy which utilize buffer strips, crop rotation, and cover crops to protect their natural resources. Their latest expansion occurred in 2014 with the addition of a young stock barn to accommodate 500 head of replacement heifers from 5-18 months of age. This four-generation business employs 20 people, produces 6,500 gallons of milk per day and sells 2.4 million gallons of milk each year. Jones Family Dairy was nominated for the Iowa Venture Award by Iowa Lakes Electric Cooperative. “IADG, on behalf of our sponsors, is proud to recognize these outstanding companies,” said Rand Fisher, president of Iowa Area Development Group. “Their demonstrated innovation, vision, cour-age, social responsibility, and contribution have made an impressive impact on their communities, regions and the State of Iowa.”

For 28 years, IADG has presented Iowa Venture Awards to individuals and organizations, both large and small, in recognition of their significant contributions to Iowa’s economy through entrepreneurial leadership, innovation and the creation of job opportunities. History has demonstrated that these are among the most accomplished and successful companies in the state. Together they are helping to sustain and grow Iowa’s economy. The Iowa Venture Award Hall of Fame showcasing these 241 companies can be found at www.IADG.com/HallOfFame.

TOGETHER

Pete Hansen Steve Williams

Jones Dairy of Spencer, Iowa, received the 2015 Venture Award recognizing the company for its expansion and contribution to Iowa’s economy. Iowa Lt. Governor, Kim Reynolds, presented the award on behalf of the Iowa Area Development Group L.C., (IADG). Pictured left to right: Rand Fisher, President, IADG; Jed Skogerboe, Manager of Business and Community Development, Iowa Lakes Electric Cooperative; Rick Olesen, President/CEO, Iowa Lakes Electric Cooperative; Iowa Lt. Governor Kim Reynolds, Patrick Jones, Jones Dairy; Nancy Jones, Jones Dairy; Jerry Beck, Board Chairman, Iowa Lakes Electric Cooperative; Tresa Hussong, Vice President of Customer and Corporate Relations, Iowa Lakes Electric Cooperative and Jack Schoon, Energy Advisor, Iowa Lakes Electric Cooperative.

Construction was completed on the new service center just west of Alta along Highway 7. The crews finished the move into the new center and began operations in December. The new service center replaced existing service centers in Cherokee and Storm Lake, which have already been sold. Combining these service centers allows your Cooperative to reduce the amount of equipment and material needed to serve you, the member-owners. The new 10,240 square foot facility improves efficiency of the line crews and eliminated a safety concern at the Storm

Lake service center, which is located along Business Highway 71. Traffic on the highway made it difficult for the large utility trucks and pole trailers to maneuver in and out of the service center. Your Cooperative has local service centers in Emmetsburg, Swea City, Pocahontas, Spencer and at its headquarters facility in Estherville in addition to the new building near Alta. Because your board of directors is commited to maintaining a local presence in these communities, the average time it takes to respond and restore electricity during a power outage is kept to a minimum.


Your cooperative’s entire line crew celebrated the safe and efficient conclusion of two long-term projects with a barbeque on Oct. 23. The finished projects included a three-year, 116-mile FEMA mitigation effort, and a five-year, 86-mile FEMA disaster relief plan.

FEMA Mitigation Your Cooperative’s line crews have been working continuously over the past three years on FEMA mitigation jobs in Dickinson, Clay, Palo Alto, Pocahontas, Buena Vista and Cherokee counties. FEMA mitigation allowed Iowa Lakes to upgrade facilities

with stronger poles and lines which will help alleviate storm damages in the future. Your Cooperative was approved for federal and state funding in December 2012 and completed the work within the three-year deadline.

FEMA Disaster RecoveryLine crews have also rebuilt electric lines that were damaged in storms that occurred from 2009 to 2013. A total of more than $3.3 million of federal and state funding was obtained to rebuild storm-damaged facilities in all eight counties in your Cooperative’s service territory.

ALTA SERVICE CENTER

2015 COOPERATIVE HIGHLIGHTS

MORTENSON RETIRES

FEMA wORK COMPLETEd

dISASTER RECOVERY MITIGATION TOTAL

FEMA Aid $3,320,625 $2,724,372 $6,044,997Miles of Overhead Line 70.4 85.3 155.7 Miles of Underground 16.1 31.2 47.3 Total Labor Hours 31,889 24,731 56,620

Tom Mortenson retired from your Cooperative’s board of direc-tors on April 11. Mortenson served on the board 16 years, earning his credentialed director certification in 2005. Tom and his wife, Shelly, re-side in Cherokee. They have two children and four grandchildren. Thanks to Tom for his longstanding service and dedication to Iowa Lakes Electric Cooperative.

“I considered it a privilege to

serve on the board of directors

of such a great organization. Iowa

lakes will continue to be a leader

in the industry due to its great

employees.”

- Tom Mortenson

a n n u a l r e p o r t • 2 0 1 5 1 8

PAM CABOTH PROMOTED TO VICE PRESIDENT OF ADMINISTRATIVE SERVICES

PAM CABOTH was promoted from executive assistant to vice president of administrative services. Caboth began her career with the Cooperative in 1985 when she began working for the former D.E.K. REC headquartered in Estherville. Caboth started as a data entry clerk assisting with the information and voting process prior to the consolidation of Buena Vista County REC, D.E.K. REC and Pocahontas County REC in 1986. Following the consolidation, Caboth worked as a computer operator and receptionist. In 1989, the billing department was formed and Caboth, along with two others, provided billing statements to the Cooperative’s member-owners. In 1991 Caboth joined the marketing and member service department as the department’s assistant. In 2000, she became executive assistant to the president/CEO, the position she held prior to her recent promotion. Caboth and her husband Mark, reside in Estherville where she has been a long-time active member of both her community and church. Caboth has served as a Sunday school teacher and youth leader, and has made pies with the women of the Estherville Lutheran Church. She is the president of the local Thrivent Financial board and a member of the Estherville Noon Kiwanis. She has been the neighborhood babysitter for years providing her neighbors with a weekly “date night” by being a token grandma for a few hours. Pam and Mark have three grown children.

JONES PROMOTED TO ENERGY ADVISOR

CHRIS JONES, apprentice lineman, was recently promoted to the energy advisor position based in Estherville and covering the territories in Emmet, eastern Dickinson and northern Kossuth counties. Jones began his career at the Cooperative as an intern for the Cherokee and Storm Lake line crews in 2013. Later that year, Jones began working for your Cooperative as an apprentice lineman for the Estherville and Emmetsburg line crews. Jones successfully completed the Northwest Lineman College Journeyman Program, and received his Lineman Apprenticeship Diploma. Jones received his power line diploma from Minnesota West Community & Technical College in Jackson. Jones worked with the Estherville line crew until January 2016, and then began his energy advisor training with Larry Walthart, who plans to retire in June 2016. Jones and his family reside in rural Armstrong. Congratulations, Chris Jones.

