duncan valley electric cooperative, inc. … operation andmaintenance expenses increase or line...

DUNCAN VALLEY ELECTRIC COOPERATIVE, INC.PO Box 440 www.dvec.org 222 North Highway 75Duncan AZ 85534 Duncan AZ 85534

Owned By Those We Serve - Incorporated - June 1947Phone: (520) 359-2503 Fax: (520) 359-2370

May 22,2017

Mr. Nick GuillenRecords Management Chief1120 Paseo de PeraltaPO Box 1269PERA Building, Rm 406Santa Fe, NM 87504

Dear Mr. Guillen:

Enclosed please find the following:¯ 2016 Annual Report¯ December 31, 2016 RUS Form 7 report¯ December 31, 2016 Audit Report.¯ 2016 Annual Report on Programs or Measures to Promote Energy

Efficiency, Conservation or Load Management in Compliance withNMAC 17.7.2.17 (B)

The Cooperative did not engage in any activities as described in NMAC 17.6.450 or17.1.2.8.

If you have any questions just give me a call.

Sincerely,

Kimberly WatersAccountant

DUNCAN VALLEY ELECTRIC COOPERATIVE, INC.PO Box 440 379597 AZ 75Duncan AZ 85534 Duncan AZ 85534

Owned By Those We Serve - Incorporated - June 194 7Phone: (1928) 359-2503 Fax: (928) 359-2370

2016 Annual Report on Programs or Measures to Promote Energy Efficiency, Conservation or LoadManagement in Compliance with NMAC 17.7.2.17(B)

New Mexico Administrative Code 17.7.2.17(B) requires that distribution cooperatives file along with its

annual report to the New Mexico Public Regulation Commission, a report that describes all of the

distribution cooperative utility’s programs or measures that promote energy efficiency, conservation or

load management.

Duncan Valley Electric Cooperative, Inc. ("DVEC") is an Arizona non-profit membership corporation

providing electric distribution service to its consumer-members in portions of Greenlee County, Arizona,

and Hidalgo and Grant Counties, New Mexico. As of December 31, 2016, of approximately 2,406

electric services total, approximately 340 services are located within the State of New Mexico. The bulk

of DVEC’s system and consumers are located in Arizona where DVEC is regulated as a public utility by

the Arizona Corporation Commission ("ACC"). DVEC’s principal office is 379597 AZ 75, PO Box 440,

Duncan, Arizona 85534 (telephone (928) 359-2503; facsimile (928) 359-2370).

Given DVEC’s small size and limited budget, DVEC currently has decided to invest its funds in several

affordable programs or measures that promote energy efficiency, conservation or load management to

its members. The first measure is an energy efficiency education program through a DVEC bi-monthly

publication titled Currents and a bi-monthly bill insert newsletter titled The Power Line. These

publications are designed to be a source of authoritative information and education for cooperative

consumer-members. During 2016, DVEC published fourteen articles designed to educate its members

on energy efficiency. These articles include topics on energy usage and conservation; tips and

information on reducing energy usage; and selecting energy efficient or low energy usage products.

Several Energy Efficient/Energy Savings pamphlets and brochures are available in our lobby area.These publications contain comprehensive information on ways to be more energy efficient and howconsumer-members can save money on their energy bills. While speaking to our consumer-members,our customer service personal regularly offer to send one of these publication to any member who asksabout energy efficiency or on ways they can reduce their electric bill.

DVEC also maintains energy savings information on its web site.

S:LAccounting\Yearend~Electric\New Mexico,2016 Report - NMPRC 17.7.2.17 Energy Efficiency Programs.docx

Duncan Valley Electric Cooperative, 2015 Annual Report on Programs or Measures to Promote EnergyEfficiency, Conservation or Load Management in Compliance with NMAC 17.7.2.17(B)

Page 2

In 2016, DVEC spent $9,386.91 on publishing and mailing each member its two bimonthly publications.

DVEC has no way of determining what energy efficiency measures or programs were installed by its

members as a result of the energy efficiency articles in its bi-monthly publications and web-site

information. Consequently, DVEC is not able to provide an estimate of the kWh savings that resulted

from these energy efficiency measures.

The second energy efficiency program that DVEC offers to its members involves low interest loans for

installing energy efficient products. DVEC has set aside a maximum of $200,000 to loan to members

at favorable interest rates to install energy efficient products in their homes. Applicants must meet

certain qualifications and credit requirements and be responsible for applicable lien, filing and recording

fees. DVEC advertises this loan program through its bi-monthly publications and at its annual meeting.

In 2016, DVEC did not have a member take out an energy efficient loan for the installation of energy

efficient heat pumps and insulation upgrades, in their homes. Since these loans are repaid by

customers with interest, there is minimal cost to DVEC to administer the program. As a result, DVEC

has not estimated or monRored the kWh savings that have resulted from this program in an effort to

minimize the cost of this program.

In conclusion, DVEC believes that the funds it is investing in its programs or measures that promote

energy efficiency, conservation or load management to its members are reasonable, cost effective and

providing benefits in the form of kWh savings to all of its customers who choose to invest in these

programs.

Respectfully submitted this 23r~ day of May 2017,

Steven LuntCEO

S:~Accounting~YearendkElectric’~New MexicoL2016 Report - NMPRC 17.7.2.17 Energy Efficiency Programs.docx

RURAL ELECTRIC COOPERATIVES

ANNUAL REPORT

OF

DUNCAN VALLEY ELECTRIC COOPERATIVEI INC.

TO THE

NEW MEXICO

PUBLIC REGULATION COMMISSION

FOR THE

YEAR ENDED DECEMBER 31, 2016

ELECTRIC OPERAI"ION AND MAINTENANCE EXPENSES

Increase or

Line Account Amount for year decrease from

No preceding year

(b) (c)(a)1 POWER PRODUCTION EXPENSES2 STEAM POWER GENERATION3 Operation4 500 Operation supervision and engineering5 501 Fuel6 502 Steam expenses7 503 Steam from other sources8 504 Steam transferred-Cr9 505 Electric expenses

10 506 Miscellaneous steam power expenses11 507 Rents12 TOTAL OPERATION13 MAINTENANCE14 510 Maintenance supervision and engineerin£]15 511 Maintenance of structures16 5!2 Maintenance of boiler plant17 513 Maintenance of electric plant18 514 Maintenance of miscellaneous steam plant19 TOTAL MAINTENANCE20 TOTAL POWER PRODUCTION EXPENSES-STEAM F21 NUCLEAR POWER GENERATION22 OPERATION23 517 Operation supervision and engineering24 518 Fuel25 519 Coolants and water26 520 Steam expenses27 521 Steam from other sources28 522 Steam transferred-Cr29 523 Electric expenses30 524 Miscellaneous nuclear power expenses31 525 Rents32 TOTAL OPERATION33 MAINTENANCE34 528 Maintenance supervisior~, and engineering35 529 Maintenance of structures36 530 Maintenance of reactor plant equipment37 531 Maintenance of electric F, lant38 532 Maintenance of miscellaneous nuclear plant39 TOTAL MAINTENANCE40 TOTAL POWER PRODUCTION EXPENSES-NUCLEA41 HYDRUALIC POWER GENERATION42 OPERATION43 535 Operation supervision and engineering44 536 Water for power45 537 Hydraulic expenses46 538 Electric expenses47 539 Miscellaneous h),draulic power generation expenses48 540 Rents49 TOTAL OPERATION50 MAINTENANCE

51 541 Maintenance supervision and engineering52 542 Maintenance of structures

0 0

o oo o

o o

0 00 0

0 0

ELECTRIC OPERATION AND MAINTENANCE EXPENSES

Increase or

Line Account Amount for year decrease from

No preceding year

(b) (c)(a)1 HYDRAULIC CONTINUED2 543 Maintenance of reservoirs, dams and waterways3 544 Maintenance of electric plant4 545 Maintenance of miscellaneous hydraulic plant5 TOTAL MAINTENANCE6 TOTAL POWER PRODUCTION EXPENSES-HYDRAUI7 OTHER POWER GENERATION8 OPERATION9 546 Operation supervision and engineering

10 547 Fuel11 548 Generation expenses12 549 Miscellaneous other power generation expenses13 550 Rents14 TOTAL OPERATION15 MAINTENANCE16 551 Maintenance supervision and engineering17 552 Maintenance of structures18 553 Maintenance of generating and electric plant19 554 Maintenance of miscellaneous other power generation plant20 TOTAL MAINTENANCE21 TOTAL POWER PRODUCTION EXPENSES-OTHER P22 OTHER POWER SUPPLY EXPENSES

24 556 S~/stem control and load dispatching25 557 Other expenses26 TOTAL POWER SUPPLY EXPENSES27 TOTAL POWER PRODUCTION EXPENSES28 TRANSMISSION EXPENSES29 OPERATION30 560 Operation supervision and engineering31 561 Load dispatching32 562 Station expenses33 563 Overhead line expenses34 564 Underground line expenses35 565 Transmission of electricit,/13)/ others36 566 Miscellaneous transmission expenses37 567 Rents38 TOTAL OPERATION39 MAINTENANCE40 568 Maintenance supervision and engineering41 569 Maintenance of structures42 570 Maintenance of station equipment43 571 Maintenance of overhead lines44 572 Maintenance of underground lines45 573 Maintenance of miscellaneous transmission plant46 TOTAL MAINTENANCE47 TOTAL TRANSMISSION EXPENSES48 DISTRIBUIION EXPENSES49 OPFRATION50 580 Operation supervision and engineering51 581 Load dispatching52 582 Station expenses

54 584 Underground line expenses55 585 Street lightin~l and signal s)~stem expenses

0 0o o

o 0

2,150,515

0 00 0

111,715

2,150,515 111,7152,150,515 111,715

355,435496

0 0

o 00 0

13,336(1,208)

ELECTRIC OPERATION AND MAINTENANCE EXPENSES

Increase orLine Account decrease fromNo preceding year

123456789

101112!3!41516171819202122232425262728293O3132333435363738394O4142434445464748495O51525354

(a)DISTRIBUTION EXPENSES CONTINUED

586 M~h’l587 Customer installations expenses588 Miscellaneous distribution expenses589 Rents

TOTAL, OPERATIONMAINTENANCE

590 Maintenance supervision and engineering591 Maintenance of structures592 Maintenance of station equipment

595 Mamton3tIc~ of Im~ traf~sformers596 Maintenance of street lishting and signal systems597 Maintena~ce of meters598 Maintenance of miscellaneous distribution plant

TOTAL MAINTENANCETOTAL DISTRIBUTION EXPENSES

CUSTOMER ACCOUNTS EXPENSESOPERATION

901 Supewision902 Met{~ ~ead~n~ expel~ses903 Custom(Jr ~(:;o[(Js and collection expenses004 Uncollectible accounts005 Miscellaneous customer accounts expenses

TOTAL O~STOM[FI ACCOUNTS EXPENSESSALES EXPENSES

OPERATION909 (}tlsIom(pr {~{~fvice al]d Irlfolmahorl [ xpense

012 Demonstrating and selling expenses913 Adve~isin8 expenses014 Revenues from merchandising, jobbin~ and contract work915 Oost and expenses of merchandising, jobbing and contract work010 Miscellaneous sales expenses

