ML20076E730

Annual Financial Rept 1981

ML20076E730
Person / Time
Site:	Seabrook
Issue date:	06/30/1982
From:	VERMONT ELECTRIC COOPERATIVE, INC.
To:
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ML20076E650	List: ML20076E646 ML20076E664 ML20076E671 ML20076E675 ML20076E685 ML20076E690 ML20076E693 ML20076E703 ML20076E714 ML20076E722 ML20076E727 ML20076E730
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1981 Annual Report j , .s  ; , To the Owners of

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l . Vermont Electric Cooperative, Inc.

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EQUITY 9309240656 830727 r @ ufE n PDR ADOCK 05000443 F v. TV G n I PDR i

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Contents  ;

President's Report . . . . ... . . .... .. 3 Three Years to Sources of Farm Credit . .. . . . .. . 3 Produce l Putting the Joos Where They Are Needed . 4 Capital can take the form of money borrowed i Farmers Home Administration . . . .. 4

• Cl to add to a herd or to raise I Small Business Administration: Rural Aid? . 5 j

I <=.- /- '

a calf from birth to milk production. Stable prices.

Farm Credit System . . . . . . . 6 (,, dependent on price sup-Vermont Agriculture by Commissioner .'n # I. " V ports, help assure the George Dunsmore . .. . .. . . 7 *'" U

farmer that a dollar in-vested today will provide a hianager's Report . . . .. . . . 8 predictable result three .

hiember Services Departrrient years hence.

l hianager's Report . . . ... . 10 Line Department S'iperintendent's Report . 12 Produce ,

Engineering Department From plan to power, Chief Engineer's Report . . 13 twelve years elapses before Power Supply . .. . . . 14 y a power plant is produc-gg g Trustees .. 16 capital-a predictable Equity Goal: 30 Percent . . . . . 18 source of revenue-is needed to fm' ance some-thing that won't yield re-FINANCIAL REPORT >:m -

turns for haif a generation.

Debt (capital) borrowed Treasurer's Report 18 today takes the burden off h1argins and TIERS . 19 the shoulders of pre .nt-Balance Sheet . day members for pcwer

. . . 20 they-and their family and Patronage Capital and Equities . . 22 neighbors-will need in the uture.

Growth in Plant (Chart) . . . 23 Operating Revenues and Expenses . . . 24 Territory and Capital hierchandising, Interest and Other Income . 26 l Electric companies are Changes In Financial Position . assured service territories 27 because building wires and Notes to Financial Statement .

The Cooperative Team: 712 Years! .

.. 28 3 dh poles to your house-and power plants-require thir-30 .'

] ,

ty year investments of capital. Planned use of uriury A* l 00 capital would be impossi-IIUdSay '

I!Ed$ny ble without fixed territories I for each electric company.

Vermont Electric Cooperative. Inc.

1981 ANNUAL. REPORT This report replates the June issue of Cwp rife, the newsletter of the Cooperstbe published elesen times a year. Address inquiries shout this Annual Report to Assistant Treasurer and Controller Jerry Buchoir. 4 ermar,t Electric Coopersthe. Inc., School 5t.. Johnson Vermont 05654, phone 802 43s-2331.

This report is dedgned and edited by Herman Associates, f ranklin. Vermont 05457. and printed by Queen City Printers Inc.. Burlington 4 ermont 05401.

1981 Annual Report 2 Vermont Electric Cooperative, Inc.

l l

Rural Strategies

PRESIDENT'S REPORT l > J. Douglas Webb

' 4 The theme of this Annual Report," Rural

, 1 Strategies," underscores the fact that Vermont 1 Electric Cooperative and the Rural Electrifica-tion program is part of a larger picture: the I . ,

i > .

] historic struggle to keep capital flowing to rural

-' America. We look at that in "Who We Are: The

! h Setting."

[ -

-1 The past year has been one of stock-taking.

I

'/ Time and again we heard that the job in rural America is complete; that special programs that have tried to right the balance between city and )

country can be phased out. The facts don't sup- 1 l

port that view. And we need to persuade the

/ American public that even though people are moving back to rural areas, population growth a without capital growth spells trouble. We oppose

1. Douglas Webb cuts in Federal programs for rural areas.

We face that fact at the Cooperative. We sup-port efforts to maintain the Rural Electrification 570 Sources of program at present levels. Only then can we Capital make sure we have the continuous supply of capital to replace wires and poles put up forty for years ago, and build for growth twenty years i

Vermont d down the road.

30 Farms: 1980 But we are realists. We know that we will de-pend more and more on private sources for capital; today, through the Cooperative Finance ,

E Corporation, we obtain thirty percent of our 5 capital needs.

j This means that our financial planning must be long-range; the Cooperative must build now o 20 to protect its access to affordable ready capital.

E Trustees have set the goal of a thirty percent equity, seventy percent debt financial structure

$ within the next fifteen years.

d 2 Thus, our equity level must grow each year and so each year we must pay rates that yield ,

equity-building margins. The Cooperative )

10 Finance Corp. predicts tnat our capital needs will grow three times faster than our members' use of electricity, for two reasons: old rusted lines must be replaced, and new lines to hook up new members must be built. Over the past ten years,4,633 members have been added.

We are indeed part of a total fabric of rural g life. When one strand is cut, we all feel it. We i are part of a continuing struggle to make the 5 rural areas livable, is a  !.e .,8a h a s Ia uso cg a a

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il i s =e 1! EQUITY

$2$f3$ POWER 1981 Annual Report 3 Vermont Electric Cooperative, Inc. .

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Rural Strategies Putting the Jobs sioner, Isaac Newton, laid the foundation fu Where rhef Areneeded research and education that has continued to this day.

Just seventy years after the close of the Meanwhile, President Andrew Jackson in 1830 Civil War, the rural electrification program was 1 had wrecked the National Bank "the greatest launched to spur recovery by getting inexpensive monopoly of its day"-because it was a capital to rural America. Non-profit, privately stronghold of traders and bankers in eastern owned business cooperatives were established t? cities. Currency reform "the same money for manage the use of that capital. Vermont Electnc Cooperative, founded in 1938, was one of them. the bondholder as for the plowholder"-was the goal of rural people after the Civil War and led Nme out of ten farms were without electricity; to the Greenback Labor Party in 1878 and even-rural banks were closmg and rural people were out of work. Although the Rural Electrification tually to the Populist Party which concentrated Admmistration co-ops couldn't stick to the on agrarian measures and free silver, electing I seven Congressmen and six Senators in 1894 I origmal idea of hirmg only those on relief l and, in 18%, polling almost six million votes for (ski' led workers were needed), the fresh cheap capital fit lights, restored confidence and William Jennings Bryan in his unsuccessful bid sparked recovery.

for the presidency.

Help for rural areas from the Federal govern-ment didn't begm with the Great Depression.