KRISTIN HANSON APPOINTED AS A MEMBER OF THE REGION 3 & 4 WORKFORCE INVESTMENT BOARD

Congratulations to KRISTIN HANSON, manager of human resources and payroll, on being appointed to Iowa’s Regional Workforce Investment Board (RWIB) for Regions 3 & 4 in northwest Iowa. The RWIB plays a leading role in establishing policy for the region’s Workforce Development Center System. The program helps workers get into training programs to gain the skills local employers need for their workforce. The regional boards were created to give communities direct input and decision-making ability to address local workforce-related priorities. The board members are selected by Iowa Gov. Terry Branstad in consultation with the Chief Elected Officials board for the region. The RWIB selects the Workforce Innovation and Opportunity Act service providers, and shares responsibility for many other duties with the CEO board, including overseeing the regional Workforce Development Center system’s service delivery. Hanson was appointed to a four-year term to represent the business sector for Emmet County.

ACCOMPLISHMENTS

EMPLOYEEPROMOTIONS.&

TOGETHER

LEVI QUASTAD joined your Cooperative’s Storm Lake line crew in January as an apprentice lineman. Quastad graduated in 2014 from the power line program at Northwest Iowa Community College in Sheldon. After graduation, Quastad completed his internship with Iowa Lakes Electric Cooperative, gaining experience working on FEMA projects.

BRANDON BUNSTON joined your Cooperative on Feb. 2, 2015, with the Pocahontas line crew. Prior to joining the Iowa Lakes’ team, Bunston lived in Humboldt, Iowa, and worked as a foreman for Wadena, Minn.,-based Legacy Power Line, Inc. Bunston achieved his journeyman lineman status while working for Prairie Energy Cooperative in Clarion, Iowa, where he started his career.

NEW LINEMEN JOIN YOUR COOPERATIVE TEAM

Every five years, Iowa’s electric cooperatives are required to set energy efficiency goals, develop programs to achieve these goals and then file the five year plan with the IUB. We have just completed our first 5-year plan covering the years 2010-2014. Over those five years, Iowa Lakes Electric Cooperative invested $3,316,805 towards energy efficiency.

5 YEARS OF ENERGY EFFICIENCY EFFORTS


1.017 0.864TOTAL WITHOUT SEVERE STORM

Yearkwh Savings

GoalActual kwh

Savings

MEMBER SATISFACTION REMAINS HIGH

Responses to the American Customer Satisfaction Index (ACSI) questions continue to be consistently high – this year’s score was unchanged from last year at 87. This score is higher than the national cooperative average (80) and MidAmerican (75), as well as the averages for investor-owned utilities (74) and municipal utilities (73). The Cooperative conducts the American Customer Satisfaction Survey (ACSI) each year to determine overall member satisfaction.

Here are the Cooperative’s results in four key areas measured in the 2015 ACSI:

Overall satisfactiOn: . . . . . . . .89% ilec Has GreatlY eXceeDeD tHeir eXPectatiOns . . . . . . . . . . 81% ilec is verY clOse tO BeinG an iDeal utilitY: . . . . . . . . . . . . 84%

WOulD cHOOse iOWa lakes electric cOOPerative: . . . . . . .84%

76

78

80

82

84

86

88

90

92

94

96

2005 2006 2007 2008 2010 2011 2012 2013 2014 2015

ACSI Score

the acsi is an independent national benchmark of customer satisfaction and is one way for your cooperative to measure how we are performing in the eyes of our member-owners . One of the most recognized customer satisfaction indices in the country, it’s managed by the university of Michigan Business school and sponsored by the american society for Quality .

88

94

8687

8382

8687 87

85


2010 2,644,418 5,213,692

2011 2,775,824 3,478,643

2012 2,949,751 2,306,168

2013 3,154,195 1,749,848

2014 3,288,416 3,641,714

Total 14,812,604 16,390,065

RELIABILITY

One of your Cooperative’s primary concerns is your electric service reliability. The goal is to limit the total number of service interruptions each year to an average of 1.5 hours or fewer per consumer. Restoration time begins from the time the Cooperative receives the notification of the outage until service is restored.

2015 TOTAL OUTAGE HOURS PER CONSUMER

a n n u a l r e p o r t • 2 0 1 5 2 0

TODD BELL, STEVE DETERMAN AND PAT WALSH were honored for their 25 years of service to Iowa Lakes Electric Cooperative at the Iowa Association of Electric Cooperative’s annual meeting on Dec. 4, 2015.

5-Year Service AwardCody Bartling, lineman, Storm Lake crew

10-Year Service AwardBrad DeWall, lineman, Pocahontas crew

10-Year Service AwardTim Mielke, engineering & IT technician

TOGETHER

Aaron Ruschy (left), vice president of operations and engineering, and Rick Olesen (right), president/CEO, present Steve Loken, lineman, with his Certified Loss Control Professional Certificate.

Iowa Lakes Electric Cooperative is pleased to announce that lineman, Steve Loken, has recently met the precise requirements needed to become a Certified Loss Control Professional. To receive this certification, Loken completed an intensive program in electric utility safety and loss control. The Loss Control Internship is a series of workshops offered by the National Rural Electric Cooperative Association in conjunction with the National Utility Training & Safety Education Association. The program instructs participants in many areas related to electric utility industry safety. According to the Occupational Safety and Health Administration, nearly 4 million injuries occur annually in the workplace. One of the goals of a Certified Loss Control Professional is to help ensure a safe work environment for utility workers and the public. Avoiding workplace accidents reduces down time and can lead to lower utility rates.

Loken is one of only a few electric utility professionals in the country who received the certification in 2015. The program requires participants to complete a rigorous series of seminars and tests, a 30-hour OSHA course, and a detailed final course project. Loken has been with Iowa Lakes Electric Cooperative for 18 years. He graduated with a lineman degree from Northwest Iowa Community College and is currently pursuing a bachelor’s degree from Buena Vista University. He resides in Milford, Iowa, with his wife and two daughters.

LOKEN BECOMES A CERTIFIEd LOSS CONTROL PROFESSIONAL

Bell started his career at your Cooperative as a journeyman lineman, was a lead lineman at the Emmetsburg Service Center for 16 years and in 2013 was promoted to operations support field technician.

Determan began working for your Cooperative in 1990 and is currently a lineman at the Spencer service center. Determan was also part of the designated FEMA crew that worked diligently to repair storm damage.

Walsh was hired in October 1990 as the foreman of the Cherokee line crew and in 2010 began overseeing the Storm Lake line crew as well.

2015AwARdSSERVICE

15-Year Service AwardCal Wolterman, lineman, Swea City crew

30-Year Service AwardPam Caboth, vice president of administrative services

30-Year Service AwardRick Johnson, lineman, Estherville crew

35-Year Service AwardMark Walsh, foreman, Emmetsburg & Pocahontas crews

25 YEARS OF SERVICE


2015 was another successful year of wind

production for your Cooperative’s two wind

farms. In their sixth year, the 14 turbines

combined generated nearly 79 million kilo-

watt-hours, exceeding the projections by 6.7

million kilowatt-hours.

The variance in wind production is due

to a couple key factors. The wind resource

is critical – the wind must blow for the tur-

bines to produce electricity; any downtime

for maintenance and repairs leads to lower

kilowatt production.