TOTAL CUSTOMER SERVICES EXPENSESADMINISTRATIVE & GENERAL EXPENSES

OPERATION920 AclmirtislrpJtive {tlld ~ollera! salalies

921 Offir:e supplies and expenses922 Administrative expenses transferred-Or923 Outside services employed924 Prope~ insurance925 Injuries and damages926 Employee pensions and benefits927 Franchise requirements928 Re~tllatol~ {:OmmlSSiOl] expenses929 [)tipll~ate cha~es Cr930 Ml£r, ellailer~us ~n~,ral expenses931 Rents

TOTAL OPERATIONMAINTENANCE

932 Maintenance of general plantTOTAL ADMINISTRATIVE & GENERAL EXPENSES

TOTAL ELECTRIC OPERATION AND MAINTENANCE EX

Amount for year

(b)

3,849 (8,183)

8,875 451368,655 4,396

0130,572

39O21,464

5,097

(5,282)(1,115)(1,087)

1,263

157,523 (6,221)526,177 (1,826)

116,463220,947

0

o10,36225,903

(600)

337,411 35,666

35,553

035,553

51,22462,640

34,515000

10,630(2,135)

188,761

345,635

6,880352,514

3,402,170

21,492

021,492

41,3987,439

12,940000

2,130168

8,600

72,674

72,281239,327

ELECTRIC OPERATION AND MAINTENANCE EXPENSES (Continued)SUMMARY OF ELECTRIC OPERATION AND MAINTENANCE EXPENSES

Line

No. OPERATION MAINTENANCE TOTAL

(b) (c) (d)

FUNCTIONAL CLASSIFICATION

1 POWER PRODUCTION EXPENSES2 ELECTRIC GENERATION3 STEAM POWER4 NUCLEAR5 HYDRAULIC6 OTHE[~ POWER7 OTHER POWER EXPENSES8 TOTAL POWER PRODUCTION EXPENSES9 TRANSMISSION EXPENSES

10 DISTRIBUTION EXPENSES11 CUSTOMER ACCOUNTS EXPENSES12 SALES EXPENSES13 ADM. & GENERAL EXPENSES14 TOTAL ELECTRIC OPERATION AND MAINTENANCE EXPEN

2!50,515

2,150,5150

368655337,411

35,553345,635

3,237,767

00

157,523

6,880164,402

2,150,515

2,150,5150

526,177337,41135,553

352,5143,402,170

NUMBER OF ELECTRIC DEPARTMENT EMPLOYEES

Number of electric department employees, payroll period ended October 31, 20151. Total regular full-time employees2. Total part-time and temporary employees

120

123. Total employees

The data on number of employees should be reported for thepayroll period ending nearest to October 31, or any payrollperiod ending 60 days before or after October 31.

If the respondent’s payrolls for the reported period includeany special construction forces include such employees as part-time and temporary employees and show the number of such

special construction employees so included.The number of employees assignable to the electric depart-

ment from joint functions of combinations utilities may be de-termined by estimate, on the basis of employee equivalents.Show the estimated number of equivalent employees attributedto the electric department from joint functions.

CONSTRUCTION OVERHEADS-ELECTRIC

1. Report below the information called for concerning con-struction overheads for the year.

2. List in column (a) the kinds of overheads according to thetitles used by the respondent. Charge.,; for outside professional ser-vices for engineering fees and management of supervision fees capi-talized should be shown as separate items.

3. On the lower sections of this schedule furnish the requestedexplanatory information concerning construction overheads

4. A respondent should not report "none" to this schedule if

no overhead apportionment’s are made, but rather should explain onthe lower sections of this schedule that only such engineering, super-visor, and administrative costs, etc., which are directly chargeableconstruction are charged to construction, if this is the case. Engi-neering, supervision, administrative, and interest costs, etc., whichare first assigned to a blanket work order and then prorated to con-struction jobs shall be considered overheads for the purpose offormulating a response to this schedule

LineNo.

1234567891011121314

Name of Overhead

(a)

LaborPayroll Taxes + BenefitsIStores ExpenseLeave Expense]ransportation ExpenseIndirect Labor

Total overheads clearedto construction

037,60612,58510,31210,00320,634

Cost of construction to whichoverheads were charged (ex-

(b)clusive of overhead charges)

(c)

TOTAL 91,140GENERAL DESCRIPTION OF CONSTRUCTION OVERHEAD PROCEDURE

91,156

Percent overheads toconstructions costs

(d)

99.98~

1. For each construction overhead for electric plant explain(a) nature of the engineering, supervisory, or administrative work,etc., the overhead charges are intended to cover. (b) the generalprocedure for determining the amount capitalized. (c) the methodof distribution to construction jobs. (d) percentages applied to dif-ferent types of construction. (e) basis of differentiation in percent-ages for different types of construction, and (f) amounts capital-ized for each overhead for the year which this report is sub-mitted.

2. In addition to other information concerning engineering andsuperintendence or other such overheads, explain whether theamounts treated as overheads include all engineering and super-intendence costs or only such portions as are not directly charge-able to specific jobs.3. For interest during construction state the interest rate used,the basic charges to which applied, in addition to the amountscapitalized for the year for which this report is submitted.

0 0

ELECTRIC IDISTRIBUTION METERS AND LINE TRANSFORMERS

1. Report below the information called for concerning distribution watt-hour meters and line transformers.2, Watt-hour demand distributions meters should be included below but external demand meters should not be included.3. Show in the footnote the number of distribution watt-hour meters or line transformers held by the respondent under lease from others, jointly owned

with others, or held otherwise than by reason of sole ownership by the respondent. If 500 or more meters or line transformers are held under lease, give name oflessor, date and period of lease and annual refit. If 500 or more meters or line transformers are held other than by reason of sole ownership or lease, give nameof co-owner or other party, explain basis of accounting for expenses between the parties, and state amounts and accounts affected in respondent’s books of

laccount. Specify in each case whether lessor, co-owner or other party is an associated company.

Line ItemNo. (a)

1 Number at beginnin~ of ~/ear2 Additions durin9 year3 Purchases4 Associated with utility plant acquired5 Total additions6 Reductions during ~/ear7 Retirement8 Associated with utility plant sold9 Total reductions

10 Number at end of year11 In stock12 Locked meters on customers’ premises13 Inactive transformers on system14 In customers’ use15 In company’s use16 Total end of year (as above)

Number of watt-hourmeters

3,870

3600

360

6OO

6OO3,63O

2OO100

03,374

43,630

Number(c)

2,404

LINE TRANSFORMERSTotal capacity (kva)

(d)48,592.0

3O0

30

102,424

16o2o75

2,4213

2,424

22500.0

225.0

200.0

200.048,617.0

6,522.5300.0

1,125.048,067.0

750.048,617.0

NOTE:Line 12(b) EstimatedLine 13(c) EstimatedLine 13(d) EstimatedLine 14(c) EstimatedLine 14(d) Estimated

VERIFICATION

The foregoing report must be verified by the oath of the President or chief officer of thecompany. The oath required may be taken before any person authorized to administer an oath bythe laws of the State in which the same is taken.

OATH

State of Arizona) SS:

County of Greenlee )

he is

of

Steven Lunt(Insert here the name of the affiant)

makes oath and says that

Chief Executive Officer(Insert here the offical title of the affiant)

Duncan Valley Electric Cooperative, Inc.(Insert here the exact legal title or name of the respondent)

that he has examined the foregoing report; that to the best of his knowledge, information, andbelief, all statements of fact contained in the said report are true and the said report is a correctstatement of the business and affairs of the above-name respondent in repsect to each and everymatter set forth therein during the period from and including

January 1, 2016 , to and including December 31, 2016

(Signature of affiant)

Subscribed and sworn to before me, a

county above named, this OO ~day of

My Commission expires }L~ ’S /

-~.~ KIMBERLY R WATERS~’2",-~-=.,~’~ Notary Public - Arizona~(~l )~ Greenlee County

~’~ , n~tnher 13,

Notary Public in and for the State and

utho edadmimster oaths)

FORM 1

Electric Company Name:

New Mexico Jurisdictional InformationYEAR ENDED DECEMBER 31, 2016

Duncan Valley Electric Cooperative, Inc.

Address:

Phone Number:

Person completing form:

379597 AZ 75, PO Box 440 Duncan, AZ 85534

(928) 359-2503

Kimberly R. Waters, Accountant

CUSTOMER CLASSNUMBER OF CUSTOMERS

KWH SALES (Thousands)GROSS REVENUESAVG ANNUAL KWH per CUSTOMER (1)AVG ANNUAL BILL per CUSTOMER (2)AVG MONTHLY BILL per CUSTOMER (3)AVG GROSS REVENUE per KWH SOLD (4)

RESIDENTIAL OTHER95

1 387140,891

14,600$1,483

$123.59$0.10158

2442,281

246,1629,348

$1,009$84.07

$0.10792

TOTAL339

3,668387,053

10,820$1,142$95.15

$0.10552

Directions for the completion of (1), (2), (3), (4):(1) Divide KWH sales by number of customers.(2) Divide gross revenues by number of customers(3) Divide (2) by 12 months(4) Divide gross revenues by KWH sales

NMPSC RULE 510 EFFECTIVE 01/01/89

NATIONAL RURAL UTILITIES BORROWER NAME

COOPERATIVE FINANCE CORPORATION BORROWER DESIGNATION

FINANCIAL AND STATISTICAL REPORT ENDING DATE

Submit one electronic copy and one signed hard copy to CFC. Round all nmnbers to the nearest dollar.

CERTWICATION¯ BALANCE CItEC~ RESULTSWe hereby certify that the entries in this report are’in accordancewith the accounts and other records of the system and reflect the

status of the system to the best of our knowledge and belief.

~,,..~ ~. ~;~.4.9 3/24/17Sig~ ~ture of Off~anager or Accountant Date

Signature of Manager Date

Needs Attention

Duncan Valley Electric Cooperative, Inc

AZ023

12/31/2016

AUTHORIZATION CHOICES

A. NRECA uses rural electric system data for legislative, regulatory and otherpurposes. May we provide this report from your system to NRECA?