RuralReform The rural struggle for ready affordable capital .is Though there was some measure of rural pros-perity after 1900, rural reform accelerated.

old and continues; the mequality between city and country e'usts today. As Federal government Bolstered by such organizations as the Grange, mtervention began early, it must continue for a the Nonpartisan League pushed for and got the long time to come, Federal Reserve Act and the Federal Loan Board and 12 regional banks for long-term credit, the The History c unty agent extension system, and subsidies by In 1776,1790 and 1817, tentative proposals the Federal Government for vocational agri-were made for national boards or committees to culture m pubh,c schools. Each step forced assist agricultural societies; in 1836 the Commis- p werful city mterests to share resources w,th i

sioner of Patents distributed seeds to farmers; mal, frgntier America. The Morrill Act of 1862 and after 1847 an agricultural division was establishms land grant colleges and the Hatch established in the Patent office and regular ap- Act of 1887 setting up state agricultural experi-propriations were made. In 1862 the Department ment stations increased rural opportunity. Some of Agriculture was set up and its first commis- have suggested that Rural Institutes, to study rural problems and guide solutions, should be

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set up under the act.

Farm Credit System '

i k The Farm Credit System is a federation of. HMory ofM

] But even with all these measures, rural

.' cooperatives-Production Credit Associationsi Federal lInterndaw Credit Banks, Federal Land Banks and 4 America still ran a poor second. It still does. A

[ Banks for Cooperatives.~ ,

long list of Congressional acts is evidence of this

! inequality and the attempt to right it. The

~

jFarmers Roma Adebelstration

] Federal Reserve Act was passed in 1913, and the

[ Vermont /New Hampelure FHA loaned $9,709,000 in > Farm Credit Act in 1916. These were followed jl981,54,023,000 in operating loans, $3,005,000 for : ! by the Rural Electrification Act of 1935, the

farm ownership and $1,876,000 in emergency loans, y Farmers Home Administration Act of 1946, the l FHA is a lommer of"last resort.". At level funding and ; Public Works and Economic Development Act i

!at constant dollars, Vermont farms will need almost " of 1965, the Rural Development Act of 1972, j $200 million in debt capital from FHA over the next ' the Farm Credit System Act of 1971, the itwenty years. FHA helps with bookkeepmg. supervi . 4 Agricultural Credit Act of 1978 and the Con-lsion and advice until a farmer"can 30 it on his own" g solidated Farm and Rural Development Act of '

or " graduate" to the Farm Credit System. "Because oh '

ithe labor needed, the family farm has a bright the same year, the Rural Development Poh.ey Di Act of 1981 and a proposed National Rural i future," says Roland R. Vautour, executive director of,

the Vermont /New Hampshire FHA. Farm Home Ad_ ; Development Bank' in 1981. In fiscal 1976 l ministration also inns for community facilities and ;

~

Federal outlays to totally rural counties were $68 l rural hoeue repait Md construction,'although present j per capita above metro counties. Yet with all

. pohcies in Wash; x n cut these funds drastically.  ;;

u_ am2mm_ _ , .a , sy s,,,,,, p.,,o e ,,n, 1981 Annual Report 4 Verrnont Electric Cooperative, Inc.

l these programs and agencics, per capita incomes munity facility loans by fifty percent, reduce in rural areas remain twenty percent below the milk price supports, and cut food stamp and city. community action organization activity.

Meanwhile, housing starts along Cooperative On Co-op Lines lines in 1981 were down twenty percent even In Vermont, and along Vermont Electric while applications for electric service piled up in Cooperative lines, only two Vermont counties the Co-op's engineering department; high in-have higher unemployment rates than the three terest rates were the main culprit. Farms, most rural counties served by the Cooperative, already suffering from a national milk surplus while average personal income in 35 towns is and lower milk supports, were squeezed by the below that of the county in which they are higher interest rates too: in 1970 interest expense situated. Subtract the cost of travel to and from was three percent of total operating expenses, a job, and the disparity grows. A fifty mile and today thirteen percent. Although farms yield round trip to work, for example, would cost a only five percent of the total gross state product rural family $2,500 for a 50-week work year. and hire 11,000 of a total workforce of 225,000, Thus even before the present Administration farms in totally rural towns contribute a much took power, rural America had failed to close higher proportion of income, assets, capital and the capital gap. Yet budget cuts of over $2 taxes. Furthermore, farms have spawned special billion are urged for REA while slices in fiscal skills that could attract capital to create 1982 end rural planning grants, cut water and workplaces outside the industrial parks of less waste disposal grants by forty percent, com- rural areas.

5100 Capital Needs Next 20 Years 90- Just For SBA New Businesses Unemployment In Counties 80- Only. How Much Served B). Cooperative W Go To Rural m

ce 70-O Areas?

Compared To Vermont As A Whole 3

a ADDISON CO-OP 8 60- (CONSTANT BENNINGTON

$ DOLLARS. CALEDONIA CO-OP 50' D NG.) ESSEX 3

g 40 FRANKLIN CO-OP

^ GRAND ISLE 30 ORANGE ORLEANS CO-OP 20' RUTLAND WASHINGTON 10 WINDHAM CO-OP WINDSOR l

0

/ 0 1 2 3 4 5 6 7 8 9 PERCENT Small Business A dministration loaned $18.5 million in Vermont in 1981, about sixty-five percent of normal.

About twenty-five percent of that was to start new businesses while the balance wentfor working capital and inventory. At present levels. SBA would need $72 million over the next 20 years as capital to help launch new businesses. (SBA guarantees loans actually made

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& ng m by commercial banks.) W11 Cn 1981 Annual Report 5 Vermont Electric Cooperative, Inc.

Rural Strategies Rural $trategies Numyg7 gg Both state and Federal strategies for rural development hang on a policy of decentraliza- Dairy Farms tion which stops dead at the industrial park; In Counties Served viewed from Washington, Vermont is rural; By Cooperative viewed from Montpelier, Morrisville with a population of 3,000 ar.d an industrial park is rural. Thus Federal and State policies leave o l@ 2@ 3@ 4@ 500 6@

totally rural Eden or Lowell, for example, out in the cold. Jobs in Morrisville or St. Johnsbury or ADDISON  :

St. Albans are important, but they carry the CHITTENDEN  :

burden of time and money for transportation. FRANKLIN -

What is worse, the labor of a worker from LAMoli.LE  :

Lowell helps build assets and capital in a distant

, WINDHAM _

commo,nity, pays for their schools and their ORLEANS amenities, and leaves his own town just where he found it. CALEDONIA -

Totally Rural Strategies From their beginning, rural electric co-operatives have been responsible for rural well-Minimum being. Cooperative managers and employees have worked with development councils and Capital Need helped launch local enterprises. A new strategy Over Next 20 Years that focuses on the completely rural towns of For Vermont Farms Vermont is needed. Federal programs, to help spark local private entelprise, need to be main-Based On 1980 Borrowing tained. Men and women with ideas and ingenui- (CONSTANT DOLLARS, ty need capital and resources especially designed LEVEL NEED) and earmarked for the zones in Vermont that $1.4 BILLION are entirely rural. MILLIONS OF DOLLARS Commissioner of Agriculture George 0~ 100 200 300 400 600 800 $1,000 Dunsmore, in the following article, looks at one * * * '-

3 aspect of capital and jobs in the rural areas:

Small part-time farm businesses. Are they a sign x of the future and a method, supported by special government programs, with which a new and thriving rural economy could be built?