The wind speeds were lower than ex-

pected June and July, resulting in the lowest

production numbers of the year. August is

usually a lower month for wind produc-

tion; however this past August proved to be

a record month at the Superior wind farm.

The seven Superior turbines produced nearly

5 million kilowatt-hours.

Each year the wind technicians complete

their annual maintenance inspections and

repair any issues they find. In January, they

had two of the wind turbines down while

they replaced bearings inside the gearbox.

During early spring, the condition mon-

itoring system (CMS) indicated a potential

issue with the bearings in two generators

which produce the electrical power. The

wind technicians proactively replaced the

bearings. Analysis of the old bearings at a

Vermont laboratory confirmed the bearings

had some very minute damage. The CMS

showed its value because, without the system,

this issue would have gone undetected until

the generators failed.

Up Wind Solutions of San Diego, Calif.,

completed the 2015 annual blade mainte-

nance and repaired lightning damage on

three blades. Up Wind Solutions also applied

leading edge tape, which protects the leading

edge of the blade from eroding, to the blades

of six turbines. The eight remaining turbines

will have the tape applied this year.

Your Cooperative hired two summer in-

terns who worked alongside the wind tech-

nicians. They helped change oil in the yaw

drives and the pitch drives.

The wind technicians wrapped up the

year with fall maintenance. The inspection

found no significant issues leading into this

year.

wINd ENERGY PROdUCTION EXCEEdEd EXPECTATIONS

Military veterans Al Zeitz, manager of

renewable energy services, and Shannon

Lehmkuhl, wind technician, traveled to

Washington, D.C. to participate in the Wind

Power on Capitol Hill Conference and meet

with members of Congress.

Attendees, including Zeitz and Lehmkuhl,

met with Iowa Sen. Joni Ernst, a veteran, and

Iowa Rep. Steve King to discuss the impor-

tance of extending the Wind Production Tax

Credit (PTC). The PTC has been a successful

policy that has driven private investment,

domestic manufacturing and rural economic

development. The PTC policy stability is im-

perative to further reduce the cost of wind.

In addition, Zeitz and Lehmkuhl told

their personal stories and expressed their

views on the benefits of wind power not only

in Iowa but the entire United States.

According to the American Wind En-

ergy Association (AWEA), investing in wind

power has created jobs, including jobs in

operations and maintenance, construction,

manufacturing and many support sectors.

The United States has more than 500 manu-

facturing facilities. In addition, wind projects

produce lease payments for landowners and

increase the tax base of communities.

In 2014, Iowa generated more than 28

percent of its electricity from wind power.

Iowa possesses a strong wind resource, the

third most installed wind capacity of any

state, and is a leader in wind manufacturing

with 12 facilities.


The Renewable Energy Services Team pictured on top of one Iowa Lakes Electric Cooperative’s wind turbines. Pictured (L-R)- Shannon Lehmkuhl, wind technician; Al Zeitz, manager of renewable energy services, and Zach Herum, wind technician.

wINd POwER ON CAPITOL HILL

Al Zeitz (l) and Shannon Lehmkuhl met with Sen. Joni Ernst in Washington D.C. to discuss current wind energy policies.

a n n u a l r e p o r t • 2 0 1 5 2 2

Iowa Lakes Electric Cooperative was among the 14 Iowa companies recently given the ‘Above & Beyond’ Award for its support of employees who serve in National Guard and Reserve military units. These awards recognize employers that have gone above and beyond the legal requirements for granting leave and providing support for military duty by their employees. Iowa Lakes Electric Cooperative joins with thousands of American employers who have reviewed and amended their current human resources policies to ensure compliance with the Uniformed Services Employment and Reemployment Rights Act. Many employers provide ‘Above and Beyond’ support with pay differential to offset the loss of wages, and extension of health care benefits which complement coverage provided by the military when their employees are mobilized.

IOwA LAKES ELECTRIC COOPERATIVE RECOGNIzEd FOR SUPPORT OF MILITARY EMPLOYEES

For the third consecutive year, foreman, Pat Walsh and the Storm Lake/Cherokee line crew secured the 2015 Outage Award with only 204.61 outage hours during the year. Each of your Cooperative’s line crews compete for the least amount of outage

hours both monthly and annually. Each of the line crews have won the award since its inception over 20 years ago. The outage award was presented to Walsh and his crew during the February safety meeting.

STORM LAKE/CHEROKEE LINE CREw wINS 2015 OUTAGE AwARd

With only 204.61 outage hours, the Storm Lake/ Cherokee line crew accepts the 2015 Outage Award. Pictured; front row, from left: Pat Walsh, foreman, accepts the award from Brian Scott, superintendent of field operations. Back row: Jeff Roeman, Dennis Rodger, Cody Bartling, Jason Thorson (energy advi-sor), Stuart Gamber, Tucker Petersen, Levi Quastad.

estherville andswea city

emmetsburg andPocahontas

storm lake and cherokee

spencer

2015REGOGNITION

COOPERATIVE

Rick Olesen, center, president/CEO, was presented with the Above and Beyond Award from the Iowa Committee of the Employer Support of the Guard and Reserve during a luncheon April 18. Shannon Lehmkuhl, sec-ond from left, wind technician, Gunnery Sergeant First Class, nominated his employer, Iowa Lakes Electric Cooperative, for granting leave and providing support for military duty for its employees. Also attending the event are, from left, Major General Timothy Orr, Iowa ESGR State Chair Dick Rue, and National ESGR Chair Paul Mock.

TOGETHER

272.38 306.66

204.61

322.39272.38 306.66

204.61

322.39

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYInDepenDent auDItorS’ report


The operation of the Cooperative’s load management program resulted in a projected savings of $891,200 in wholesale power costs in 2015.

Margin Rebates

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

‘94 ’95 ‘96 ’97 ‘01 ’02 ‘04 ’06 ‘07 ’08 ‘09 ’10 ‘12 ’13 ‘14 ’15

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

‘94 ’95 ‘96 ’97 ‘01 ’02 ‘04 ’06 ‘07 ’08 ‘09 ’10 ‘12 ’13 ‘14 ’15

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

‘94 ’95 ‘96 ’97 ‘01 ’02 ‘04 ’06 ‘07 ’08 ‘09 ’10 ‘12 ’13 ‘14 ’15

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

‘94 ’95 ‘96 ’97 ‘01 ’02 ‘04 ’06 ‘07 ’08 ‘09 ’10 ‘12 ’13 ‘14 ’15

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

‘94 ’95 ‘96 ’97 ‘01 ’02 ‘04 ’06 ‘07 ’08 ‘09 ’10 ‘12 ’13 ‘14 ’15

Electric Margin Rebate

Load Management Rebate

Revenue Deferral Credit

Wholesale Margin Rebate

Wind Margin Rebate


IN REMEMBRANCE

We are saddened of the pass-

ing of Mark Courtright on July

16, 2015, after a courageous battle

with cancer. Mark was an energy

advisor for Cherokee and Buena

Vista counties who retired on Dec.