B. Will you authorize CFC to share your data with other cooperatives?

LAST YEAR

3,858,7980

2,164,23400

631,086 ~215,302344,17424,990

0306,3291

3,686,117305,844

00

20,4200,

200

0’

4r012r581(153r7831116,415

056,235

1,521119,556

11,774

0151r719

ITEM

1. Opemtinl~ Revenue and Patronage Capital2. Power Production Expense3. Cost of Purchased Power

4. Transmission Expense5. Regional Market Operations Expense6. Distribution Expense - ODeration7. Distribution Expense - Maintenance8. Consumer Accounts Expense9. Customer Service and Informational Expense10. Sales Expense11. Admim’strative and General Expense

12. Total Operation & Maintenance Expense (2 thru 11)13. Depreciation & Amortization Expense14. Tax Expense - Proper~ & Gross Receipts15. Tax Expense - Other

16. Interest on Lone-Term Debt17. Interest Charged to Construction (Credit)18. Interest Expense - Other19. Other Deductions

Z0. Total Cost of Electric Service (12 thru 19)

21. Patronage Capital & Operatinl~ Marsins (1 minus 20)22. Non Operatinl~ Maq~ins - Interest23. Allowance for Funds Used Durin¢ Construction24. Income (Loss) from Equit~ Investments25. Non Operating Margins - Other

26. Generation & Tmnsmission Capital Credits27. Other Capital Credits & Patronage Dividends

28. Extraordinar~ Items29. Patronage Capital or Marl~ins (21 thru 28)

YEAR-TO-DATE

THIS YEAR

4,001,7890

2,275,0200

554,52~

186,908337,41125,440

0297,276

3~676,582317,958

00

22,1960

470

04,017~206

(15~4171156,551

062,784

(4.958)131,77711,517

0342,255

BUDGET

4,326,7060

2,582,52300

641,242

226,936349,88326,611

0

307,768

4~134~963317,854

00

22,4690

139

04,475~425

(148,719’~36,611

058,362

000

0(53,746}

THIS MONTH

328.0910

186,22800

57,87222,09124,828

3,6020

25.164

319~78527,192

00

3,7270

45

0350,750(22,659)

112,924ol

5,0420

131,777

Oo227,084

PARTS. DATA ON TRANSMISSION AND DISTRI]B~N ~-~4NT ....YEAR-TO-DATE YEAR-TO-DATE

ITEM

1. New Services Connected2. Services Retired

3. Total Services In Place~. Idle Services (Exclude Seasonal)

CFC Form 7 (2/2017) - Version 2.07

LAST YEAR THIS YEAR

60 4434 23

2,588 2,609176 228

ITEM

5. Miles Transmission6. Miles Distribution Overhead

7. Miles Distribution Under~round8. Total Miles Energized (5+6+7)

LAST YEAR

!a)0

454

3457

THIS YEAR

0454

3457

CFCNATIONAL RURAL UTILITIES

COOPERATIVE FINANCE CORPORATION

FINANCIAL AND STATISTICAL REPORT

PART C. BALANCE SHEET

ASSETS AND OTHER DEBITS

l. Total Utility Plant in Service

2. Construction Work in Progress

3. Total Utilit~ Plant 0+2)

4. Accum. Provision for Depreciation and Amort

5. Net Utilit~ Plant (3-4)

6. Nonutilit~� Propert), - Net7. Investment in Subsidia~ Companies

8. Invest. in Assoc. Or~. - Patronage Capital9. Invest. in Assoc. Orig. - Other - General Funds

I 0. Invest in Assoc. Ore. - Other - Non~eneral Funds

I I. Investments in Economic Development Pro~ects12. Other Investments

13. S~aecial Funds

14. Total Other Proper~ & Investments (6 thru 13)15. Cash-General Funds

16. Cash-Construction Funds-Trustee

17. Special Deposits18. Temporary Investments

19. Notes Receivable - Net

20. Accounts Receivable -Net Sales of Ener~

21. Accounts Receivable - Net Other

22. Renewable Ener~:~� Credits

23. Materials & Supplies - Electric and Other24. Prepayments

25. Other Current & Accrued Assets

26. Total Current & Accrued Assets (15 thru 25)27. Deferred Debits

28. Total Assets & Other Debits (5+14+26+27)

10,558,136

116,397

10,674,533

6,363,514

4,311,019

22,728

112,784

1,864,165

683,757

0

0

36,125

34,241

2,753,800

130,424

0

0

1,444,113

0

356,113

(53)

0

152,92622,129

19,821

2,125,473

328,375

9,518,667

BORROWER NAME

BORROWER DESIGNATION

ENDING DATE

LIABILITIES AND OTHER CREDITS

29. Memberships

30. Patronage Capital31, O~eratin~ Mar~ins - Prior Years

32. O]~-~ratin~ Mar~ins - Current Year

33. Non-Operatin~ Mar~ins

34. Other Mar~ins & Equities

35. Total Mar~ins & Equities (29 thru 34)

36. Lon[-Term Debt CFC (Net)

37. Lon~-Term Debt - Other (Net)

38. Total Lonl~-Term Debt (36 + 37)

39. Obligations Under Capital Leases - Non current

40. Accumulated O~eratin~ Provisions - Asset Retirement Obligations41. Total Other Noncurrent Liabilities (39+40)

42. Notes Payable

~,3. Accounts Puff able

44. Consumers Deposits

4-5. Current Maturities Lon~÷Term Debt

46. Current Maturities Lon~-Term Debt-Economic Dev.

~-7. Current Maturities Capital Leases

48. Other Current & Accrued Liabilities

49. Total Current & Accrued Liabilities (42 thru 48)

50. Deferred Credits

51. Total Liabilities & Other Credits (35+38+41+49+50)

~STgMA TF~ co~trrION.~ Am-OF -CONS~U ~cr~ONBalance Be~innin~ of Year

]Amounts Received This Year (Net)

TOTAL Contributions-In-Aid-Of-Construction

Duncan Valley E

AZ023

12/31/2016

0

7,720,373(552,910)(15,417)

357,672575,465

8,085,183

295,84397,105

392,948

000

0230,317

67,420301,625

00

227,257826,619

213,9179,518,667

785,396

1,959

787,354

2016_DVEC_CFC_form7.xlsm Page 2 of 10




BORROWER NAME IBORROWER DESIGNATION

ENDING DATE

Duncan Valley F

AZ022

12/31/2016

ITEM

ket Operation Plant

+13)

BALANCE BEGINNING OF YEAR

6,861,477

1,024,833 ~

645,733 I

176

ol0

0

0

0

0

1,626,364

10,158,58263,557

10,222,139

158,430

558,66552,841

611~07

RETIREMENTS

(57,528)

(69,304)

0

ADDITIONS

~b~319,075

76,761

4,400

0

0

0

0

0

0

0

(32,281)

159,112

159,112

ADJUSTMENTSAND TRANSFER

0

0

0

CFC NO LONGER REQUIRES SECTIONS "F", "G", AND "N" DATAThose sections refer to data on "’Analysis of Accumulated Provision for Depreciation" (F),

"Materials and Supplies" (G), "Anmtal Meeting and Board Data" (N), and "Conservation Data" (P).

0

0

0

0

0

0

0

oo

o

BALANCE END OF YEAR

7,123,024

1,032,290

650,133

176

0

0

0

0

0

0

1,752,513

10,558,136

116,398

1~,674333

s~ular Timeertime

L

Avg. Minutes per Consumer byCause

Power Supplier

0.0024.99

IITEM


Major Event

5.38

172.95

ofPa~’ona e Ca italb Su ~ersofElect~ic Power ~~ilb Lenders for Credit Extended to the Electric Sys~


Planned

30.78

21.42

AvI. Minutes per Consumer by CauseAll Other

36.1634.30

TOTAL

(e)

72.32

253.66

12 4. Pa~roll- Expensed J 518,979

23,589 5. Payroll - Capitalized [ 170,7401,252 6. Payroll - Other 11,404

Iv~arr ~ DU~ FROMCON~ FOR~C raceTHIs YEAR " "CU~M’ULATIVE Jl. Amount Due Over"~0 Da~s:’ ’

(a) (~b,) [ 18,485I0 [ 3,962,22412. AmountWrittenOffDurin[[Year:

0 I 3,962,224 I

11,156

11,666

Page 3 of I 0




D TOTAL COST

ER

tire

BORROWER NAME


ENDING DATE

Duncan Valley

AZ023

12/31/2016

INCLUDED IN TOTAL COST

CFC USE ONLYSUPPLIER

CODE

(b)

RENEWABLEENERGY

PROGRAMNAME

RENEWABLEFUEL TYPE

(,I)

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

0 None

KWHPURCHASED

(e)

28,970,938

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

28,970,938

TOTAL COST

2,150,515

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

2,150,515

AVERAGECOST PER

KWH (cents)(g)

7.42

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

7.42

FUEL COSTADJUSTMENT

(h)000000000000000000000

WHEELING &OTHER

CHARGES (orCredits) COMMENTS

(i) (j)

0 Comments

0 Comments

0 Comments

0 Comments

0 Comments

0 Conunents

0 Comments

0 Comments

0 Comments

0 Comments

0 Comments

0 Comments

0 Comments

0 Comanents

o ~omments0 Comments

0 Comments

0 Comments

0 Comments

0 Comments

0

Page 4 of 10

CFC

PART L.

NATIONAL RURAL UTILITIES



KWH PURCHASED AND TOTAL COST (Continued)

COMMENTS

12

3

45

678

9

101112

131415

1617

1819

20

BORROWER NAME


ENDING DATE

Duncan Valley E

AZ022

12/31/2016





PART M. LONG-TERM LEASES (If ~ntl,space is needed, use ~te theet)

BORROWER NAME


ENDING DATE

LIST BELOW ALL "RESTRICTED PROPERTY" ** HELD UNDER "LONG TERM" LEASE. (lf none, State "NONE")

NAME OF LESSOR TYPE OF PROPERTY RENTAL THIS YEAR

Arizona State Land DepartmenVBLM Ri~at of Wa~’ Leases

TOTAL

** "RESTRICTED PROPERTY" means all properties other than automobiles, trucks, tractors, other vehicles (including without

limitation aircraft and ships), office and warehouse space and office equipment (including without limitation computers). "LONG TERM"means leases having unexpired terms in excess of 3 years and covering property having an intial cost in excess of $250,000).

eAaT o. ~r~c,-a, ra~ D~ s~atv~cz a~unt~BILLED THIS YEAR

NAME OF LENDER BALANCE END OF INTEREST PRINCIPALYEAR (a) (b)

1 National Rural Utilities Cooperative Finance Corporation 533,354 12,679 36,424

2 NCSC 0 0 0

3 Farmer Mac 0 0 0

4 Truck Leases 161,220 9,517 55,564

5 0 0 0

6 0 0 0

7 0 0 0

8 0 0 0

9 0 0 0

10 Principal Pa}rments Received from Ultimate Reci]~,ients oflRP Loans ~ ~ 0

11 Principal Pa~nents Received from Ultimate Recipients of REDL Loans ~ ~ 012 TOTAL (Sum of l thru9) $694,574 $22,196 $91,988

Duncan Valley

AZ023

12/31/2016

$6,058$0

$6,055

TOTAL [ CFC USE ONLY

49,103

65,081 ~

0





PART R. ~POWER REQUIRI~MENT~ DATA BASE

BORROWER NAME


ENDING DATE

Duncan Valley E

AZ023

12/31/2016

DECEMBER TOTAL KWH SALESCONSUMER, SALES, AND JANUARY CONSUMERS CONSUMERS AVERAGE CONSUMERS AND REVENUE

CLASSIFICATION REVENUE DATA (a) (b) (c) (d)