Federal Assistance

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! Whts the U.S. Goverament provided the inkiel fund-1 To Utilities During 1981

• las for the various 8=assia== of the Penn Credit . M $3 BILLION k Speese, this " seed capital" has einee been' repaid. The d

[ Pans Credt Speeses is now entirely borrower owned hj

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[land h(FCA),==*=m d aven the independset theAssacy Federal consS of the perm Ctest Ad. ?

! that ensuinas and supervises this synese, is assessed , a 1

apan'aumuher hemks k supervisses thesefoss, it is the ; 7 f f

spesem% benouers and not the tempeyers who pay thed 3*'

, supemens of the pCA.-It ekselas its loan funds - ' - 1 m primerty thsough the sets of securities in the national y g 200-

/ and inestantionsi money markets 1These sesurkies are 1 j h ast guarameesd by the U.S. Governsange: They'are n .1  :-! 100 [ - /

% said throud the syseemts fiscal asset in New York ' S l2 /-

/

i City.-Stonement of Carl T. Fredrickson, Senior a 0 -- H / /

/d ELECTRIC PUBLICLY INVESTOR-

[ Deputy Goweraer, Farma Credt Adeslaistration, ,

s Masch g,1982.' ~ > CO-OPS OWNED OWNED mawa.a,;.mkhswa n,_d UTILITIES 1981 Annual Report 6 Vermont Electric Cooperative, Inc.

Verniont Agriculture In the 1980s chronicinfiation Chronic inflation is also an important factor in the George M. Dunsmore capital investment as reflected by annual or periodic Commissioner of Agriculture balance sheets.

The average value of land and buildings as reported by the U.S.D.A. has increased at a rate of approxi-mately twelve percent per year. This constitutes nearly

• a one hundred percent increase each four years in real W property value.

The followirg example, using the Vermont Elec-

)- N tronic Farm Account annual summaries illustrates the rate of increased capitalization and also the change in j3 i

g j* net worth of dairy farms which participate in that pro-g F 8'"*

• Annual Aserage Per Farm Number of Total Farm Accounts Net ffp fMd. Year Farms Assets Payable Worth George Af. bunsmore 5 30,164 $65,908 1%9 144 5 96 072 1979 111 267,52b 198,012 69,516 Agriculture is a very dynamic and complex m. dustry. 1980 108 311, % 8 247,033 64,035 Farm operational methods and practices are under- Land and buildings constituted $6% of the average gomg contmual change. Vermont farmers are meeting dairy farm investment in 1%9 and 51% in 1980.

challenges that include higher prices for purchased m, -

puts, flat or static prices for farm products, and ac- Developing projections or predictions in respect to celerating competition in marketing products. the demand for farm financing and the anticipated Dairying is Vermont's dominant farm industry. Dur- availability of funds should be regarded as an onerous ing a period of nearly fifty years the production and exercise.

sale of fluid milk has continued to increase at a nearly If we evaluate and apply generalinformation cur-constant rate. Commercial production of most other rently available in respect to the demand and rupply of farm products has declined during this period. farm financing, we might conclude that adequate funds Dedicated Farmers will be available through the next decade.

I believe that the relative s: ability of our dairy in- The production of many farm products, including dustry is attributable to a major degree to our proximi- milk, is in excess of market demands. From a national ty to fluid milk markets, the assurance of minimum perspective it could be stated that dairy farming is over-farm milk prices under the federal milk marketing capitalized in respect to consumer demands. Looking order, and our dedicated and committed farm popula- ahead, I believe we should expect a large number of tion. potential farmers to seek ownership of commercial The aspiration of becoming a successful farmer is a dairy farms during the 1980s. As has been true for a common goal of many individuals. The anticipated number of years, only a small percentage of those privileges of self employment, opportunity to succeed, potential farmers will become farm operators, and a and to work and live close to the land and nature con- smaller number will achieve success as farm owners.

tinues as a domir. ant, inherited objective for many. Increase In Farms ,

The volume of agricultural products being produced Family dairy farms are commercial business opera-in this country continues to increase while the number tions. It is generally understood and accepted that in-of people engaged in farming, the number cf farms, the dividuals having limited, if any, capital, and little or no acres of land deciine. managerial experience cannot expect to acquire title One might conclude that we can expect the rate of in- and financing for a non-farm type commercial business  !

creased productivity to continue in the foreseeable operation.

future and also that the number of farms and area of We should not, however, overlook the fact that, over a period of years, many successful farmers and many  !

farmland will continue to decline.

CapitalIntensive commercial business operators started in part-time or Agriculture is a capital intensive industry. To a limited operations and increased and expanded as l

significant degree the increased efficiency and produc- equity became available.

tisity being gained in agriculture has been accomplished Current census information indicates that a signifi-through increased capitalization. Farm investment per cant increase in the total number of farm operations is man employed is appreciably higher than that in most now under way in Vermont and in many other

. all other commercial activities. agricultural states. This is an abrupt reversal of the I This continued infusion of capitalin family farrn long-term trend which has been under way since 1940.

operations has been accomplished to some degree by This increase in the number of individual farm units in-the reinvestment of a major portion of the annual net dicates that there are families getting started in part-income on a continued basis. Most farm owners con- time or limited farm operations. We should encourage centrate their available capital into their farm operation and assist this effort. It is very probable that a portion rather than non-farm investments which have growth of our new farmers will succeed in establishing full-time or interest-earning potential. viable operations.

1981 Annual Report 7 Vermont Electric Cooperative, Inc.

F Rural Strategies cipals and private utilities throughout New England.

In September,1981, Boston Edison Company cancelled Pilgrim 2 Nuclear Unit, in which your Cooperative had an interest (2/10ths of 1%).

We are in the process of selling the equipment which had been purchased. No construction ever MANAGER'S REPORT began, fortunately. Until everything is sold, we

. will not know our total loss, but we estimate it William J. Gallagher will be between $300,000 and $500,000. For-1981 was a trying year for our national tunately, our loan is repayable over a 30 year economy. Although most people seem to agree period, beginning in 1986, and will present very that the Reagan economic programs will, in the little impact on your electric rates. Unfortunate-long run, benefit all of us, the adjustment is ly, we will not have the 2.3 MW of capacity, proving difficult. This is especially true in the and will have to obtain it from other sources.

rural areas. In December,1981, after almost five years of 1 Most rural federal programs were slashed dur- work, we obtained a major license to construct ing 1981. Especially hard hit were the FHA pro- the North Hartland Hydro Project. We im-grams and farm price supports. Many co-op mediately began final design engineering and members will have a hard time surviving until hope to bring the project on line in 1985, a year the long hoped-for economic recovery comes. earlier than originally planned. We are continu-On balance, the REA program fared well, due ing to study several other sites.

to strong support in the Congress. However, the Our wind energy experiment on Stratton

- changes that were made had a significant impact Mountain was terminated by the Department of on our cooperative. Energy in 1981. We learned there is plenty of The days of five percent money for generation wind up there, but the technology to harness it projects are gone. We had hoped to finance the is not yet available.