1, 2014, just one month shy of 29

years of service to Iowa Lakes

Electric Cooperative. Working

with the member-owners was the

most rewarding part of his job

and he always looked out for the

best interest of the membership

and the Cooperative. Mark will

be missed by all who knew him.

LOAd MANAGEMENT REBATE

LOAd MANAGEMENT SAVINGS

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

‘94 ’95 ‘96 ’97 ‘01 ’02 ‘04 ’06 ‘07 ’08 ‘09 ’10 ‘12 ’13 ‘14 ’15

Month Savings in demand

January $ 86,400 February $ 81,800 March $ 74,200 April $ 52,400 May $ 49,700 June $ 49,000 July $ 53,300 August $ 53,300 September $ 52,500 October $ 51,000 November $ 74,200 December $ 83,400 Total Corn Belt Savings $ 761,200 Total NIPCO Savings $ 130,000

Total Savings in Demand Charges $ 891,200

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYInDepenDent auDItorS’ report

a n n u a l r e p o r t • 2 0 1 5 2 4

TOGETHER

FINANCIALS_Layout 1 3/24/16 11:32 AM Page 2

Board of Directors Iowa Lakes Electric Cooperative and Subsidiary

(2)

OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Iowa Lakes Electric Cooperative and Subsidiary as of December 31, 2015 and 2014, and the results of their operations, changes in its patronage capital and other equities, and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

CliftonLarsonAllen LLP

Austin, Minnesota March 18, 2016


IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYConSolIDateD BalanCe SHeetS | DeCeMBer 31, 2015 anD 2014

FINANCIALS_Layout 1 3/24/16 11:32 AM Page 3

a n n u a l r e p o r t • 2 0 1 5 2 6

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYConSolIDateD BalanCe SHeetS | DeCeMBer 31, 2015 anD 2014

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYConSolIDateD StateMentS oF operatIonS | DeCeMBer 31, 2015 anD 2014IOWA LAKES ELECTRIC COOPERATIVE AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2015 AND 2014

See accompanying Notes to Consolidated Financial Statements. (5)

2015 2014

OPERATING REVENUES - DISTRIBUTION 59,341,044$ 62,245,871$

OPERATING EXPENSES - DISTRIBUTIONCost of Power 42,536,107 45,221,509 Distribution Expense - Operations 2,801,843 2,804,289 Distribution Expense - Maintenance 1,304,053 1,435,848 Consumer Accounts Expense 1,622,727 1,635,258 Consumer Sales Expense 546,283 487,736 Administrative and General Expense 1,973,573 1,980,734 Depreciation 3,776,491 3,673,498 Taxes 106,826 71,672 Other Deductions 48,640 58,030

Total Operating Expenses 54,716,543 57,368,574

OPERATING MARGINS BEFORE FIXED CHARGES - DISTRIBUTION 4,624,501 4,877,297

OPERATING REVENUES - WIND GENERATION 3,700,963 3,392,917

OPERATING EXPENSES - WIND GENERATIONGeneration Expense - Operations 295,795 238,374 Generation Expense - Maintenance 481,968 263,872 Administrative and General Expense 457,009 432,367 Depreciation and Amortization 2,262,150 2,256,920

Total Operating Expenses 3,496,922 3,191,533

OPERATING MARGINS BEFORE FIXED CHARGES -WIND GENERATION 204,041 201,384

TOTAL OPERATING MARGINS BEFORE FIXED CHARGES 4,828,542 5,078,681

INTEREST EXPENSEInterest on Long-Term Debt 1,652,175 1,596,150 Interest - Other 55,223 123,195

Total Interest Expense 1,707,398 1,719,345

OPERATING MARGINS AFTER FIXED CHARGES 3,121,144 3,359,336

GENERATION AND TRANSMISSION AND OTHER CAPITAL CREDITS 2,130,970 2,290,229

NET OPERATING MARGINS 5,252,114 5,649,565

NONOPERATING MARGINS (LOSS)Interest Income 115,367 101,940 Net Loss from Merchandising (83,281) (80,633) Other Nonoperating Margins 392,298 59,015

Total Nonoperating Margins 424,384 80,322

NET MARGINS 5,676,498 5,729,887

Unrealized Holding (Loss) Gain Arising During the Period (2,264) 4,849

COMPREHENSIVE NET MARGINS 5,674,234$ 5,734,736$

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYConSolIDateD StateMentS oF patronaGe CapItal anD otHer eQuItIeS | DeCeMBer 31, 2015 anD 2014


IOWA LAKES ELECTRIC COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF PATRONAGE CAPITAL AND OTHER EQUITIES

YEARS ENDED DECEMBER 31, 2015 AND 2014


Accumulated

Other Patronage Other Comprehensive

Capital Equities Margins Total

BALANCE - DECEMBER 31, 2013 5,999,582$ 60,714,417$ 8,602$ 66,722,601$

Comprehensive Margins 5,729,887 - 4,849 5,734,736

Retirement of Capital Credits (293,289) 189,676 - (103,613)

Transfers to Other Equities (4,661,545) 4,661,545 - -

BALANCE - DECEMBER 31, 2014 6,774,635 65,565,638 13,451 72,353,724

Comprehensive Margins 5,676,498 - (2,264) 5,674,234

Retirement of Capital Credits (262,016) 35,944 - (226,072)

Transfers to Other Equities (5,228,888) 5,228,888 - -

BALANCE - DECEMBER 31, 2015 6,960,229$ 70,830,470$ 11,187$ 77,801,886$

TOGETHER

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYConSolIDateD StateMentS oF patronaGe CapItal anD otHer eQuItIeS | DeCeMBer 31, 2015 anD 2014

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYConSolIDateD StateMentS oF CaSH FloWS | DeCeMBer 31, 2015 anD 2014

a n n u a l r e p o r t • 2 0 1 5 2 8

ERROR! UNKNOWN DOCUMENT PROPERTY NAME. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED ERROR! UNKNOWN DOCUMENT PROPERTY NAME. AND ERROR! UNKNOWN DOCUMENT PROPERTY NAME.


2015 2014

CASH FLOWS FROM OPERATING ACTIVITIESNet Margins 5,676,498$ 5,729,887$ Adjustments to Reconcile Net Margins to Net Cash Provided by Operating Activities:

Depreciation and Amortization 6,005,595 5,894,239 G & T and Other Capital Credits (2,130,970) (2,290,229) (Decrease) Increase in Accumulated Provisions for Pension and

Benefits (48,973) 4,117 (Increase) Decrease in Deferred Debits 316,549 299,545 Increase (Decrease) in Deferred Credits 310,541 (54,646)

Changes in Assets and Liabilities:(Increase) Decrease in:

Accounts Receivable 271,963 385,952 Materials and Supplies Inventory (8,476) 15,175 Other Accrued Assets 223,032 (310,254)

Increase (Decrease) in:Accounts Payable 297,414 (637,709) Other Current and Accrued Liabilities 105,959 49,427

Net Cash Provided by Operating Activities 11,019,132 9,085,504

CASH FLOWS FROM INVESTING ACTIVITIESConstruction and Acquisition of Plant (6,555,626) (4,711,332) Cash Received from Retirement of Patronage 428,654 398,243 Change in Other Property and Investments 127,659 (1,130,000)