¯ Residential Sales a. No. Consumers Served 1,955 1,942 1,949 ~

(excluding seasonal) b. KWH Sold ~ ~ ~ 17,716,417c. Revenue ~ ~

°2,298,006

2. Residential Sales - a. No. Consumers Served 0 0 0 ~

Seasonal b. KWH Sold

~~~

0

c. Revenue 0

3. Irrigation Sales a. No. Consumers Served 96 89 93 ~

b. KWH Sold~~~~

2,653,906c. Revenue Illilllll[~~li~lll~ 345,831

1000 KVA or Less ~. ~~ 6,329,34~3

~ c. Revenue ~ 7618675. Comm. and Ind. a. No. Consumers Served 0 0 0

Over 1000 KVA b. KWH Sold 0c. Revenue ~ 0

a. No. Consumers Served 2 2 2 ~6. Public Street & Highway

Lighting

7. Other Sales to Public

b. KWH Sold 130,148c. Revenue ~ ~ ~ 16,331

a. No. Consumers Served 0 0 0 ~Authority b. KWH Sold

c. Revenue

8. Sales for Resales-RUS a. No. Consumers Served

Borrowers b. KWH Sold

c. Revenue

9. Sales for Resales-Other a. No. Consumers Served

b. KWH Soldc. Revenue

10. TOTAL No. of Consumers (lines la thru 9a) 2~401 2,3912,381

0

11. TOTAL KWH Sold (lines lb thru 9b)

12. TOTAL Revenue Received From Sales of Electric Energy (line lc thru 9c)

13. Transmission Revenue

14. Other Electric Revenue

15. KWH - Own Use

16. TOTAL KWH Purchased

17. TOTAL KWH Generated

18. Cost of Purchases and Generation

19. lnterchan[e - KWH - Net20. Peak - Sum All KW Input (Metered)

Non-coincident II ® Coincident

26,829,814

3,422,035

0

49,210

84,127

28,970,938

0

2,150,515

0

7,646





PART S. ENERGY EFFICIENCY PROGRAMS

BORROWER NAME


ENDING DATE

Duncan Valle), E

AZ023

12/31/2016

Line # Classification

1. Residential Sales (excludin$ seasonal)2. Residential Sales - Seasonal3. lrri~ation Sales4. Comm. and Ind. 1000 KVA or Less

5. Comm. and Ind. Over 1000 KVA6. Public Street and Hi~;hwa~, Li[htin[~

7. Other Sales to Public Authorities

8. Sales for Resales - RUS Borrowers9. Sales for Resales - Other10. "FOTAL

Number ofConsumers

Added This Year

AmountInvested

(b)o o

o oo oo o

0 o

o oo o

0 0o oo o

ESTIMATEDMMBTU Savings

0

Number ofConsumers

(d)

o

oo

o0o

Total To Date

AmountInvested

000000o000

ESTIMATEDMMBTU Savings

00

oo

ooo


CFCNATIONAL RURAL UTILITIES BORROWER NAME

COOPERATIVE FINANCE CORPORATION BORROWER DESIGNATION

FINANCIAL AND STATISTICAL REPORT ENDING DATE(All investments refer to your most recent CFC Loan Agreement)

7a - PART 1 - INVESTMENTSDESCRIPTION INCLUDED ($)

(a) (b)

2. INVESTMI~ITS IN ASSOCIATED ORGANIZATIONS5 G&T and Statewide Cooperative 20,8556 NRUCFC/NCSC 1007 AZNEX - Stock 112,7848 Others

Subtotal (Line 5 thru 8) 133,739

,rr --rs DEv t r NTrR0n rs ,, .......91011

12Subtotal (Line 9 thru 121

13 Federated141516

Subtotal (Line 13 thrn 16)

S; Svwc~ ~l~s ....17 Member Loans 34,24118 019 020 0

Subtotal (Line 17 thru 20) 34,241 [#: CA~Ii~ GlgNI~.AL. : : 130,~24

21 OneAz Credit Union22

2324

Subtotal (Line 21 thru 24)

EXCLUDED(S)

1,785,773664,414

76,781

2~26,9671

oo,oo

01

36,12500

36,125

ooo

130,424

ooo

oo

25 026 027 028 0

Subtotal (Line 25 thru 28) 0 ]

o

0

o

o

29 Homestead Funds

303132

Subtotal (Line 29 thru 32)

ooo

0

ol

oooo

ol

oo

0oo

1,444,113 00 00 00 0

1,444,113 [ 0

oooo0

33 Misc A!R (53)34 o35 o36 o

Subtotal (Line 33 thru 36) (53)

10. COMMITMENTS TO INVEST WITHIN 12 MONTHS BUT NOT ACTUALLY PURCHASED

oo

Subtotal (Line 37 thru 40) 0Total[ 1,778,589

.ZLIIO LYVE,~ t~U~ torm/.xlsm

3738

3940

ooooo

2,526,967

Duncan Valley E

AZ023

12/31/2016

INCOME OR LOSS

(dl

0ooo

o

oooo

o

o0ooo

o0o

0o

ooooo

oo

0oo

ooI

ooo

o

oooooo

rage v or to



FINANCIAL AND STATISTICAL REPORT ENDING DATE

(All investments refer to ~/our most recent CFC Loan Agreement)

7a" PART IL LOAN GUARANTEES

Organization & Guarantee Beneficiary(a)

LineNo.

1

23

45

I"OTALS (Line I thru 5)

.....Line Name of Organ:izationNo. (a)

1 Members Ener~p/Efficiency Loans2

34

5FOTALS (Line I thru 5)

Maturity Date ofGuaranteeObligation

co)

Maturity DateCo)11/30/2020

BORROWER NAME Duncan Valley E

BORROWER DESIGNATION AZ023

12/31/2016

OriginalAmount ($)(c)

0o000

Original Amount ($)(c)

847,9610

0

00

847,961

Performance GuaranteeExposure or Loan Balance ($)

(d)

0’0

0

00

Loan Balance ($)(d)

24,7760

001

0

24,776

Available Loans(Covered byGuarantees)

(e)

Available Loans(e)

00o

0

00

oooooo

TOTAL (Part I, Total - Column b + Part If, Totals - Column d + Column e + Part II1, Totals - Column d + Column e)LARGER OF

a. 15 percent of Total Utilit~ Plant/CFC Form 7, Part C, Lineb. 50 percent of Total Equity (CFC Form 7, Part C, Line 35)

1,601,180 I4,042,592

1,803,365

4,1)42,592


CONSOLIDATED FINANCIAL STATEMENTS

-3-DUNCAN VALLEY ELECTRIC COOPERATIVE, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETSDECEMBER 31, 2016 AND 2015

Exhibit A

ASSETS

UTILITY PLANT AT COSTPlant in ServiceConstruction Work in Progress

Less: Accumulated Provision for Depreciation

OTHER PROPERTY AND INVE-STMENTS - AT COST OR STATED VALUENon-Utility PropertyInvestments in Associated OrganizationsTemporary Investments - OtherNotes Receivable (Less allowance for uncollectibles

of $4,169 in 2016 and $4,169 in 2015)

CURRENT ASSETSCash - GeneralAccounts Receivable (Less allowance for uncollectibles

of $14,143 in 2016 and $12,094 in 2015)Materials and SuppliesInterest ReceivableOther Current and Accrued Assets

DEFERRED CHARGES

TOTALASSETS

EQUITIESPatronage CapitalOther Equities (Deficits)Unrealized Gain on Available-for-Sale Securities

EQUITIES AND LIABILITIES

LONG-TERM DEBTCFC Notes PayableLoans PayableCapital Leases Less Current Maturities

CURRENT LIABILITIESCurrent Portion of CFC Notes PayableCurrent Portion of Capital LeasesCurrent Portion of Loans PayableLine of Credit PayableAccounts Payable - Purchased Power and GasAccounts Payable - Overbilled Power and Gas CostAccrued TaxesConsumers’ Deposits and PrepaymentsAccrued Employee Compensated AbsencesAccrued PayrollOther Current and Accrued Liabilities

DEFERRED CREDITS

TOTAL EQUITIES AND LIABILITIES

$

$

$

December 31,2016 2015

10,558,136 $ 10,158,583116,397 63,557

10,674,533 $ 10,222,1406,363,515 6,198,3844,311,018 $ 4,023,756

22,728 $ 22,7282,584,048 2,463,2161,444,113 1,294,602

34,241 47,1474,085,130 $ 3,827,693

$ 132,266 $ 76,645

422,776 408,907153,077 174,814

8,267 8,25950,913 50,082

767,299 $ 718,707

$ 340,100 $ 383,480

$ 9,503,547 $ 8,953,636

$

$

8,000,199 $ 7,720,373(395,386) (457,817)480,371 462,444

8,085,184 $ 7,725,000

$

$

295,843 $ 333,3543,148

93,957 123,143392,948 $ 456,497

37,511 $ 36,42429,186 27,66534,928

200,000181,209 194,848

13,416 14,02151,895 48,55967,420 68,255

123,086 116,48116,661 13,28656,186 53,694

811,498 $ 573,233

$ 213,917 $ 198,906

$ 9,503,547 $ 8,953,636

The accompanying notes are an integral part of these consolidated financial statements.


Exhibit BCONSOLIDATED STATEMENTS OF INCOME, PATRONAGE CAPITAL, AND OTHER COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Years Ended December 31,2016 2015 Increase

Amount % Amount % (Decrease)OPERATING REVENUES

Residential $ 2,713,526 65.5 $ 2,673,365 66.9 $ 40,161Irrigation 380,794 9.2 334,144 8.4 46,650Commercial and Industrial 843,292 20.3 815,407 20.4 27,885Public Street and Highway Lighting 16,331 0.4 15,301 0.4 1,030Power and Gas Cost Over (Under) Billed 604 0.0 (38,205) (1.0) 38,809Internet Revenues 156,010 3.8 147,322 3.7 8,688Rent from Electric Property 23,191 0.6 23,501 0.6 (310)Other Operating Revenues 10,866 0.2 22,393 0.6 (11,527)

Total Operating Revenues $ 4,144,614 100.0 $ 3,993,228 100.0 $ 151,386

OPERATING EXPENSESPurchased Power and Gas $ 2,275,020 54.9 $ 2,164,235 54.2 $ 110,785Distribution - Operation 546,134 13.2 623,073 15.6 (76,939)Distribution - Maintenance 188,609 4.6 216,870 5.4 (28,261 )Customer Accounts 338,913 8.2 345,211 8.6 (6,298)Customer Service and Information 19,721 0.5 19,607 0.5 114Administrative and General 297,390 7.2 306,365 7.7 (8,975)Intemet Expenses 65,771 1.6 67,446 1.7 (1,675)Depreciation 322,175 7.8 310,191 7.8 11,984Other Interest 12,044 0.3 164 0.0 11,880

Total Operating Expenses $ 4,065,777 98.3 $ 4,053,162 101.5 $ 12,615

OPERATING MARGINS (LOSS) - BEFOREFIXED CHARGES $ 78,837 1.7 $ (59,934) (1.5) $ 138,771

FIXED CHARGESInterest on Long-Term Debt 10,508 0.3 20,420 0.5 (9,912)

OPERATING MARGINS (LOSS) - AFTERFIXED CHARGES $ 68,329 1.4 $ (80,354) (2.0) $ 148,683

Capital Credits 143,294 3.5 131 ~331 3.3 11,963

NET OPERATING MARGINS $ 211,623 4.9 $ 50~977 1.3 $ 160,646

NONOPERATING MARGINSInterest IncomeOther Nonoperating Gain (Loss)

$

$

$NET MARGINS - BEFORE INCOMETAX EXPENSE

2.9 $0.02.9 $

4.2 $

156,551 3.8 $ 116,415 40,136(4,959) (0.1) 1,267 (6,226I

151,592 3.7 $ 117t682 33,910

363,215 8.6 $ 168,659 194,556

(20,958) (0.5) (17,195) (0.4) (3,763)

342,257 8.1 $ 151,464 3.8 $ 190,793

17~927 0.4 (104,874) (2.6) 122,801

360,184 8.5 $ 46,590 1.2 $ 313,594

7,720,373 7,535,553

(17,927) 104,874

(62,431) 27,076

6,280

$ 7,720,373

Income Tax Expense - C~,~rrent

NET MARGINS - BEFORECOMPREHENSIVE INCOME

COMPREHENSIVE INCOMEGain (Loss) on Securities Available-for-Sale

NET MARGINS - AFTERCOMPREHENSIVE INCOME

PATRONAGE CAPITAL - BEGINNING OF YEAR

Transfer of Comprehensive Income

Transfer (Margins) Losses to Other (Deficits)

Transfer Other (Deficits) to Patronage Capital

PATRONAGE CAPITAL - END OF YEAR 8,000,199



CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Exhibit C

CASH FLOWS FROM OPERATING ACTIVITIESNet MarginsAdjustments to Reconcile Net Margins to Net Cash Provided byOperating Activities

DepreciationCapital Credits - NoncashDeferred ChargesDeferred CreditsAccounts ReceivableInventories and Other Current AssetsPayables and Accrued Expenses

Net Cash Provided By Operating Activities

December 31,2016 2015

342,257 $ 151,464

353,194 335,481(143,294) (120,174)

43,380 47,54415,011 16,539

(13,869) (24,327)20,898 54,958

729 10,787618,306 $ 472,272

CASH FLOWS FROM INVESTING ACTIVITIESGross Additions to Utility PlantSalvage Value of Retirernents and Other CreditsPlant Removal CostsInvestments in Associated OrganizationsNotes Receivable - Energy Resource Loans (Net)Investments in Temporary Investments - Other

Net Cash Used in Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIESLoan ProceedsAdvances on Line of CreditPayments on Loans PayablePayments on NRUCFC Notes PayablePayments on Capital Lea.ses

Net Cash Provided by (Used in) Financing Activities

CHANGE IN CASH AND CASH EQUIVALENTS

$

$

(611,349) $ (446,322)14,512 12,717

(43,619) (45,752)22,462 9,83312,906 (15,251)

(131,584) (76,049)(736,672) $ (560,824)