North Hartland hydro project with a combina- In late 1981, after nearly three years trying to tion of 5% money and private sources for a find partners, your Cooperative determined to composite rate of about 8%. Instead, we are "go it alone" and study the environmental and forced to rely on the Federal Financing Bank at economic feasibility of burning coal in Vermont about 12% despite a fine effort by our Congres- to generate electricity. In early 1982, your Board sional Delegation. This increase in interest cost of Trustees commissioned Black and Veatch to almost made the project unfeasible and added ' prepare the study. We believe coal holds the best

$959,000 to the total cost. future for baseload generation.

REA's five percent distribution program will Thepotentialloss of PASNY hydro power l provide an ever-decreasing portion of the total after 1985 continues to be a serious concern. In requirements of the rural electric cooperatives, 1981, we joined with the municipal utilities and l

i thus forcing us more and more into the private Washington Electric Cooperative to form a markets. In order to compete for capital, the coalition to fight a " preference" battle in the need for cooperatives to build equity has never Federal Courts if necessary. The PASNY ~

been greater. licenses contain a preference right to municipals

{

Through our national organizations, we will and cooperatives and we intend to protect your continue our grass roots efforts in Washington rights to this power. Unfortunately, our position i to ensure that the REA program gets its propor- is at odds with the present Vermont administra-tionate share of Federal dollars. tion, but this will not deter us. The loss of Co-op Power Supply PASNY will mean millions of dollars per year in During 1981, your cooperative assigned most inacases to ym dect& 2, and we W go aH the way to the U.S. Supreme Court if necessary, of its existing power supply contracts to Ver-mont Electric Generation and Transmission - Your Distribution System .

l Cooperative, Inc. ("G&T"). The G&T was formed During the summer of 1981, we completed a l by your cooperative to take advantage of certain major project in the Richmond, Hinesburg, tax advantages and lower mortgage cov- Williston and Jericho area. The new wires erage requirements afforded these types of resulted in greatly improved service in those organizations. The G&T membership is now areas. Similar projects will be carried out in l comprised of electric cooperatives in Vermont, other parts of the system in 1982 and 1983. t New Hampshire and Maine, as well as muni- Financing of these projects was obtained at a six 1981 Annual Report 8 Vermont Electric Cooperative, Inc.

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Since the oil embargo in 1973, the average j M ,J 7~4 i .- F . ( monthly consumption per residential member j 7 4.N e - J >j has dropped about 20%. To my knowledge, this is the best record in the country and you should 3

be proud of it. But recent conversations with 5

residential members have convinced me that

/ '

many of you have conserved as much as you are able. Therefore, we will concentrate more of our

~

efforts in 1982 on our industrial and commercial

1. 3, members.

h Your Emplo>ves s .

The level of full-time employees at year end was 57, compared with 57 a year earlier. When you consider the amount of effort required to

'" accomplish all that we did in 1981, you will begin to understand how productive your em-( '

ployees were. Despite the long hours worked, forgoing of vacations and time spent away from families, morale is high. Except for retirements, 4

]

the turnover rate in 1981 was zero. I ask you to j remember that the people who conduct your  !

business for you are all human beings, sometimes i

/ .

making mistakes, but always working for your William l. Gallagher best interest, and to do the best job possible.

percent rate of interest with a 35 year repayment Summary period. That's right: six percent. Even while meeting the Administration's at- l The new substation in Westford was ener- tack on rural programs, we took steps in 1981 l J

gized in October,1981. that incred the value and ef ficiency of your Even with the tight mortgage money, we con- electG cooperative business. We increased nected 278 new consumers to the system in 1981. members, sales and activity of the G&T; we con-On January 1,1981, we began serving the But- cluded our wind experiment; we decided to go it terfield Division of Litton Industries at Derby alone with coal; we fought for a retention of Line. This 1.5 MW load has proved extremely PASNY power and laid a foundation to protect beneficial to your Cooperative. our share in the future; we completed and placed in service the new Westford Substation; Your Rates and Conservation we c neluded a system improvement project in In the Fall of 1981, under orders from the Richmond and Hmesburg; we obtamed the 35 Public Service Board, we instituted the present year I an at six percent interest to do so; we summer / winter rate structure. Although we ,

c nnected 278 new members; we contmued our agreed that some form of seasonal differential Wise Watt Owl

• campaign to shave our wmter was necessary, we disagreed with the form final- peaks; and we went to Montpelier to see what, ly adopted by the PSB. However, we spent an we could do to reduce the cost of regulation.

enormous effort in informing the members of Finally, three major goals were met: we con-the new design: how it would affect you, and nected our first industrial member-Butterfield various options available to reduce the impact. Division of Litton Industries; we obtamed a I am proud to report that members responded license to build the North Hartland Hydroelec-with understanding and forbearance. Many of tric Project, and, after our first system-wide you took advantage of the various options and meter reading, we launched summer / winter rates thereby reduced your electric bills. f r the first time, and performed all the tasks re-Members also continued to respond to conser- quired to do that. All this was accomplished vation efforts. After hitting a record peak in h the same number of full-time employees we January,1981-caused by the unbelievably cold d

• weather-the monthly peaks dropped off. The optional rates designed to shift usage off peak appear to be working. However, we need to EQUITY make extensive analysis before we can conclude that they are. POWER 1981 Annual Report 9 Vermont Electric Cooperative, Inc.

Rural Strategies MEMBER SERVICES DEPARTMENT '

s** ]

Manager Bryaitt M. Watson .t , i The Member Servic:s Department stocks, merchan-dises, installs and services flotpoint major appliances, A. O. Smith elect ic water heaters, and farm and home electrical equipment.

The Department handles high-energy use com- ,.

plaints, low voltage complaints, heat loss calculations, ^

special meter tests, inquiries related to members' elec-tric problems and assists other departments with ad- ga 4 y vice, material and manpower.

_. M Standhv Generators K We also maintain the three standby generators at '

I the radio transmitter sites in the Northern District plus l' l one at the School Street Office, one at the Warehouse  !

and Garage and the battery bank on the computer in-verter. (The computer inverter supplies uninterruptable ' I.

power to the computer system.) The Department also ,

checks fire extinguishers in both the main head- /

quarters and the line buildings, assists line crews in Bryant Af. Watson repairing storm damages, and provides on-call helpers for linemen for trouble calls outside of regular work-ing hours. The Niember Services personnel also assist

" " " "' g  ; y  ;

E " '

hthe ct i le handled by the Niember Services Department are The Department does all non-energy billing and col- much more energy efficient than the units they lections, assists with special projects, such as annual meetmgs, special mailings and member relations. The {P C g Department helps m openmg mail and assists other At the present time we have 42 storage heat installa-departments wherever and whenever neCJed. tions on our system with a total connected load of The Niember Services Department is also responsible 1,056 KW off-peak demand. These heaters receive for the installation of secondary underground service, power between the hours of 12 midnight and 6 a.m. at member disconnect switches, and Niember Services g gg g Personnel also assist the Lme Department m mstalling which is released through the rest of the day. At pres-primary underground feeders. Listed below are quan- ent the average storage heat installation is 25 kw each.

tities of the above items that were installed in 1981: If a member des. ires mformation on storage electnc heating systems, a detailed brochure explammg the Work in 1981 pros and cons of the systems will be sent to them on A.1/0-100 Amp Underground-3,552 ft. request. Included within this brochure is a question-B. 4/0-200 Amp Underground-il,300 ft. naire. After the member has read all the information C.100 Amp Disconnect Switches-147 and he has returned the questionnaire to our office, D. 200 Amp Disconnect Switches-22 we then can advise the member of installing storage E. Primary Underground-in Sand 14,718 ft. heai.