Net Cash Used by Investing Activities (5,999,313) (5,443,089)

CASH FLOWS FROM FINANCING ACTIVITIESPrincipal Payments on Long-Term Debt (4,662,061) (4,701,420) Proceeds from Issuance of Long-Term Debt - 6,000,000 Change in Notes Payable - (2,866,667) Retirement of Capital Credits, Net of Donated Capital (226,072) (103,612) Increase in Consumer Deposits 14,001 181,103

Net Cash Used by Financing Activities (4,874,132) (1,490,596)

NET INCREASE IN CASH AND CASH EQUIVALENTS 145,687 2,151,819

Cash and Cash Equivalents - Beginning of Year 7,865,529 5,713,710

CASH AND CASH EQUIVALENTS - END OF YEAR 8,011,216$ 7,865,529$

SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATIONCash Payments for Interest 1,699,911$ 1,750,549$

Noncash Transactions:

Change in Asset Valuation and Equity for UnrealizedGain (Loss) on Available for Sale Investments (2,264)$ 4,849$

IOwA LAKES ELECTRIC COOPERATIVE ANd SUBSIdIARYnoteS to ConSolIDateD FInanCIal StateMentS | DeCeMBer 31, 2015 anD 2014


IOWA LAKES ELECTRIC COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015 AND 2014

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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization Iowa Lakes Electric Cooperative (ILEC) is a cooperative association organized under Iowa laws and statutes. The primary purpose of the Cooperative is to buy and sell electric energy to its member-owners located in Northwest Iowa and Southern Minnesota. The governing body consists of a fourteen (14) member board of directors elected by the members of the Cooperative to serve four (4) year terms. Iowa Lakes Development Corporation (ILDC) is a taxable Corporation and was formed for the purpose of promoting economic development. Principles of Consolidation The consolidated financial statements include the accounts of Iowa Lakes Electric Cooperative and its wholly owned subsidiary, Iowa Lakes Development Corporation. All significant intercompany transactions and accounts have been eliminated in consolidation. Basis of Accounting The Cooperative follows the Federal Energy Regulatory Commission's (FERC) Uniform System of Accounts prescribed for Class A and B Electric Utilities as modified by Rural Utilities Service (RUS). The accounting policies conform to accounting principles generally accepted in the United States of America as applied in the case of regulated electric utilities. The board of directors as regulators of the Cooperative establish all rates, charges, and fees charged to members-owners. Electric Plant and Depreciation Procedures Plant, property and equipment are stated at cost. Major improvements and betterments to existing plant are capitalized in accordance with recommended RUS procedures. Expenditures for maintenance and repairs, which do not extend the life of the applicable assets, are charged to expense as incurred. The distribution and generation plants are depreciated using composite straight-line methods and the general plant is depreciated using straight-line methods. When distribution and generation plant assets are sold or retired, the original cost is removed from the accounts and charged, together with any cost of removal, to the accumulated provision for depreciation. Any salvage value realized is credited to the same accumulated provision. When general plant assets are sold or retired, the original cost and accumulated provision for depreciation are removed from the accounts and any gain or loss is recognized in operations.



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NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents For the purposes of the statement of cash flows, the Cooperative considers short-term investments to be cash equivalents. The following is a summary of these items at December 31, 2015 and 2014:

2015 2014Cash on Hand and in Banks 805,208$ (120,295)$ Commercial Paper - NRUCFC 6,732,135 7,582,262Revolving Loan Fund Cash 473,873 403,562

Total 8,011,216$ 7,865,529$

The Cooperative maintains cash in checking accounts at financial institutions approved by the board of directors and insured by FDIC or FSLIC. Accumulated deposits at these institutions, at times, may exceed federally insured limits. The Revolving Loan Fund Cash is restricted for making economic development loans to businesses according to the Rural Economic Development Loan and Grant Program. Accounts Receivable The Cooperative provides an allowance for bad debts using the allowance method based on management’s judgment. Sales are made on an unsecured basis. Payment is generally required within twenty (20) days of the date of billing. Accounts past due are individually analyzed for collectability and accounts determined uncollectible are written off annually. In addition, an allowance is provided for other receivables when a pattern of uncollectability has occurred. At December 31, 2015 and 2014, the allowance for uncollectible accounts was $473,111 and $488,773, respectively. Investments Except as noted below, investments are stated at cost and adjusted for amortization of premiums and accretions of discounts. Premiums and discounts are amortized using the straight-line method. Gains or losses on disposition of investments are based on the net proceeds and the adjusted carrying value of the securities sold, using the specific identification method. Marketable securities are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive net margins. Investments in associated organizations and certain other investments are stated at cost plus undistributed allocated equities from other cooperatives.





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Allowance for Loan Losses The allowance for loan losses (allowance) is an estimate of loan losses inherent in the Cooperative’s loan portfolio. The allowance is established through a provision for loan losses which is charged to expense. Additions to the allowance are expected to maintain the adequacy of the total allowance after loan losses and loan growth. Loan losses are charged off against the allowance when the Cooperative determines the loan balance to be uncollectible. Cash received on previously charged off amounts is recorded as a recovery to the allowance. A loan is considered impaired when, based on current information and events, it is probable that the Cooperative will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Loans determined to be impaired are individually evaluated for impairment. When a loan is impaired, the Cooperative measures impairment based on the present value of the expected future cash flows discounted at the original contractual interest rate, except that as a practical expedient, it may measure impairment based on an observable market price, or the fair value of the collateral if collateral dependent. A loan is collateral dependent if the repayment is expected to be provided solely by the underlying collateral. The Cooperative considers the allowance based on the risk characteristics described as follows:

Rural Development: The Rural Economic Development Revolving Loan Fund (RLF) is a “pass through” loan program. The Cooperative receives a loan from the United States Department of Agriculture Rural Development and makes a separate loan which mirrors those terms to the benefit of the ultimate recipient. The Intermediary (ILEC) is charged with operating the RLF as a “prudent lender”. However, by its very nature, a RLF is expected to be a gap financer – taking risks when the conventional financing market is unwilling. The RLF is not intended to compete with other public and private lenders. As such, occasional losses to the RLF are expected. Loans are made from the RLF for projects that will significantly benefit rural areas, without restriction to ILEC’s service area. These loans are generally collateralized with a mortgage lien on real estate property.

Although management believes the allowance to be adequate, ultimate losses may vary from its estimates. At least annually, management reviews the adequacy of the allowance, including consideration of the relevant risks of the portfolio, current economic conditions, and other factors. If management determines that changes are warranted based on those reviews, the allowance is adjusted.