65,976200,000(27,900)(27,665) (26,223)(36,4241 (35,369)173,987 $ (61,592)

55,621 $ (150,144)

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 76,645 226,789

CASH AND CASH EQUIVALENTS - END OF YEAR 132,266 $ 76,645

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash Paid During the Year for:

InterestIncome Taxes

$ 20,025 $ 20,420$ 19,028 $ 15,331

During the years ended December 31, 2016 and 2015, the Cooperative had unrealized gains (losses) of $17,927 and($104,874), respectively, which changed unrealized gain on available for sale and temporary investments - other.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations and Summary of Significant Accounting Policies

Nature of OperationsDuncan Valley Electric Cooperative, Inc. (the Cooperative) is a non-profit company organized toprovide electric service at the retail level to primarily residential and commercial accounts in adesignated service area. Power delivered at retail is purchased wholesale from Arizona’s G&TCooperatives, of which the Cooperative is a member. Any revenues earned in excess of costsincurred are allocated to members of the Cooperative and are reflected as patronage capital equityin the balance sheet.

During 2008, the Cooperative merged Duncan Rural Services Corporation (DRSC) into theCooperative as a division. DRSC acquired the gas and water utility systems serving the town ofDuncan, Arizona, and surrounding area from Graham County Utilities, Inc. on November 1, 1989.Subsequently, the water system was transferred to the town of Duncan for the original purchaseprice.

During 1997, the Cooperative formed a subsidiary company, AZNEX Cooperative Services, Inc.The Subsidiary was formed to provide communication services. The Subsidiary has authorized10,000,000 shares of no par value common stock of which 50,000 has been issued to theCooperative. The Subsidiary began operations in January, 1998. In June 2008, AZNEX sold all ofits plant to a third party and ceased operating as an internet company and now earns commissionson a percentage of revenue earned by the acquiring company.

Principles of Consoli(~lationThe consolidated financial statements include the accounts of the Cooperative and its wholly-owned subsidiary AZNEX Cooperative Services, Inc. All material intercompany transactions havebeen eliminated.

System of AccountsThe accounting records of the Cooperative are maintained in accordance with the Uniform Systemof Accounts as prescribed by the Federal Energy Regulatory Commission for Class A and B electricutilities modified for electric borrowers of the National Rural Utilities Cooperative FinanceCorporation (CFC).

Plant in Service, Maintenance, and DepreciationPlant is stated at the original cost of construction which includes the cost of contracted services,direct labor, materials, and overhead items. Contributions from others toward the construction ofelectric plant are credited to the applicable plant accounts.

When property which represents a retirement unit is replaced or removed, the average cost of suchproperty as determined from the continuing property records is credited to electric plant and suchcost, together with cost of removal less salvage, is charged to the accumulated provision fordepreciation.

Maintenance and repairs, including the renewal of minor items of plant not comprising a retirementunit, are charged to the appropriate maintenance accounts, except that repairs of transportationand service equiprnent are charged to clearing accounts and redistributed to operating expenseand other accounts.



InventoriesMaterials and supplies inventories are valued at average unit cost.

Electric and Gas RevenuesThe Cooperative’s operating revenues are under the jurisdiction of the Arizona CorporationCommission and the New Mexico Public Regulatory Commission.

The Cooperative records electric revenues as billed to customers on a monthly basis. Revenue isnot accrued for power delivered but not billed at the end of each month. The unbilled revenue wasestimated to be $92,948 and $100,264 at December 31, 2016 and 2015, respectively. A recentFASB pronouncement related to revenue recognition will require the Cooperative to recognizeunbilled revenue in future financial statements. The requirement will become effective for annualreporting periods during 2019 and will likely result in the recognition of this balance in the financialstatements.

The Cooperative records gas revenues as billed to customers on a monthly basis. Revenue is notaccrued for gas ,delivered but not billed at the end of each month. The unbilled revenue wasestimated to be $,’.)5,397 and $29,088 at December 31,2016 and 2015, respectively. A recent FASBpronouncement related to revenue recognition will require the Cooperative to recognize unbilledrevenue in future financial statements. The requirement will become effective for annual reportingperiods during 2019 and will likely result in the recognition of this balance in the financialstatements.

The Cooperative’s tariffs for electric and gas service include a power cost and gas cost recoveryfactor under which rates charged to customers are adjusted to reflect changes in the cost of powerand gas. In order to match power costs and gas costs and related revenues, power cost and gascost billed in advance is recorded as advance billings to consumers, and power cost and gas costto be billed in subsequent periods is recognized as accrued unbilled revenue. Annual changes inthese amounts appear as over and under billed power cost and gas cost revenue on the statementof income.

Receivables and Bad DebtsThe Cooperative records a receivable for power delivered monthly. Periodically, the Board ofDirectors reviews .accounts over 90 days and writes them off. The provision for bad debts is basedon historical write-.offs and expectations of future bad debts.

Patronage Capital CertificatesPatronage capital allocations received from other associated cooperatives is recorded at the statedamount of the certificates. Due to the timing of actual allocation notices from Arizona’s G and TCooperatives, the Cooperative records final allocations from the previous year as current yearincome.



The G and T patronage income recognized for the years 2016 and 2015 is as follows:

December31,2016 2015

$ $ 119,556131,777

$ 131,777 $ 119,556

2014 Final Allocation2015 Final Allocation

Cash EquivalentsFor purposes of the statement of cash flows, the Cooperative considers cash - general to be cashand cash equivalents.

Group Concentration of Credit RiskThe Cooperative’s headquarters facility is located in Duncan, Arizona. The service area includesmembers in Greenlee County, Arizona, and Hidalgo and Grant Counties, New Mexico. TheCooperative records a receivable for electric and gas revenues as billed on a monthly basis. TheCooperative requires a deposit from consumers upon connection. The deposit accrues interestannually. Deposit,,; are applied to any unpaid bills and fees in the event of default. Deposits on handtotaled $67,420 and $68,255 at December 31, 2016 and 2015, respectively. At times during theyear, cash balances exceeded FDIC insurance limits.

Use of Estimates in the Preparation of Financial StatementsThe preparation o1: financial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.

Federal Income Tax StatusThe Cooperative qualifies for exempt status under Internal Revenue Code section 501(c)(12) whichrequires that 85% or more of income consists of amounts collected from members.

AZNEX Cooperative Services, Inc. is a taxable C-corporation.

2. Assets Pledged

Currently the Cooperative has capital lease assets whose title remains with lessor throughout the leaseterm. In addition, the Cooperative has amounts owing National Rural Utilities Cooperative FinanceCorporation (CFC) though no assets are pledged against that debt.



=Plant in Service

The major classes of electric plant are as follows:

Duncan Valley Electric Cooperative, Inc.Intangible PlantDistribution PlantGeneral Plant

Total Electric Plant in Service

Gas Utility PlantGas General Plant

Total Gas Plant in Service

Construction Work in Progress

Total Utility Plant

$$

$$$

December 31,2016 2015

176 $ 1767,123,024 6,861,4771,682,423 1,670,566

8,805,623 $ 8,532,219

1,710,225 $ 1,585,90542,288 40,459

1,752,513 $ 1,626,364

116,397 $ 63,557

10,674,533 $ 10,222,140

Provision has been rnade for depreciation of distribution plant at the straight-line composite rates asfollows, for both 2016 and 2015:

Station EquipmentPoles, Towers, and FixturesOverhead Conductors and DevicesUnderground ConduitUnderground Conductors and DevicesLine TransformersServicesMetersStreet Lighting and Signal SystemsGas Utility Plant

3.20%4.00%2.80%2.30%2.90%3.10%3.60%3.40%4.30%

2.80% - 9.60%

General plant depreciation rates have been applied on a straight-line basis and are as follows:

StructuresFurniture and EquipmentTransportation EquipmentStores EquipmentShop and Laboratory EquipmentCommunications EquipmentMiscellaneous Equipment

2.85% - 10.00%16.67% - 25.00%6.36% - 10.00%

10.00% - 12.50%8.34% - 20.00%

10.00% - 20.00%20.00%

Depreciation for the years ended December 31, 2016 and 2015 was $353,194 and $335,481,respectively, of which $322,175 and $310,191 was charged to depreciation expense, and $31,019 and$25,290 allocated to other accounts.



4. Non-Utility Property

Non-utility property includes land (seven acres, cost $22,728) not presently being used in the utilityoperations.

5. Investments in Associated Organizations

Investments in associated organizations consisted of the following as of December 31,2016 and 2015:

CFCMembershipCapital Term CertificatesMember Capital SecuritiesPatronage Capital

Arizona’s G&T CooperativesPatronage CapitalMembership

NRTCPatronage CapitalMembership

Grand Canyon State Electric Cooperative, Inc.MembershipBuilding

Federated InsurancePatronage Capital

Other

December 31,2016 2015

1,000 $ 1,000160,647 160,647500,000 500,000

2,767 2,244

1,785,618 1,664,5595 105

66,269 68,1421,000 1,000

150 15020,855 21,416

36,125 36,4689,612 7,485

2,584,048 $ 2,463,216

=

Patronage capital certificates are recordedinvestments are recorded at cost.

Notes Receivable

Notes receivable consist of the following:

Member Loans - Energy Efficiency ApplicationsReserve for Uncollectible Loans

at the stated amount of the certificates. All other

December 31,2016 2015

$ 38,410 $ 51,316(4,169/ (4,169/

$ 34,241 $ 47,147