F. Primary Underground-In Conduit 5,103 ft. Presently VEC has enough capacity in its system to The N1 ember Services Department also makes supply another 94 members with storage heat. It re-available to the member (at below retail cost) all types mains a good tool with which a member can use off-of wiring supplies including underground wiring peak power and the Cooperative can manag its load.

materials if the member should decide to install his Electric Heat and Hear Contro/s own service. The Niember Services Department, as in the past, Hotpoint Aferchanditine performed heat-loss calculations for members and or in 1981 a total of 564 flotpoint appliances were their contractors to determine the amount of purchased by the Niember Services Department resistance-type electric heat to be installed in a 1 through the General Electric Credit Corporation residence or commercial building. I (G.E.C.C.). G.E.C.C. allows us ninety days free floor November 1st,1981, Vermont Electric Cooperative, planning: appliances were not paid for until sold nr Inc. implemented new summer / winter rate structures, i they had been in our stock for ninety days. raising the cost of electricity to 7M cents per KWil As a further benefit to Co-op members, all of our during the winter months, and affecting the cost of j Ilotpoint appliances were ordered in one-half or full heating a home with electricity. Electric heat, trailer loads to obtain the best volume prices, prepaid howeser, with the proper controls and planning still freight, and permission to purchase single items at remains a good inexpensive way with which to heat.

special pricing from a district flotpoint warehouse. One way that VEC has made it possible to save 40 l Total appliance sales for 1981 were down 101 pieces percent on your electric heat bill is to participate in over sales in 1980, reflecting the overall decline in our Controlled Space fleating program.

1981 Annual Report 10 Vermont Electric Cooperative, Inc.

An example of the savings that can be realized is At the same time we processed 307 applications for given below. If in December of "81" you used 2400 Controlled Space Heating. Fifty-eight members re-kilowatt hours on your heat meter and you paid 7.58 turned signed contracts.

a kilowatt hour you would have been charged $180.00 in an effort to install the time controls as quickly as plus your customer charge if you were enrolled in our possible, two contractors were employed in our North-Controlled Space Heating program your energy charge ern District, Peck Electric of Essex Junction, Vt. and would have been 4.54 a KWH and a total of $108.00 Newport Electric of Newport. The work done by these plus your customer charge. A savings of $72.00. two contractors was of the highest quality and we if you wish to participate in this program or desire commend them. As in the past, Dompier Electric of further information please contact the Member Ser- Brattleboro, Vermont took care of our Halifax vices Department. District installations and repairs and continued to do Remember, your Member Services Department is his commendable job.

ready, willing and able to help and advise you with food Control Aspect your energy needs. There are many new concepts us- Our load control programs currently control ap-ing forms of electric heat and we will be glad to proximately 2,630 water heaters and 58 electrically discuss the pros and cons with you and help you make heated homes. Based on the theory that a water heater j- the right decision for you. through coincidence factors and natural diversity has Water Neoter Lesse/ Purchase Plan been proven to constitute a load of 1 KW of peak de-There were 704 water heater accounts on this plan mand and that an electrically heated home will cause as of December 31,1981. One hundred and thirteen an average of 8 KW of peak load, VEC has removed new accounts began and 30 were paid off during 1981. 3,086 KW of peak demand from its system. Based on i

Seven heaters were replaced under warranty and none an average of $60.00 per kilowatt for purchasing this were removed after the initial three-year period. As peaking power capacity for a year, we realize was the case last year, more and more people continue $185,160.00 savings annually. This helps us make to turn to electricity to heat their water because of the equity-building margins and meet our TIER.

high cost of gas and oil. Electricity has been and will We strongly urge all members with electric water continue to be viable and competitive fu:1 with which heaters who are not currently participating in this pro-to heat water. .

gram to do so. We also urge all members with elec-The Cooperative has three storage-type water heater trically heated homes to consider our Controlled Space contracts with 27 KW total connected load presently Heating plan.

, in operation on off-peak power (six water heaters with Unique Contribution to Co-op 4.5 KW each). The Member Services Department bills all work

. Off-Prok Water Heater and Space Heating Controls order materials and any materials from our stock On November 1st,1981, along with new rate struc- which are used in the main office building and the I tures, we instituted a new timesontrolled water heater garage and line buildings. These materials are billed at credit. The new credit gives you $4.00 of free electric- cost and reflect no charge for handling, storing or bill-ity a month for allowing VEC to turn the power to ing. Appliances and materials are also sold to trustees your water heater off between the hours of 4 p.m. and employees at cost that reflects no overhead. This and 8 p.m. daily. Upon offering the $4.00 a month is one example of the Department's contribution to i credit in November, the Member Services Department the whole Co-op.

! processed some 920 applications for Time-Controlled Thus, once again, the results of the analysis of the 1

Hot Water Heaters, and 250 member ultimately Member Services Department labor cost for 1981 decided to install the time clocks on their water shows that only 30.4% of the total payroll of this

'. Department is devoted to the merchandising and water heaters.

heater programs. More than two-thirds of the payroll is fully devoted to categories which are within the

, primary functions of the Cooperative, namely ade-quate and dependaNe eleMc ses to our me&n.

OPERATIONS

• Based upon our analysis, the conclusions are clear.

MAI CE, S^L The Member Services Department plays a dramatic O U R gER E ep ch mepwer and We l

r le in e ACCOUNTS- OF S sepce to de me*n h mahng eneweNem ALL ACTIVITIES -=- APPLIANCES H tpo RELATED TO whichis}nt ap$ances of greatest ava&, inble, importance our plus appliance rural areas, all service ELECTRIC '

paid for by merchandismg.

, SERVICE FOR MEMBERS passing of 1981 my first full year as Manager of the Member Services Department was completed. I have found the position to be very challenging but also very rewarding and gratifying. I Pie is 100's of labor costs of Member Services Department. find it a distinct privilege to work with the caliber of white eres shows that 30 percent pe3s for sale' sed service of trustees that the co-op has and to serve its member-

,,,n,m ship in my capacity.