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Inventories Inventories are valued at the lower of cost or market using the average unit cost method. Electric Energy Sales and Purchases Revenue is recognized and monthly billings are made for energy sold as indicated by meter readings received on or about the first day of each month utilizing an automated meter reading (AMR) system. In the case of certain large commercial, industrial or certain three-phase metered accounts, meter readings are acquired or obtained on the first day of each month or the closest business day thereafter. Cost of power purchased is recognized on the basis of meter readings made by the wholesale power suppliers on the last day of each month or closest business day thereafter. Income Taxes Iowa Lakes Electric Cooperative is exempt from income taxes under Section 501(c)(12) of the Internal Revenue Code, thus there is no provision for income taxes at December 31, 2015 and 2014. Exempt cooperatives which receive gross income from business activities which are regularly carried on and which are not substantially related to the Cooperative’s exempt purpose are required to pay tax on this income. There was no income tax expense or benefit for the years ended December 31, 2015 and 2014. Iowa Lakes Development Corporation had no income tax expense or benefit for the years ended December 31, 2015 and 2014. As of December 31, 2015, Iowa Lakes Electric Cooperative and Iowa Lakes Development Corporation have net operating loss carryforwards available of approximately $109,800 and $419,900, respectively. An equal and offsetting valuation allowance has been recorded against the net operating loss carryforwards as the likelihood of using the carryforwards is not determined. The Cooperative has evaluated its tax positions and determined that it has no uncertain tax positions as of December 31, 2015 and 2014. With few exceptions, Iowa Lakes Electric Cooperative and Iowa Lakes Development Corporation are no longer subject to federal, state, or local income tax examinations by tax authorities for years before 2012. Presentation of Sales Taxes The Cooperative does business in various taxing jurisdictions which impose sales taxes on sales to nonexempt member-owners. The Cooperative collects that sales tax from member-owners and remits the entire amount to the taxing jurisdictions. The Cooperative’s accounting policy is to exclude the tax collected and remitted to the taxing jurisdictions from revenues and costs of sales.





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Fair Value Measurements The Cooperative categorizes its assets and liabilities measured at fair value into a three-level hierarchy based on the priority of the inputs to the valuation technique used to determine fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used in the determination of the fair value measurement fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. Assets and liabilities valued at fair value are categorized based on the inputs to the valuation techniques as follows:

Level 1 – Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Cooperative has the ability to access. Level 2 – Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 3 – Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Subsequent to initial recognition, the Cooperative may evaluate the carrying value of assets and liabilities measured on a nonrecurring basis to fair value. Adjustments to fair value usually result when certain assets are impaired. Such assets are written down from their carrying amounts to their fair value. Professional standards allow entities the irrevocable option to elect to measure certain financial instruments and other items at fair value for the initial and subsequent measurement on an instrument-by-instrument basis. The Cooperative has adopted the policy to value certain financial instruments at fair value. The Cooperative has not elected to measure any existing financial instruments at fair value; however, it may elect to measure newly acquired financial instruments at fair value in the future.



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Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Comprehensive Margins Comprehensive margins and its components are required to be presented for each year a statement of operations is presented. The only component included in other comprehensive margins for the Cooperative is the unrealized gain (loss) on available for sale securities. Subsequent Events In preparing these financial statements, the Cooperative has evaluated events and transactions for potential recognition or disclosure through March 18, 2016, the date the financial statements were available to be issued. New Accounting Pronouncements During the year ended December 31, 2015, the entity early adopted a provision of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This provision eliminates the requirement for entities, other than public business entities, to disclose the fair values of financial instruments carried at amortized cost, as previously required by Accounting Standards Codification (ASC) 825-10-50. As such, the entity has omitted this disclosure for the years ended December 31, 2015 and 2014. The early adoption of this provision did not have an impact on the entity’s financial position or results of operations.

NOTE 2 ELECTRIC PLANT AND DEPRECIATION PROCEDURES

Listed below are the major classes of plant as of December 31, 2015 and 2014:

2015 2014Intangible Plant 11,372$ 11,372$ Electric Distribution Plant 95,545,711 93,314,848Wind Generation Plant 45,171,680 45,054,759 General Plant 19,371,719 18,898,219Electric Plant in Service 160,100,482 157,279,198 Construction Work in Progress 1,124,043 970,034

Total Electric Plant 161,224,525$ 158,249,232$





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NOTE 2 ELECTRIC PLANT AND DEPRECIATION PROCEDURES (CONTINUED)

The following plant depreciation rates are being used for the years ended December 31, 2015 and 2014: Electric Distribution Plant 2.80% - 10.00%Wind Generation Plant 3.30% - 20.00%General Plant 3.60% - 17.00%

NOTE 3 OTHER PROPERTY AND INVESTMENTS

Investments in Associated Organizations Investments in associated organizations include capital term certificates, loan term certificates, zero term certificates, and member capital securities of the National Rural Utilities Cooperative Finance Corporation (NRUCFC). The Cooperative entered into an agreement in 1984 to extend the maturity dates on each capital term certificate to fifty (50) years. These certificates bear interest at a rate of 5% per annum and begin maturing in the year 2070. The loan term certificates bear interest at 3% and begin maturing in the year 2020. The Cooperative was invested in member capital securities which earned interest at 7.5% and were scheduled to begin maturing in the year 2044. The Cooperative is a voting member of Corn Belt Power Cooperative (CBPC) and Northwest Iowa Power Cooperative (NIPCO). The voting members share margins realized by CBPC and NIPCO, on the cooperative principle, based on pro-rata revenues. These investments or patronage capital earned by voting members are returned annually as approved by their respective Boards of Directors. Listed below is a summary of investments in associated organizations as of December 31, 2015 and 2014:

2015 2014Investments in Associated Organizations:

NRUCFC - Capital Term Certificates 1,575,442$ 1,581,010$ CBPC - Patronage Capital Credits 14,476,390 12,937,482 NIPCO - Patronage Capital Credits 1,067,435 955,652 NRUCFC - Patronage Capital Credits 1,039,869 966,363NRTC - Patronage Capital Credits 810,060 865,642 RESCO - Patronage Capital Credits 220,424 212,150 FREIE - Patronage Capital Credits 203,183 189,064 Other Associated Organizations 116,162 105,634

Total 19,508,965$ 17,812,997$



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NOTE 3 OTHER PROPERTY AND INVESTMENTS (CONTINUED)

Other Investments 2015 2014

Investments Classified as Available for Sale:Corporate Equity Securities 20,323$ 22,587$

Investments in Business Park/Residential Developments 1,619,819 1,619,819 Investment in Pocahontas Hospitality, LLC 1,455 1,273 Special Funds - Deferred Compensation 388,311 437,284

Loans:Rural Development Loans, 0% to 3% 3,046,583 3,213,026Allowance for Loan Losses (4,642) (102,115)

Total Loans 3,041,941 3,110,911

Total Other Investments 5,071,849$ 5,191,874$

Investments in ILDC Business Park/Residential Developments consist of land and land improvements being held for resale and are recorded at cost. Changes in the allowance for loan losses and recorded investment in loans for the year ended December 31, 2015 as follows:

2015 2014Allowance for Loan Losses:Balance at Beginning of Year 102,115$ 76,785$

Provision for Loan Losses 33,061 25,330 Loans Charged-Off (130,534) - Recoveries of Loans Previously

Charged-Off - -

Balance at End of Year 4,642$ 102,115$

Ending Balance: CollectivelyEvaluated for Impairment 4,642$ 102,115$

Loans:Ending Balance: Collectively

Evaluated for Impairment 3,046,583$ 3,213,026$

Rural Development

The following table shows an aging analysis of the loan portfolio by time past due as of December 31, 2015:

30-89 More ThanDays 90 Days Total

Current Past Due Past Due Nonaccrual TotalRural Development 2,999,434$ -$ 47,149$ -$ 3,046,583$

Total 2,999,434$ -$ 47,149$ -$ 3,046,583$

Accruing Interest





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Other Investments (Continued) The following table shows an aging analysis of the loan portfolio by time past due as of December 31, 2014:

30-89 More ThanDays 90 Days Total

Current Past Due Past Due Nonaccrual TotalRural Development 3,034,172$ 178,854$ -$ -$ 3,213,026$

Total 3,034,172$ 178,854$ -$ -$ 3,213,026$

Accruing Interest

Available for Sale Securities The following is a summary of the amortized cost and estimated market value of investments classified as available for sale as of December 31, 2015 and 2014:

EstimatedGross Gross Market Value

Amortized Unrealized Unrealized (CarryingCost Gains Losses Value)

Stocks 9,136$ 11,187$ -$ 20,323$ Total Available for Sale Securities 9,136$ 11,187$ -$ 20,323$

December 31, 2015

EstimatedGross Gross Market Value

Amortized Unrealized Unrealized (CarryingCost Gains Losses Value)

Stocks 9,136$ 13,451$ -$ 22,587$ Total Available for Sale Securities 9,136$ 13,451$ -$ 22,587$

December 31, 2014

The net unrealized holding gain in the Available for Sale portfolio, totaling $11,187 and $13,451 at December 31, 2015 and 2014, respectively, is recorded as a separate component of members' equity. In general, investments are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of the investments will occur in the near term, however, such changes would not be material to the financial statements.



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Non-Utility Property The balance of the non-utility property represents various rental properties owned by the Cooperative, net of accumulated depreciation. The Coop sold the various rental properties in 2015. Listed below is a summary of non-utility property as of December 31, 2014:

2014Rental Properties and Buildings 89,678$ Accumulated Depreciation (86,128)

Total 3,550$

NOTE 4 SPECIAL FUNDS – DEFERRED COMPENSATION

The Cooperative has a deferred compensation plan with certain employees. The deferred compensation funds are invested in mutual funds and recorded at fair value with an offsetting liability account, reflected as accumulated provisions for pensions and benefits. The cumulative carrying value of the investment as of December 31, 2015 and 2014 was $388,311 and $437,284, respectively.

NOTE 5 DEFERRED DEBITS

As of December 31, 2015 and 2014, deferred debits consisted of the following:

2015 2014Preliminary Surveys 216,009$ 211,351$ Bond Issuance Costs 29,268 32,816 Unamortized Loan Conversion Fees 33,494 36,471NRECA RS Pension Plan Prepayment 2,276,554 2,594,213

Total 2,555,325$ 2,874,851$

The unamortized loan conversion fees and bond issuance costs are being amortized over the life of the loans. On March 1, 2013, the Cooperative made a prepayment of $3,176,587 to the NRECA RS Plan. The Cooperative is amortizing this prepayment over ten years.





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NOTE 6 DETAIL OF PATRONAGE CAPITAL AND OTHER EQUITIES

Patronage Capital The following is a summary of patronage capital at December 31, 2015 and 2014:

2015 2014Assignable 5,676,498$ 5,729,887$ Assigned 1,283,731 1,044,748 Balance 6,960,229$ 6,774,635$

Mortgage provisions restrict the retirement of patronage capital unless, after retirement, the capital of the Cooperative equals at least 30% of the total assets of the Cooperative; provided, however, that retirements can be made if such distributions do not exceed 30% of the patronage capital or the preceding year's operating margins. No distributions can be made if there are unpaid, when due, any installments of principal or interest on the notes payable. Distributions to estates are made by a voluntary request of the estates on a predetermined discounted basis and approved quarterly by the Cooperative’s board of directors. Discounts are retained by the Cooperative and transferred to other equities. As of December 31, 2015, capital credits through 2000 have been fully retired. Other Equities Other equities consist of retained margins not allocated to patrons as follows at December 31, 2015 and 2014:

2015 2014Statutory Surplus 12,726,121$ 11,647,043$ Reserve for Contingent Losses 15,840,477 15,190,667 Reserve for Plant Replacement 39,342,839 35,842,839 Reserve for Education Fund 24,239 24,239 Reversion Fund 289,914 268,190 Donated Capital 2,606,880 2,592,660

Total 70,830,470$ 65,565,638$

The Cooperative’s Articles of Incorporation require that at least 10% of the Cooperative’s earnings remaining after provision is made for depreciation, obsolescence, bad debts, or contingent losses or expense, and must be added to statutory surplus until the surplus equals either $1,000 or 30% of all capital paid in for memberships plus unpaid patronage dividends, earnings from non-member business, and earnings from allocations of other cooperatives, whichever is greater, but is not to exceed 50% of that total, as required by Section 499.30(2)(b) of the Iowa Code. Surplus at December 31, 2015 and 2014 equals 50% of this total. The board of directors has the option to assign patronage earnings in the amount it determines necessary to maintain a reasonable reserve for depreciation, obsolescence, bad debts, contingent losses or expenses, which may include a Reserve for Contingent Losses and a Reserve for Electric Utility Plant Replacement.



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NOTE 7 LONG-TERM DEBT AND LINE-OF-CREDIT

Following is a summary of outstanding long-term debt as of December 31, 2015 and 2014:

2015 2014National Rural Utilities Cooperative

Finance Corporation:Notes, Due 2016 to 2044 (2.50% to 6.90%) 33,378,187$ 35,173,581$

CoBank Fixed-Rate Note, Due 2023 (0%) CREBS 22,933,333 25,800,000 USDA Note, Due 2024 (0%) 1,000,000 1,000,000 Loan Conversion Costs Payable 33,494 36,471

Subtotal 57,345,014 62,010,052 Less Current Maturities 4,820,000 4,688,000

Long-Term Debt, Net of Current Maturities 52,525,014$ 57,322,052$

Substantially all assets are pledged as security for the long-term debt owed to NRUCFC and CoBank. The Energy Policy Act of 2005 provided electric cooperatives with the ability to issue Clean Renewable Energy Bonds (CREBS). A CREB is a special type of bond, known as a tax credit bond, that offers electric cooperatives low cost financing for the development of eligible renewable energy facilities. The Cooperative issued $43,000,000 in CREBS in 2009. These bonds were purchased by CoBank and bear interest at a rate of 0% with final payment due in 2023. The Cooperative obtained a loan of $1,000,000 at 0% from USDA to support an economic development project for Brown Development, LC. The loan is due in monthly installments of $10,417 starting May of 2016 through May 2024. The loan is guaranteed by Brown Development, LC. As of December 31, 2015, there was $22,823,413 in unadvanced loan funds with NRUCFC. Loan Conversion Costs Payable During 2003, the Cooperative converted three (3) of its NRUCFC fixed rate loans to lower fixed-rate loans. The Cooperative incurred conversion costs of $183,910. These costs are being paid in quarterly installments over the life of the loans. The aggregate five-year maturities of long-term debt are as follows:

Year Ending December 31, Amount2016 4,820,000$ 2017 4,844,000 2018 4,903,000 2019 4,994,000 2020 5,035,000

Later Years 32,749,014 Total 57,345,014$





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NOTE 7 LONG-TERM DEBT AND LINE-OF-CREDIT (CONTINUED)

Lines of Credit The Cooperative has a $10,000,000 perpetual line of credit with NRUCFC. Borrowings on the line of credit are due on demand at interest rates, which vary with the prime interest rate published in the Wall Street Journal. The interest rates on the line of credit at December 31, 2015 and 2014 were 2.90% and 2.90%, respectively. There were no advances outstanding on the line of credit as of December 31, 2015 and 2014. The Cooperative has an $8,000,000 line of credit with CoBank at December 31, 2015 and 2014, respectively. The interest rates on the line of credit at December 31, 2015 and 2014 were 2.53% and 2.92%, respectively. There were no advances outstanding on the line of credit as of December 31, 2015 and 2014. This line of credit expires on September 30, 2016.

NOTE 8 RETIREMENT PLAN

Disclosure Information for Iowa Lakes Electric Cooperative Participation in the Retirement Security Plan Narrative Description The National Rural Electric Cooperative Association (NRECA) Retirement Security Plan (RS Plan) is a defined benefit plan qualified under Section 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. It is a multi-employer plan under the accounting standards. The plan sponsor’s Employer Identification Number is 53-0116145 and the Plan Number is 333. A unique characteristic of a multi-employer plan compared to a single employer plan is that all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participating employers. Plan Information Iowa Lakes Electric Cooperative contributions to the RS Plan in 2015 and in 2014 represented less than 5% of the total contributions made to the plan by all participating employers. The Cooperative made contributions to the plan of approximately $972,000 in 2015 and $981,000 in 2014. There have been no significant changes that affect the comparability of 2015 and 2014 contributions. For the RS Plan, a “zone status” determination is not required, and therefore not determined, under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the Retirement Security Plan was over 80% funded on January 1, 2015 and January 1, 2014 based on the PPA funding target and PPA actuarial value of assets on those dates.



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NOTE 8 RETIREMENT PLAN (CONTINUED)

Plan Information (Continued) Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience. At the December 2012 meeting of the I&FS Committee of the NRECA board of directors, the Committee approved an option to allow participating cooperatives in the RS Plan to make a contribution prepayment and reduce future required contributions. The prepayment amount is a cooperative’s share, as of January 1, 2013, of future contributions required to fund the RS Plan’s unfunded value of benefits earned to date using RS Plan actuarial valuation assumptions. The prepayment amount will typically equal approximately 2.5 times a cooperative’s annual RS Plan required contribution as of January 1, 2013. After making the prepayment, for most cooperatives the billing rate is reduced by approximately 25%, retroactive to January 1, 2013. The 25% differential in billing rates is expected to continue for approximately 15 years. However, changes in interest rates, asset returns, and other plan experience different from expected, plan assumption changes and other factors may have an impact on the differential in billing rates and the 15 year period. The Cooperative has also adopted the 401(k) Pension Plan, a savings plan qualified under Section 401(k) of the Internal Revenue Code. The plan allows employees to defer the maximum amount prescribed by law combined on a pre-tax basis and an after-tax basis (Roth 401(k) provision) through contributions to the savings plan. The Cooperative may also make voluntary contributions to this plan. The Cooperative’s contributions to the plan for the years ended December 31, 2015 and 2014 were approximately $96,400 and $91,700, respectively.

NOTE 9 ACCUMULATED PROVISIONS FOR PENSION AND BENEFITS

The following is a summary of accumulated provisions for pensions and benefits at December 31, 2015 and 2014:

2015 2014Deferred Compensation Plan 388,311$ 437,284$

The Cooperative has a deferred compensation plan covering certain key employees.





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NOTE 10 DEFERRED CREDITS

Deferred credits at December 31, 2015 and 2014 are as follows:

2015 2014

Deferred Gain on RUS Debt Buyout 160,579$ 193,626$ Deferred Revenue 4,450,000 4,200,000 Economic Development Credits 124,959 124,959 Customer Advances for Construction 59,918 1,522 Other Deferred Credits 18,395 16,249

Total 4,813,851$ 4,536,356$

Effective December 19, 1996, the Cooperative reached an agreement with RUS and NRUCFC wherein RUS accepted $7,050,208 as payment in full on all outstanding RUS notes. As a result of the RUS buyout and NRUCFC’s refinancing arrangement, the Cooperative realized a $1,702,033 gain. This gain is being amortized on the effective interest method over the remaining lives of the original notes. Deferred revenue totaling $4,450,000 and $4,200,000 at December 31, 2015 and 2014, respectively, was approved by the board of directors. The Cooperative started to recognize deferred revenues beginning in 2012 and will continue through 2020 depending upon forecasted cost of wholesale power supply, the anticipated loss of certain renewable energy tax incentives, and forecasted increases in maintenance expenses due to aging wind energy property.

NOTE 11 COMMITMENTS AND CONTINGENCIES

The Cooperative has entered into an agreement to guarantee the debt of Heartland Security Services, LLC. The maximum guaranteed amount is $28,889 and there is no current exposure as of December 31, 2015. The Cooperative has entered into long-term all requirements contracts for the purchase of its wholesale electric power and energy requirements from Corn Belt Power Cooperative and Northwest Iowa Power Cooperative through the year 2075. Amounts received or receivable from the U.S. Department of Homeland Security and Iowa Homeland Security and Emergency Management are subject to agency audit and adjustment. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of funds which may be disallowed by the agencies cannot be determined at this time although the Cooperative expects such amounts, if any, to be immaterial. The financial assistance received is subject to audits by the grantor agency.



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NOTE 11 COMMITMENTS AND CONTINGENCIES (CONTINUED)

The following is a summary of FEMA and Iowa Homeland Security and Emergency Management receivable amounts related to storm damage and hazard mitigation grants. FEMA covers 75% of the eligible costs and Iowa Homeland Security and Emergency Management will cover 10% of the eligible costs, or as established in the grant agreement.

Iowa HomelandSecurity andEmergency

FEMA Management TotalDecember 31, 2015

Public Assistance Grants 74,208$ 10,429$ 84,637$ Hazard Mitigation 344,184 46,394 390,578

Total 418,392$ 56,823$ 475,215$

Iowa HomelandSecurity andEmergency

FEMA Management TotalDecember 31, 2014

Public Assistance Grants 233,100$ 35,548$ 268,648$ Hazard Mitigation 454,562 60,608 515,170

Total 687,662$ 96,156$ 783,818$

TOGETHER


TOGETHER

Touchstone Energy

Touchstone Energy

Touchstone Energy

Touchstone Energy

Iowa Lakes Electric Cooperative702 South 1st St. | Estherville

800-225-4532 | www.ilec.coop

anniversary edition - iowa lakes electric cooperative · circus” started out in eastern iowa...

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