During 1990, the Cooperative initiated a program to finance the cost and installation of heat pumps formembers. The loans a~re to be repaid monthly over five years with an interest rate of 5.50%.



7. Temporary Cash Investments

Homestead Funds (at Fair Market Value) $Judy White Memorial Scholarship Fund (at Fair

Market Value)

Total Investments $

December 31,2016 2015

1,324,252 $ 1,179,624

119,861 114,978

1,444,113 $ 1,294,602

The Cooperative’s investment in available-for-sale securities is shown at fair market value. Gains andlosses on securities classified as available-for-sale are recognized through the equity account.

The following available-for-sale securities were held as of December 31,2016:

Homestead Funds

Fair UnrealizedValue Cost Gain

$ 1,444,113 $ 963,742 $ 480,371

$ 1,444,113 $ 963,742 $ 480,371

Fair Value Hierarchy

The Fair Value Measurements Topic of the FASB Accounting Standards Codification establishes a fairvalue hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Thehierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assetsor liabilities (Level 1 measurements) and the lowest priority to measurements involving significantunobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 - Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilitiesthat the Cooperative has the ability to access at the measurement date.

Level 2 - Inputs are other than quoted prices included within Level 1 that are observable for theasset or liability, either directly or indirectly.

Level 3 - Inputs are unobservable inputs for the asset or liability.

The securities above are considered Level 1.



o Inventories

Inventories consist of:

Duncan Valley Electric Cooperative, Inc.Electric Construction Materials and SuppliesResaleGas Utility Construction Material and Supplies

Total Cooperative Inventory

December 31,2016 2015

$ 131,154 $ 148,7381,184 2,359

20,739 23,717

$ 153,077 $ 174,814

=Deferred Charges

Deferred charges consist of the following:

Right of WayNRECA Retirement Funding PrepaymentOther

December 31,2016 2015

$ 40,121 $ 34,585296,937 344,447

3,042 4,448

$ 340,100 $ 383,480

The Cooperative prepaid premiums into the NRECA retirement plan during the year ended December31, 2013 to receive reduced annual contribution rates. The related deferred charge is being recognizedover the estimated benefit period of the prepayment, which was ten years.

10. Income TaxesThe Cooperative is exempt from federal income taxes under Section 501 (c)(12) of the Internal RevenueCode as long as 85°,/o of its revenue is from members for the sole purpose of meeting losses andexpenses. For the year ended December 31,2016, the Cooperative qualified for exemption.

AZNEX Cooperative Services, Inc. is a C-corporation subject to federal income taxes. This corporationfiles a federal income, tax return. Current taxes and deferred taxes are allocated to each corporationon a standalone basis.

The Cooperative follows accounting standards for income taxes. The objective of the asset and liabilitymethod is to establish deferred tax assets and liabilities for the temporary differences between thefinancial reporting basis and the tax basis of the Cooperative’s assets and liabilities at enacted taxrates expected to be in effect when such amounts are realized and settled. As changes in the tax lawsor rates are enacted, deferred tax assets and liabilities are adjusted through the provision for incometaxes.



Deferred income taxes result from transactions which enter into the determination of taxable income indifferent periods than recorded for financial reporting purposes. Currently there are no timingdifferences between book income and taxable income and as such no deferred taxes are recognized.

The components of the provision for federal and state tax expense are as follows:

December 31,2016 2015

FederalFederal Income Tax Expense $ 15,123 $ 12,078

StateState Income Tax Expense

Total Provision for Federal and State Income Taxes

5,835 5,117

$ 20,958 $ 17,195

AZNEX Cooperative Services, Inc. does not have a net operating loss (NOL) carryover for state orfederal income tax purposes.

The Cooperative and Subsidiary apply the "uncertain tax positions" provisions of accounting principlesgenerally accepted in the United States of America. The primary tax position of the Cooperative is itsfiling status as a tax exempt entity. The Cooperative and Subsidiary determined that it is more likelythan not that their tax positions will be sustained upon examination by The Internal Revenue Service(IRS), or other State taxing authority, and that all tax benefits are likely to be realized upon settlementwith taxing authorities.

The Cooperative and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and thestate of Arizona. The, Cooperative and subsidiaries are no longer subject to U.S. federal and stateincome tax examinations by federal taxing authorities for years before 2013, and state taxing authoritiesfor years before 2012.

The Cooperative and Subsidiary recognize interest accrued related to unrecognized tax benefits ininterest expense and penalties in operating expenses. There were no penalties or interest recognizedduring the years ended December 31, 2016 and 2015.

11. Return of Capital

No patronage capital has been retired in 2016 or 2015.



12. Patronage Capital

AssignedAssignable

Less: Retired

Balance

$

$

December 31,2016 2015

11,497,777 $ 11,497,777464,646 184,820

11,962,423 $ 11,682,5973,962,224 3,962,224

8,000,199 $ 7,720,373

13. Other Equities (Deficits)

Retired Capital Credits - GainUnrecovered Losses

$

$

December 31,2016 2015

95,093 $ 95,093/490,479) /552,910)

(395,386/ $ (457,817/

14. Long-Term Debt

Capital Lease Obligations

During the year ended 2012, the Cooperative leased equipment from Altec Capital Services, LLC. Theeconomic substance of the capital leases is that the Cooperative is financing the acquisition of theassets through the lease over their terms, and accordingly, they are reflected in the Cooperative’s plantassets and liabilities.

The following is an analysis of the book value of the leased assets included in electric plant atDecember 31, 2016 and 2015, which is being depreciated on a straight-line basis over 15 years.

December 31,2016 2015

Cost $ 236,766 $ 236,766Accumulated Depreciation (69,534) (54,082)

$ 167,232 $ 182,684

The capital lease obligation has an interest rate of 5.364% and will mature in 2019. The entire leaseobligation to AItec Capital Services, LLC called for payments totaling $243,222 over the term of theleases.



Below is a schedule by years of the future minimum payments required under the leases, with theirpresent value at December 31, 2016 and 2015.

2016201720182019

Total Minimum Lease PaymentsAmount Representing Interest

Present Value of Lease Payments

Current MaturitiesNon Current Maturities

$

$

$

$

December 31,2016 2015Altec Al~c

Leasing Leasing

$ 35,08135,081 35,08135,081 35,08164,893 64,893

135,055 $ 170,136(11,912) (19,328)

123,143 $ 150,808

29,186 $ 27,66593,957 123,143

123,143 $ 150,808

CFC Notes Payable

During 2013, the Cooperative borrowed $475,099 from CFC for the purpose of funding the NRECAAccelerated Funding Payment for the Retirement and Security Plan. These funds were originallyborrowed using the Cooperative’s line of credit until permanent financing could be established. During2014, a note was issued with a principal balance of $431,000 to be paid over 11 years at 2.950%. Asof December 31,2016, the remaining unpaid principal was $333,354.

Maturities for the next five years are as follows:

2017 $ 37,5112018 38,6292019 39,7822020 40,9682021 42,190

Loans Payable

During 2016, the Cooperative purchased a new truck with a note from Ford Motor Credit. The notecarries an interest rate of 4.89% and is due in monthly installments of principal and interest ofapproximately $1,244 and matures in the year 2018.

Maturities for the next two years are as follows:

2017 $ 34,9282018 3,148



15. Short-Term Borrowing

The Cooperative has a $550,000 line of credit for short-term financing with CFC at an interest rate of2.50% which expires on September 17, 2017. At December 31, 2016 and 2015, the Cooperative had$200,000 and $0 outstanding.

16. Deferred Credits

Judy White Memorial Scholarship FundRenewable Energy Standards Tariff - NM and AZOther

December 31,2016 2015

$ 81,416 $ 66,09498,741 99,51833,760 33,294

$ 213,917 $ 198,906

17. Litigation, Commitrnents, and Contingencies

There is no pending litigation which would materially affect the financial position of the Cooperative,

The Cooperative is committed to purchase its electric power requirements from Arizona’s (3 and TCooperatives through the year 2035.

18. Pension Benefits

Narrative DescriptionThe NRECA Retirement Security Plan (the RS Plan) is a defined benefit pension plan qualified underSection 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. It is a multiemployerplan under the accounting standards. The RS Plan sponsor’s Employer Identification Number is 53-0116145 and the RS Plan Number is 333.

A unique characteristic of a multiemployer plan compared to a single employer plan is that all planassets are available to pay benefits of any plan participant. Separate asset accounts are notmaintained for participating employers. This means that assets contributed by one employer may beused to provide benefits to employees of other participating employers.

Plan InformationThe Cooperative contributions to the RS Plan in 2016 and in 2015 represented less than five percentof the total contributions made to the RS Plan by all participating employers. The Cooperative madecontributions to the RS Plan of $154,543 in 2016 and $150,830 in 2015. There have been nosignificant changes that affect the comparability of 2016 and 2015 contributions. Pension expensefor the years ended IDecember 31, 2016 and 2015, including amortization of R&S prepayment, was$202,053 and $198,340, respectively.



In the RS Plan, a "zone status" determination is not required, and therefore not determined, underthe Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and planassets are not determined or allocated separately by individual employer. In total, the RS Plan wasover 80% funded on January 1, 2016 and 2015 based on the PPA funding target and PPA actuarialvalue of assets on those dates.

Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans andsurcharges are not applicable. Future contribution requirements are determined each year as part ofthe actuarial valuation of the plan and may change as a result of plan experience.

Defined Contribution PlanThe employees also participate in a 401(k) plan, a defined contribution plan provided throughNational Rural Electric Cooperative Association. The Cooperative makes monthly contributions tothe plan. The cost for the Cooperative was $37,971 and $41,916 for the years ended December 31,2016 and 2015, respectively.

19. Related Party Transactions

The Cooperative is represented on the Board of Directors of Arizona’s G and T Cooperatives andpurchases all of its electric power from them. Margins earned by Arizona’s G and T Cooperatives havebeen allocated to the Cooperative and are included under Investments in Associated Organizations.

20. Subsequent Events

The Cooperative ha.,; evaluated subsequent events through February 21, 2017, the date which thefinancial statements were available to be issued.

21. Recently Issued Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases. The new standardestablishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a leaseliability on the balance sheet for all leases with terms longer than 12 months. Leases will be clarifiedas either finance or operating, with classification affecting the pattern of expense recognition in theincome statement. A modified retrospective transition approach is required for lessees for capital andoperating leases existing at, or entered into after, the beginning of the earliest comparative periodpresented in the financial statements. The new standard is effective for nonpublic entities for fiscalyears beginning after December 15, 2019. The Cooperative is evaluating the impact of the newstandard on the financial statements.

CONSOLIDATING AND ACCOMPANYING INFORMATION

CONSOLIDATING INFORMATION

-18-DUNCAN VALLEY ELECTRIC COOPERATIVE, INC.

CONSOLIDATING INFORMATIONBALANCE SHEETS

DECEMBER 31, 2016 AND 2015

ASSETS

Schedule I

UTILITY PLANT AT COSTPlant in ServiceConstruction Work in Progress

Less: Accumulated Provision for Depreciation

OTHER PROPERTY AND INVESTMENTS - AT COST OR STATED VALUENon-Utility PropertyInvestments in Associated OrganizationsTemporary Investments - OtherInvestment in Subsidiary CompanyNotes Receivable (Less allowance for uncollectibles

of $4,169 in 2016 and $4,169 in 2015)

CURRENT ASSETSCash - GeneralAccounts Receivable (Less allowance for uncollectiblesof $14,143 in 2016 and $12,094 in 2015)

Materials and Suppliesinterest ReceivableOther Current and Accrued Assets

DEFERRED CHARGES

TOTAL ASSETS

EQUITIESPatronage CapitalOther (Deficits)Unrealized Gain on Available-for-Sale

EQUITIES AND LIABILITIES

LONG-TERM DEBTCFC Notes PayableLoans PayableCapital Leases

CURRENT LIABILITIESCurrent Portion of Long-Term DebtLine of Credit PayableAccounts Payable - Purchased Power and GasAccounts Payable - IntercompanyOverbilled Power and Gas CostAccrued TaxesConsumers’ Deposits and PrepaymentsAccrued Employee Compensated AbsencesAccrued PayrollOther Current and Accrued Liabilities

DEFERRED CREDITS

TOTAL EQUITIES AND LIABILITIES

$

$

$

December 31,2016 2015

10,558,136 $ 10,158,583116,397 63,557

10,674,533 $ 10,222,1406,363,515 6,198,3844,311,018 $ 4,023,756

22,728 $ 22,7282,584,048 2,463,2161,444,113 1,294,602

t12,784 106,234

34,241 47,1474,197,914 $ 3,933,927

$

$

$

130,424 $ 72,648

356,060 360,097153,077 174,809

8,267 8,25935,223 35,487

683,051 $ 651,300

340,100 $ 383,480

9,532,083 $ 8,992,463

8,000,199 $ 7,720,373(395,386) (457,817)480,371 462,444

8,085,184 $ 7,725,000

295,843 $ 333,3543,148

93,957 123,143392,948 $ 456,497

101,625 $ 64,089200,000181,209 194,84849,109 56,38013,416 14,02151,895 48,55967,420 68,255

123,086 116,48116,661 13,28635,613 36,141

840,034 $ 612,060

$ 213,917 $ 198,906

$ 9,532,083 $ 8,992,463


CONSOLIDATING INFORMATIONSTATEMENTS OF INCOME, PATRONAGE CAPITAL, AND OTHER COMPREHENSIVE INCOME


Schedule 2

OPERATING REVENUESResidentialirrigationCommercial and IndustrialPublic Street and Highway LightingPower and Gas Cost Over (Under) BilledRent from Electric PropertyOther Operating Revenues

Total Operating Revenues

OPERATING EXPENSESPurchased Power and GasDistribution - OperationDistribution - MaintenanceCustomer AccountsCustomer Service and informationAdministrative and GeneralDepreciationOther Interest

Total Operating Expenses

OPERATING LOSS - BEFOREFIXED CHARGES

FIXED CHARGESInterest on Long-Term Debt

OPERATING LOSS - AFTERFIXED CHARGES

Capital Credits

NET OPERATING MARGINS (LOSS)

NONOPERATING MARGINSInterest IncomeOther Nonoperating Gain (Loss)Income from Subsidiary

NET MARGINS - BEFORECOMPREHENSIVE INCOME

COMPREHENSIVE INCOMEGain (Loss) on Securities Available for Sale

NET MARGINS - AFTERCOMPREHENSIVE INCOME

PATRONAGE CAPITAL - BEGINNING OF YEAR

Transfer of Comprehensive Income

Transfer (Margins) Losses to ,Other (Deficits)

Transfer Other (Deficits) to Patronage Capital

PATRONAGE CAPITAL - END OF YEAR

Years Ended December 31,2016 2015

Amount % Amount %

2,713,526 68.0 $ 2,673,365 69.4380,794 9.5 334,144 8.7843,292 21.1 815,407 21.2

16,331 0.4 15,301 0.4604 0.0 (38,205) (1.0)

29,688 0.7 29,947 0.810,866 0.3 22,393 0.5

3,995,101 100.0 $ 3,852,352 100,0

2,275,020 56.9 $ 2,164,235 56.2546,134 13.7 623,073 16.2188,609 4.7 216,870 5.6338,913 8.5 345,211 9.0

19,721 0.5 19,607 0.5297,390 7.4 306,365 8.0322,175 8.1 310,191 8.1

12,044 0.3 164 0.04,000,006 100.1 $ 3,985,716 103.6

(4,905) (0.1) $ (133,364)

increase/Decrease)

10,508 0.3 20,420

(0.4) $ (153,784)

3.6 131,331

3.2 $ (22,453)

3.9 $ 116,415(0.1) 1,2681.6 56,2345.4 $ 173,917

40,16146,65027,885

1,03038,809

(250)(11,527)142,749

(15,413)

143,294

127,881

156,551(4,959)62,784

214,376

342,257 8.6 $ 151,464

110,785(76,939)(28,261)(6,298)

114(8,975)11,98411,88014,290

17,927 0.4

(3.6) $ 128,459

360,184

7,720,373

(17,927)

(62,431)

9.0

0.5

(4.1)

3.4

3.00.01.54.5

(9,912/

138,371

11,963

150,334

40,136(6,227)6,550

40,459

3.8 $ 190,793

(104,874) (2.7)

$ 46,590

7,535,553

104,874

27,076

6,280

$ 7,720,373

1.1

122,801

313,594

$ 8,000,199


CONSOLIDATING INFORMATIONSTATEMENTS OF CASH FLOWS


Schedule 3

CASH FLOWS FROM OPERATING ACTIVITIESNet MarginsAdjustments to Reconcile Net Margins to Net Cash Provided byOperating Activities

DepreciationIncome from SubsidiaryDeferred ChargesDeferred CreditsAccounts ReceivableInventories and Other Current AssetsPayables and Accrued Expenses

Net Cash Provided by Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIESGross Additions to Utility PlantSalvage Value of Retirernents and Other CreditsPlant Removal CostsInvestments in Associated OrganizationsNotes Receivable - Energy Resource Loans (Net)Dividends ReceivedInvestments in Temporary Investment

Net Cash Used in Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIESLoan ProceedsAdvances on Line of CreditPayments on Loans PayablePayments on Capital LeasesPayments on CFC Notes Payable

Net Cash Provided Used in Financing Activities


CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

$

$

December 31,2016 2015

342,257 $

353,194(62,784)43,38015,0114,037

21,988(9,562)

707,521

151,464

(611,349)14,512

(43,619)(120,832)

12,90656,234

(131,584)(823,732)

335,481(56,234)47,54416,539

(24,498)52,5168,948

$ 531,760

65,976200,000(27,900)(27,665)(36,424)173,987

(446,322)12,717

(45,752)(110,341)(15,251)58,294

(76,049)(622,704)

57,776

72,648

$ 130,424

(26,223)(35,369)

$ (61,592)

$ (152,536)

225,184

$ 72,648



$ 20,025 $ 20,420$ 0 $ 0

During the years ended December 31, 2016 and 2015, the Cooperative had unrealized gains (losses) of $17,927and($104,874), respectively, which changed unrealized gain on available for sale and temporary investments - other.

-21-AZNEX COOPERATIVE SERVICES, INC.

CONSOLIDATING INFORMATIONBALANCE SHEETS

DECEMBER 31, 2016 AND 2015

Schedule 4

ASSETS

December 31,2016 2015

CURRENT ASSETSCash - GeneralAccounts ReceivableAccounts Receivable - IntercompanyPrepaid Income Taxes

$ 1,842 $ 3,99766,716 48,81049,109 56,38015,690 14,600

$ 133,357 $ 123,787

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIESAccrued Liabilities

STOCKHOLDERS’ EQUITYCapital Stock; No Par Value; 10,000,000 Shares Authorized;

50,000 Shares Issued and OutstandingRetained Earnings

$ 20,573$ 2O,573

$ 50,00062,784

$ 112,784

$ 17,553$ 17,553

$ 50,00056,234

$ 106,234

$ 133,357 $ 123,787


CONSOLIDATING INFORMATION:STATEMENTS OF INCOME AND RETAINED EARNINGS


Schedule 5

OPERATING REVENUESCommission Revenue

OPERATING EXPENSESCommission Expenses

OPERATING MARGINS - I~,EFORE INCOME TAXES

INCOME TAX EXPENSE

OPERATING MARGINS - AFTER INCOME TAXES

RETAINED EARNINGS - BEGINNING OF YEAR

DIVIDENDS

RETAINED EARNINGS - END OF YEAR

$$

$$

$

$

$

December 31,2016 2015

156,010 $ 147,322156,010 $ 147,322

72,268 $ 73,89372,268 $ 73,893

83,742 $ 73,429

(20,958/ (17,195)

62,784 $ 56,234

56,234 58,294

/56,234) (58,294)

62,784 $ 56,234


CONSOLIDATING INFORMATIONSTATEMENTS OF CASH FLOWS


Schedule 6

CASH FLOWS FROM OPERATING ACTIVITIESNet MarginsAdjustments to Reconcile Net Margins to Net Cash

Provided by (Used in) Operating ActivitiesAccounts ReceivableAccounts Receivablle - IntercompanyPrepaid Income TaxesPayables and Accrued Expenses

Net Cash Provided by Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIESNet Cash Provided by (Used in) Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIESDividends Paid

Net Cash Used in Financing Activities


CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR



December 31,2016 2015

62,784 $ 56,234

(17,9O6) 1717,271 2,415

(1,090) 2,4403,020 (575/

54,079 $ 60,685

o $ 0

$$

(56,234) $ (58,294)(56,234) $ /58,294)

(2,155) $ 2,391

3,997 1,606

1,842 $ 3,997

$$

o $ o19,028 $ 15,331

ACCOMPANYING INFORMATION


ELECTRIC PLANTFOR THE YEAR ENDED DECEMBER 31, 2016

Schedule 7

CLASSIFIED ELECTRIC PLANT IN SERVICE

Intangible Plant

Distribution PlantLand and Land RightsStation EquipmentPoles, Towers, and FixturesOverhead Conductors and DevicesUnderground ConduitUnderground Conductors and DevicesLine TransformersServicesMetersStreet Light and Signal Systems

Total

General PlantLand and Land RightsStructures and ImprovernentsOffice Furniture and EquiipmentTransportation EquipmentStores EquipmentTools, Shop, and Garage, EquipmentLaboratory EquipmentPower Operated EquipmentCommunications EquipmentMiscellaneous Equipment

Total

Balance1/1/2016 Additions