1981 Annual Report 11 Vermont Electric Cooperative, Inc.

Rural Strategies

~

LINE DEPARTMENT , p '

Superintendent Robert E. Lamb i c Fifty miles of line was renewed to replace bad- l ly rusted wire which causes lengthy outages when it breaks in a major storm. This will improve the service in the towns of Williston, St. George, i

xk Jericho, Bolton, Richmond, Hinesburg, I \ >,

Starksboro, Huntington, Morristown, Stowe, ,.

Waterville and Fairfield.  :

NORTHERN DISTRICT New Substation Robert E. Lamb The Line Department also built a new substa-tion in Westford. It was placed in service on Oc- the only severe storm in 1981 that created major tober 1,1981 and serves 237 members. This will problems.

give even better service to these customers now In spite of this major storm, and our normal and for a long time to come. amount of outages due to bad weather and other New Connections usual reas ns, ur primary cause f utages re-In addition to our regular upkeep and repair mains power suppher mterruptions. More than of lines, we connected 230 new residences. This one-third of all outages are due to this reason.

number is 92 less than 1980. The second outage category is the major storm closely followed by planned interruptions. While Rights-of- Way this figure is fairly high, it compares very Right-of-way upkeep for 1981 included both favorably with recorded times in the Northern cutting and chemical treatmer.. The cutting was District, and it is always associated with done in selected areas where the brush and trees upgrading our lines or correcting a hazardous had grown extensively. condition.

Examination of the right-of-way showed sprouting and seeding of brush up to 10 feet or N'" C8""'C'I "#

more in height, and this would have caused a Our crew connected 48 new services in 1981, great deal of trouble in a surprisingly short time which is a bit higher than connections for the if the right-of-way had not been sprayed. past five years. Our crew also completed work orders covering installation of neutral brackets

• Scheduled Outages in Readsboro and rewiring in Marlboro, plus its Our outage time for 1981 is higher than regular duties of upkeep and repair.

average in several categories. The chief increase The Molleur Line Clearing crew cut selected was in scheduled interruptions in order to replace sections of right-of-way, mostly widening an ad-I rusted lines. While these outages were inconve- ditional 5 or 10 feet on each side. They also nient, we know they were only a small fraction worked just under five weeks applying herbicide of the outage time that would have been caused to growth in the rights-of-way.

by the badly deteriorated wires.

The results of all this work have been apparent

~ Severe Storms in 1981. We had at least six heavy, wet snow Severe storms in 1981 caused more interrup. storms that caused extensive outages to the other tions of power than normal. However, the utilities in this area. Several of these storms number and length of outages would have been brought no outages at all to our system and the much higher if we had not kept rights-of-way rest were at such a reduced rate that our Halifax clean and open. Our programs are paying off. personnel were able to keep up without calhng for additional help. There are no questions in my SOUTHERN DISTRICT mind that this is the result of the extensive Asst. Line Supt. Richard Parker maintenance and right-of-way program.

I consider 1981 to have been a very successful A major storm hit us in February. Our crews, year for our Southern district.

plus outside crews, worked practically around the clock starting February 25th until the last outage was conquered on February 28th. Outages were *The brackets carry the neutral wire below and off to caused by several feet of wet, heavy snow break- the side of the hot wire, decreasing the chance they will ing down wires and trees. Fortunately, this was touch in high winds or when weighed down by ice.

l 1981 Annual Report 12 Vermont Electric Cooperative, Inc.

ENGINEERING DEPAtRTMENT Chief Engineer O. John Bohn i f gy [

As we all experienced,1981 was a year of higher prices, high interest rates, and increasing g unemployment, all of which caused a con- E siderable drop in new housing starts in Vermont. J Connections for new service on Cooperative lines were down in 1981 by 92 (-25%) from

' M- g$  %

0 1980. This was directly attributed to the drop in 5 f

new housing starts due to the severe economic i Y ',1 conditions for the year.

New Connections The Engineering Department provided the engineering and design for the facilities required to add 278 new connections. These included the O. John Bohn addition of 9.3 miles of overhead and 6.0 miles of underground distribution line.

j r deterrent to use this form of natural energy New Substation # # ## #* *#'

The new Westford Substation was completed and placed in service in October. The temporary North Hartland 1981 saw the culmination of over six years of Westford Substation was removed at the same study, and hard work come to the benefit of Co-time.

op members. In 1981, VEC received a "Certifi-Replacing Line .

cate of Public Good" from the Vermont Public Over 34 miles of deteriorated h.ne conductor Service Board and on November 24th, VEC was was replaced in the Hinesburg, Richmond, issued an " Operation and Construction License" Williston and Jericho area of the system. Th.is from the Federal Energy Regulatory Commis-work will greatly improve the reliability of your sion for its North Hartland Dam Project.

electric service m these areas. Because of the timely receipt of these two per-Small Power Producers mits, the Board of Trustees voted to accelerate in 1981 two more small power producers were the completion date by one year. This will result added to the system. Both of these use water in a savings of $1,000,000 in the overall cost of power to turn their electric generators. Alvin the project. The present schedule calls for bids Warner in Lowell, has built a substantial dam, on the turbine package to be received in late intake canal and turbine house which presently 1982, construction will be in 1984 and 1985 and has a 7.5 KW generator in service. He expects to the scheduled in-service date is November 1, add a second unit in 1982 to make use of the 1985. We expect this project will be of substan-surplus water spilling over the dam. Raymond tial benefit to Co-op members in the future.

Miller of Halifax, Vermont has also installed a New Peak small hydro-powered generator at a site he has In January of 1981, the Cooperative hit a new completely refurbished. all time peak of 32,200 KW's. This was 8.8%

Wind Afeasurement higher than the previous peak in 1979 and was The wind measurement tower on Stratton due to one of the coldest spells recorded in recent l years. The peak for the 1981-82 winter appears Mountain has provided usefulinformation and l to be lower due to the less severe temperatures.

will be decommissioned by the Department of Energy in 1982. This project would not have The peak of 32,200 KW's would have been 12 been possible without the fine help and assis- to 14% higher had not you members cooperated tance of the people of the Stratton Corporation. by reducing your usage of electricity at the peak The information gained has demonstrated that times. This 12 to 14% reduction in peak results there is wind energy in sufficient amounts to in a substantial reduction of future generation provide power for wind-powered generators on capacity requirements and the cost thereof. Your Stratton Mountain. However, any such genera- individual efforts to conserve do add up to tion equipment at this or other high locations in substantial amounts. Wise Watt Owlc says, Vermont will have to be designed to withstand "Thanks!"

severe " rime icing" conditions during high wind We look forward to serving you during 1982 periods in the winter. This appears to be a ma- and the coming years.

1981 Annual Report 13 Vermont Electric Cooperative, Inc.

Rural Strategies Co-op's Power Planners Watch Trends Power and the G & T *' Cooperative Procurement, cost and source of power all de_ KW Demand pend on predictions based on past trends, interest rctes, economic activity and the influence of price. Vermont Electric Generation and Transmission Cooperative buys and sells power m 30- u d:y-to-day in the marketplace anticipating and "

reacting to requirements as they rise and fall with h "

is o the season, day of the week and hour. 3 " "

I2 o 20-

_. 8

, _ ~ ~ .. . ~ . .

g i Count on Volatility g l " Don't count on single digit interest rates. Count on " 10-D volatility."-Donald Wilkinson, Governor, Farm h Credit Administration, January 1982.

L.

i Farm Income f Net farm income for farms in the U.S. In 1981 was  ;

L 523 billion,54 billion of which was inventory buildup. 0 Predictions for 1982 hover between $13 and $18 1975 1976 1977 1978 1979 1980 1981*

e billion compared to an all-time peak in 1973 of $33 u

{ billion. In constant dollar terms, net farm income in 100 Cooperative p 1982 could be about one-fifth what it was in 1973.

Kilowatt Hours Sold

[ Net farm income for farms in Vermont in 1980 was o 5123 million: 5346 million income and 5223 million ex- 90-penses. ' " "

? Assets / Equity .

80-0 Total farm assets in the U.S. were in excess of a ~i

' trillion dollars and debt was 5200 billion. In Vermont,' - m i total assets were 51.7 billion while farm debt stood at g70-i 5265 million, or about $1.4 billion in equity. The key o L to anderstanding these figures, says Carl T. -

i Fredrickson, Senior Deputy Governor of the Farm [60-i Credit Administration, is that nationwide the ratio of '

. total debt to farm income in 1982 will most likely be o 5 13 to I compared to less than 3 to 1 in 1973. Vermont _ g50 E farms, with a ratio of 2 to I, are in much better u.

' shape. But high interest rates are hurting all farmer., . O g increasing from about three percent to thirteen percent V z #'

of total operating expenses in the past seven years. $

a j Farm Economy: Danger Signal . 930-l

The price of agricultural assets increased less than the i general rate of inflation during the past two 30' E years, leading to a decline in real wealth position of

' agriculture. In 1981, farm assets decreased about 312 i billion, a drop of one percent, but contrasting with i the mid 1970s when capital appreciation was 10-

, large.-Carl T. Fredrickson, Senior Deputy Governor r of Farm Credit Administration, March 1982.

L,. O 1975 1976 1977 1978 1979 1980 1981*

' Union Butter 6 eld added 1981 Annual Report 14 Vermont Electric Cooperative, Inc.

Price and Market Day-To-Day 1

l Co-op Sources of Power by Percent 1981 IOC- Coal (Merrimack)

Cost 1.9 % k of , gg rJ Power a H

1 k

~0 o

g 58- Pasny 2 22.0 %

C.V.P.S 34.3 Fo o

4C- y 5

o g *VEG&T

< 25.3 %

$ GMP d 3g, o 5.5 o u '

g -Nepool

o. 2.7%

Gas Turbines

{j .1 '*o 2e-

' Includes Merr, Vt.Yk., CVPS, Nepool & Gas Turbines New Members Connected to Cooperative Lines: 1971-1981 IC.

o 425 428 o o 3!,I 389 360 35 370 335 o

0 299 293 o

m o

$ ?8

$R E D a aa a WL y8 y 8 8 p ad 9 8 i a u zum 09 o >z

' includes:

Merrimack, Vermont Yankee, l CVPSC, NEPOOL and ,

Ces Turbines. '71 '72 '73 '74 '75 '76 '77 '78 1979 1980 1981 1981 Annual Report 15 Vermont Electric Cooperative, Inc.

Trustees I lilNESBURG, p' m-~- *" m -

}{UNTINGTON, e' -

O>

RICliA!OND, -

STARKSBORO O.J / <

2 BERKSlilRE, FRANKLIN, .

SHELDON #

.i i

1 3 ENOSBURG, h10NTGON1ERY, RICHFORD, WESTFIELD -

(A10NTGONIERY ROAD) 4 BROWNINGTON, COVENTRY, JAY, IRASBURG, LOWELL, NEWPORT TROY, WESTFIELD 1 Sumner Farr 5 DERBY 1971/1983 6 BAKERSFIELD, FAIRFAX, -

FAIRFIELD, FLETCliER, GEORGIA, ST. ALBANS,

,--m._.. - .t., SWANTON

-r  ; ..

y _w n ., ~- - (- c ;- ) .s Jm _- -

' , * < .2'~

. . 7 BELVIDERE, JOIINSON, fif'

~

N10RRISTOWN, STOWE,

,2 ,, . .

'] .

gq)+ -

i.

~ '~

,-. ,,..N - -

WATERVILLE v J i 1. . - -

.2N

' ! I,.

~

7 ,, . , 8 ALBANY, CRAFTSBURY,  :

kb} y;_J 7

n.7 fr }3 EDEN, GLOVER, HYDE PARK 9 BOLTON, ESSEX, JERICHO, O

t '. ~

'j / ' N11LTON, WESTFORD t-r,

'[f_..'

3 c ,

I{ - , , _ , , .~. '*] .

! ._ 3 4) g, --- . -[ h j .

10 CAN1 BRIDGE, UNDERHILL 7 Marshall Washer 3, I*'I*

(; .7 ' ji 5 _" m _ . . J I1 SHELBURNE, ST. GEORGE, WILLISTON

? - i % ,' , g ,, . 3 . . . ,, i, t

12 ANDOVER, JANIAICA,

... ( ' /_ ~ ".._''---.2

. . - - 7 TOWNSHEND, WARDSBORO,

[- - , - -

f WINDHAh!

13 DOVER, NEWFANE

_- 9.{

{,/E :-i _-~ []' E_. , ~ . ' ' ~ '~ ,,/ 14 h1ARLBORO, READSBORO, ify. .E*?," f ,c. / WHITINGHAN1, d..._-M^'.N.,-- ~1 4 - WILA11NGTON v- .

9- ,- a.~. .

'i  :

>: s c .-

15 GUILFORD, HA LIFAX, A..._!..p/ VERNON (in Vt.), COLRAIN, l, ]f.,

M LEYDEN, BERNARDSTON (in

- y- j . -, /lf hiass.) l

,f -

}

( - C I. .

3 j

• Terms expire 1982. July Co-op Life will carry

[. '

//))vlj' i, names of nominees. First date is first year elected, second is year term cuptres. Gerard Caron was defeated in 1977, appointed in 1978 f._

4. _...

I 2_ ,j-;, and re-elected in 1981. William Kinney was defeated in 1974 and appointed in 1979.

1981 Annual Report 16 Vermont Electric Cooperative, Inc.

=

• • a.

'ywsN,gi

,. /$  :)

qf j .

,I. m

. b(

4

% l ,

$Y ,

.. ,;f

,h b

I j

awa c . x ad ~

2 Arnold Centabar* 3 Hubert Daberer 4 Alvin Warner 5 Benoit Blais 61. Douglas Webb 1981/1985 1980/1984 1971/1983 1952/1983 1977/1982 m -

.mma g~..: w--~ ~ c-y;. k /

,, l ,

i -

t i. 1

g% ,Q.

l ,

1 M

i -.

[w mpr qj [ q ,

y F ..

l 8 Ernest Earle, Jr. 9 Gerard Caron 10 William Kinney* 11 Henry Pillsbury 12 Laura Howe

• 1970/1982 1977/1985 1970/1982 1980/1984 1957/1985

~,- r~;. 7,7 ~tm v~ .-s Of-I ICER.T 1981 .