Total Classified Electric Plant in Service

Gas Plant in ServiceDistribution PlantGeneral Plant


Construction Work in Progress

Total Utility Plant

176 $ 0

RetirementsBalance

12/31/2016

$ 0 $ 176

2,397 $ 1,000 $145,413

2,094,971 83,846 17,4341,608,065 30,681 17,097

21,336141,876

1,469,931 50,656 12,615625,742 33,786 5,825562,486 103,724189,260 15,381 4,556

6,861,477 $ 319,074 $ 57,527

$4,4002,572

74,189

$ 81,161

$ 4OO ,235

$

$

69,304

$ 9,740635,993149,096408,66630,19016,21819,264

256,76554,71589,919

$ 1,670,566

$ 8,532,219

69,304

126,831

$ 156,445 $ 32,1251,829

$ 158,274 $ 32,125

$ 52,840 $ 0

$ 611,349 $ 158,956

$ 1,585,90540,459

$ 1,626,364

$ 63,557

$ 10,222,140

$ 3,397145,413

2,161,3831,621,649

21,336141,876

1,507,972653,703666,210200,085

$ 7,123,024

$ 9,740640,393151,668413,55130,19016,21819,264

256,76554,71589,919

$ 1,682,423

$ 8,805,623

$ 1,710,22542,288

$ 1,752,513

$ 116,397

$ 10,674,533


ACCUMULATED PROVISION FOR DEPRECIATIONFOR THE YEAR ENDED DECEMBER 31, 2016

Schedule 8

CLASSIFIED ELECTRIC PLANTIN SERVICE

Distribution Plant

General PlantStructures and ImprovementsLaboratory EquipmentOffice Furniture and FixturesTransportation EquipmentTools, Shop, and Garage EquipmentCommunications EquiprnentStores EquipmentPower Operated EquipmentMiscellaneous Equipment

Total General Plant

Total Classified Electric Plant in Service

Gas Plant in ServiceDistribution PlantGeneral Plant


Retirement Work in Progress

Balance Depreciation1/1/2016 Accruals

$ 3,968,897 $ 237,160

$ 580,844 $ 16,52019,264

119,841 13,311260,839 19,256

16,21748,608 1,11630,191

117,856 11,76354,864 7,319

$ 1,248,524 $ 69,285

$ 5,217,421 $ 306,445

950,665 $ 46,50736,442 242

987,107 $ 46,749

(6,144)

6,198,384 $ 353,194

(1)

RetirementsBalance

12/31/2016

$ 86,817 $ 4,119,240

61,804

2,627/2,627)

$ 61,804

$ 148,621

$ 42,423

$ 42,423

$ /2,981)

$ 188,063

(2)

$ 597,36419,264

133,152218,291

16,21749,72430,191

126,99264,810

$ 1,256,005

$ 5,375,245

$ 954,74936,684

$ 991,433

$ (3,163)

$ 6,363,515

(1) Charged to Depreciation ExpenseCharged to Clearing Accounts

(2) Cost of Units RetiredAdd: Cost of RemovalLess: Salvage and Other Credits

322,17531,019

353,194

$ 158,95643,61914,512

Loss Due to Retirements $ 188,063


OTHER PROPERTY AND INVESTMENTSDECEMBER 31, 2016 AND 2015

Schedule 9

NON-UTILITY PROPERTYLand

INVESTMENTS IN ASSOCIATED ORGANIZATIONSPatronage Capital Credits

Arizona Electric Power Cooperative, Inc.CFCNRTCWestern United

MembershipsCFCGrand Canyon State Electric Cooperatives AssociationGrand Canyon State Electric Cooperatives- BuildingArizona’s G&T CooperativesNational Cooperative Services CorporationNRTC

Capital Term Certificates - CFCMember Capital Securities - CFCInvestment - Federated Insurance

TEMPORARY INVESMENTS - OTHERHomestead FundsJudy White Memorial Scholarship Fund

INVESTMENT IN SUBSIDIARY - AZNEX, INC.Capital StockAccumulated Margins

NOTES RECEIVABLEMember Loans - Heat Pump InstallationsReserve for Uncollectible Loans

Total Other Property and Investments

$

$

$

$

$

$

$

December 31,2016

22,728 $

1,785,618 $2,767

66,2699,512

2015

22,728

1,664,5592,244

68,1427,005

1,000 1,000150 150

20,855 21,4165 105

100 1001,000 1,000

160,647 160,647500,000 500,00036,125 36,848

2,584,048 $ 2,463,216

1,324,253 $119,860

1,444,113 $

5O,OOO $62,784

112,784 $

38,410 $(4,169)34,241 $

4,197,914 $

1,179,624114,978

1,294,602

50,00056,234

106,234

51,316(4,169)47,147

3,933,927


PATRONAGE CAPITALDECEMBER 31, 2016

Schedule 10

Yea r

1962196319641965196619671968196919701971197219731974197519761977197819791980198119821983198419851986198719881989199019911992199319941995199619971998200120022003201420152016

G&T

6,280119,556131,777

AssignableDistribution

Assi~lnedG&T Distribution Retired

2,4493,3119,430

10,17711,00016,741

93,791125,726

55,32O

18,45128,33124,32122,13614,12926,31418,40721,87029,12425,01631,55727,48133,26117,18167,323

6,692298 176688 746557 245695 070430 960232 451392 534470 802450 792416,247404 833394 443568 865550 305451 779446 191501 539601 994146 067615,366

1,443,833

18,45128,33124,32122,13614,12926,31418,40721,87029,12425,01631,55727,48133,26117,18167,323

6,692298,176688,746557,245695,070430,960232,451392,534255,448

58,984148,049

Balance

2,4493,3119,430

10,17711,00016,741

215 354450 792416 247404 833394 443568 865550 305451 779446 191501 539601,994146,067615366

1,443,83393,791

125,72655,3206,280

178,540279,826

$ 25;’,613 $ 207,033 $ 327,945 $ 11,169,832 $ 3,962,224 $ 8,000,199


ADMINISTRATIVE AND GENERAL EXPENSESFOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Schedule 11

Office Supplies and Expense

Outside Services Employed

Directors’ Fees and Expense

Annual Meeting Expense

Dues to Associated Organizations

Miscellaneous General Exipense

Utility Commission Related Expenses

Maintenance of General Plant

Duplicate Charges (Credit),

Total

December 31,2016 2015

61,806 $ 60,314

29,995 28,316

88,817 90,421

7,958 8,939

28,112 28,044

54,861 63,709

21,096 21,651

6,880 7,273

(2,135/ (2,302!297,390 $ 306,365

IncreaseIDecrease)

1,492

1,679

(1,604)

(981)

68

(8,848)(555)(393)

167

(8,975)


FIVE YEAR COMPARATIVE DATASchedule 12

Years Ended December 31,2016 2015 2014

OPERATING REVENUESResidential $ 2,713,526Irrigation 380,794Commercial and Industrial 843,292Public Street and Highway Lighting 16,331Power and Gast Cost Under (Over) Billed 604Rent from Electric Property 29,688Other Operating Revenues 10,866

Total Operating Revenues $ 3,995,101

OPERATING EXPENSESPurchased Power and Gas $Distribution - OperationDistribution - MaintenanceCustomer AccountsCustomer Service and InformationAdministrative and General ExpenseDepreciation and AmortizationOther Interest

Total Operating Expenses $

OPERATING LOSS - BEFOREFIXED CHARGES


OPERATING LOSS - AFTERFIXED CHARGES

Capital Credits

NET OPERATING LOSS

2,275,020546,134188,609338,913

19,721297,390322,17512,044

4,000,006

(4,905)

2,673,365 $ 2,559,622334,144 397,568815,407 825,081

15,301 14,445(38,205) 77,16229,947 25,20422,393 32,545

3,852,352 $ 3,931,627

2,164,235 $ 2,324,983623,073 672,438216,870 238,281345,211 326,014

19,607 16,876306,365 307,959310,191 306,010

164 1363,985,716 $ 4,192,697

$ (133,364) $ (261,070) $

2013

2,737,722435,275863,637

15,310(66,368)23,81221,160

4,030,548

2,395,616601,175220,670340,590

20,230294,646295,347

934,168,367

(137,819)

2012

$ 2,651,843478,351752,161

15,61421,08328,71816,67t

$ 3,964,441

$ 2,412,465586,392186,947331,868

25,344276,316282,632

142$ 4,102,106

$ (137,665)

10,508 20,420 22,689 21,694 6,224

$ (15,413)

143,294

$ 127,881

NONOPERATING MARGINSInterest Income $ 156,551Other Nonoperating income (Loss) (4,959)Income of Subsidiary 62,784

$ 214,376

NET MARGINS (LOSS)

(153,784) $ (283,759)

131,331 243,492

/22,453) $ /40,267)

(159,513)

97,205

(62,308)

$ (143,889)

28,451

$ (115,438)

84.82 85.91 84.58 84.58 89.3194.24 93.69 92.18 92.18 96.93

Miscellaneous StatisticsEquity to Total AssetsEquity to Total Capitalization

$ 342,257 $ 151,464 $ 85,964

$ 116,415 $ 68,8851,268 (948)

56,234 58,294$ 173,917 $ 126,231 $

$

67,569 $ 64,577990

55,842 34,912124,401 $ 99,489

62,093 $ (15,949!


DIVISIONAL INCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2016

Schedule 13

OPERATING REVENUESResidentialIrrigationCommercial and IndustrialPublic Street and Highway LightingPower and Gas Cost Over BilledRent from Electric PropertyOther Operating Revenues

Total Operating Revenues

OPERATING EXPENSESPurchased Power and GasDistribution - OperationDistribution - MaintenanceCustomer AccountsCustomer Service and InformationAdministrative and GeneralDepreciationOther Interest

Total Operating Expenses

OPERATING INCOME (LOSS) - BEFOREFIXED CHARGES


OPERATING INCOME (LOSS) - AFTERFIXED CHARGES

Capital Credits

NET OPERATING MARGINS

NONOPERATING MARGINSInterest IncomeOther Nonoperating Expense

DIVISIONAL INCOME

$

$

$

Year Ended December 31,2016Electric Gas

Amount % Amount

2,313,675 66.6 $ 399,851333,684 9.6 47,110760,585 21.9 82,707

16,331 0.53,097 0.1 (2,493)

36,471 1.17,406 0.2 3,460

3,471,249 100.0 $ 530,635

75.48.9

15.60.0

(0.5)0.00.7

100.0

2,150,515 62.0 $ 124,505360,956 10.4 185,178157,523 4.5 37,869286,248 8.2 52,665

19,721 0.6276,150 8.0 21,240275,428 7.9 46,747

12,044 0.33,538,585 101.9 $ 468,204

23.534.9

7.19.90.04.08.80.0

88.2

(67,336) (1.9) $ 62,431 11.8

10,508 0.3

(77,844) (2.3) $ 62,431

143,294 4.1

65,450 1.9 $ 62,431

11.8

11.8

0.0

11.8

156,551 4.5 $(4,959) (0.1)

151,592 4.4 $ 0

217,042 6.2 $ 62,431

BOLINGER, SEGAI~S, GILBERT & ~OSS, L.L.P.

PHONE;: (B0~-) ’74’7-3BrtB

FAX," (B[36) ’74’7-3B~ 5

LUBBOCK, TEXh~ 79423-1954

LETTER TO BOARD OF DIRECTORS REGARDING POLICIESCONCERNING AUDITS OF CFC BORROWERS

Board of DirectorsDuncan Valley Electric Cooperative, Inc.Duncan, Arizona

We have audited, in accordance with auditing standards generally accepted in the United States ofAmerica, the financial statements of Duncan Valley Electric Cooperative, Inc. (the Cooperative), for theyear ended December 31,2016, and have issued our report thereon dated February 21,2017.

In connection with our audits, nothing came to our attention that caused us to believe that the Cooperativefailed to comply with the terms of Article V of the National Rural Utilities Finance Corporation LoanAgreement insofar as they relate to accounting matters. However, our audits were not directed primarilytoward obtaining knowledge of such noncompliance.

The Cooperative’s accou~nting and reporting procedures were considered adequate in all material respects.The records were maintained in accordance with the prescribed Uniform System of Accounts. Theprocedures used in accounting for material, transportation, labor, and overhead costs provide a fairdistribution of these costs to construction, retirement, and maintenance or other expense accounts.

This report is intended solely for the information and use of the Board of Directors and management ofDuncan Valley Electric Cooperative, Inc. and the National Rural Utilities Cooperative Finance Corporationand is not intended to be and should not be used by anyone other than these specified parties.

Lubbock, Texas

February 21,2017

Certified Public Accountants

-31-

duncan valley electric cooperative, inc. … operation andmaintenance expenses increase or line...

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