J Doublas Webb,1973 * .

s

+

I r  ?- N..

Clyde W. Jones,1979  :

Drst Vke Presufent s)_ B }

S d>v de t f '

• / -f' Marshall Washer,1974

.u ' y '-

Treasurer aura L. D. Ilowe,1973 William J. Gallagher,1979 Vwe Presulent and Decutive Afanager Assistant T u ' Y Nora ll. Winckler,1979 O A'

Assistant Clerk 13 ClydeJones 14 Richard AIlen 151 George Butler Dates indicate year elected to position indicated. 1977/1985 1 % 3/1984 1979/1983 l

l EQUITY POWER 1

l Vermont Electric Cooperative, Inc.

l 1981 Annual Report 17

1 l

r Financial Report /81 s., Financial Report  !

EQUITY ,

q[ ,

TREASURER'S REPORT POWER l n Marshall Washer As your Cooperative's Treasurer, I have a s / strong feeling of responsibility for establishing 5

,Y , financial programs to provide the resources T Marshall Washer necessary to continue to give our members the Treasurer best possible service at the lowest reasonable cost.

("" Equity Goal We must, therefore, strive toward a goal of a s

• ratio of 30% to 70% of debt and equity. The Administration in Washington has proposed cut-backs in many of the federal programs which serve rural America. One of these programs is y ,7 -

y the Rural Electrification Administration (REA).

l As a result, there have been changes and limita-

{ tions in REA's lending policies, including a renewed emphasis on cooperatives borrowing u

, from private fmancial sources m order to finance system improvement and other construc-tion needs.

, This emphasis pushes all electric cooperatives in the U.S. into the financial markets where they ry B

,g lj,,, must comoete for the capital needed to continue

, to provide reliable electrical service for their members. This same federal policy is also pushing many other federal agencies which serve rural Americans into the private financial markets, thereby increasing the competition in those markets for available capital needed to spur the continued economic health in the rural areas of our country. Our Cooperative must a compete for these funds, too.

30 4 28 ACTUAL PROJECTED 26 24

(

g22 l '@20 -

N I8 .

o 16 g 14

7. i2 3 l l d 10 ~ EQUITY: NOW

$8 AND TIIE FUTURE I

• 6 4

2 0 ' '

1977 1978 1979 1980 1981 1982 JJ 1988 1990 1981 Annual Report 18 Vermont Electric Cooperative, Inc.

Reason For Equity Goal $100-Thus, you can now understand why it is so Vermont Electric Cooperative, Inc.:

very important that the Cooperative reach and 90 Growth In Distribut!on Cooperative, maintain a strong financial structure. This finan-cial structure is shown on the Cooperative's Reflecting Growth In balance sheet under Total Equities and Margms 80 Assets And Need For Capital.

(TEAM), and Long-Term Debt. The debt / equity (Constant dollars does not include generation) ratio in addition to times interest earned ratio 70-(TIER) and debt service coverage (DSC) are used a by the financial markets to evaluate the worthi- $ 60-ness of the Cooperative to borrow money and the interest rates which will have to be paid. "b At December 31,1981, total equities and g 50-margins had increased by $490,959 over the end y of 1980. However, because of the corresponding 9 40-increase in long-term debt (which includes in- $

vestment in power plants), the member equity in 2 30 the Cooperative decreased to 11.4%. Exclude the debt for the power plants and, as we show 20 below, a different equity picture emerges.

During 1981, the Cooperative had margins of

$286,%8, equal to a 1.59 TIER. However, the 10' revenues to provide these margins included

$184,861 in recoupment related to the rate case o filed by the Cooperative in May of 1980. Had 19'81 20'01 this amount not been included in revenues dur- The Gd T ing 1981, the Cooperative would not have met During 1981, the Vermont Electric Generation its mortgage requirement of a 1.5 TIER. and Transmission Cooperative, Inc. (G&T),

which was established in 1979, began operations by assuming many of VEC's purchase power Margins and Tiers contracts.

"3.35 During the coming years, it is anticipated that Tier the G&T will assume the Cooperative's in-

$58 " vestments and corresponding debt related to its I 59 280- "

I 91 joint ownership in various power plants now Tier under construction. These transfers will improve 260- Tier the equity position of VEC. When the financial

' 2@- statements are adjusted for the debt related to E 220- the generation projects, the equity level of VEC 5 m is 18.5%. This increase is on-target with the 200 .52 policy of the Board of Trustees to grow in equi-l 8180- "I*76 Tier l ty two percent per year.

O 160- Cost Control And Rates

$ gg. The only way VEC can continue to build

< financial strength through equity and demon-g120- strate its ability to meet its debt obligations is to establish a firm policy combining cost control

@100

• and adequate rates.

80- 1.16 There are many who predict financial gloom 60- for rural America as a result of the reduction of federal programs. We will continue to support 40 all rural programs, including REA. And with the 20- strong financial base that the Cooperative now l 70 has and with strong member support for the 1975 1976 1977 1978 1979 1980 1981 I financial programs necessary, your Cooperative i

is in a fine position to continue its service to

- 246,272 rural Vermont.

1 1981 Annual Report 19 Vermont Electric Cooperative, Inc.

1

( l

l Financial Report /81 Balance In summary, the balance sheet shows, and, on the right, how m'ach of the total how much is owed on them Jong term on the left, the tools used by the worth of those tools (asse's) is owned by debt).

Cooperative to provide electric service members (total equities and margins), and The theme of this Annual Report,

" Rural Strategies" refers in general to the Exhibit I ways in which rural America can protect its supply lines of capital. In particular.

EALANCE SIIEET this Financial Statement shows the way, in DECEMBER 31,1980 AND 1981 1981, the Cooperative protected its supply ASSETS (Note 1) of capital by moving a percentage point

y. - . - -

Increase and a half closer to its goal of 30 percent 1981' 1980 (Decrease) equity, from 17 percent last year to 18%

Utility Plant: (Note 2) . percent this year. Thus, if the perfor-Electric plant in service- f 3 mance could be improved by a half a per-at cost  ! $18,020,091 $16,834,177 $1,185,914 centage pomt to a two percent increase Completed construction 3 each year, the Cooperative would reach its not classified 980,237 651,080 329,157 desired goal by 1990.

Work in progress (Note 2) i 10,599,769 l 7,705,032 2,894,737 The top horizontal gray band (right 29,600,097 i 25,190,289 ( 4,409,85 ) side of balance sheet) shows that Total Equ ties and Margins (TEAM), also called Less: Retirement work in  ;

progress (dr) ( 3,836)) ( 4,829) ( 993) mem wneq, cmased W,2 to

$3,272,364 which is 18.5% of the assets of Accumulated provisions .

for depreciation 5.214,784 .! 4,873,864 340,920 $17,736,888 of Vermont Electric Coopera-tive, Inc. Total assets shown at the bot-

} _5,210,948 4,869,035 341,913 tom of the vertical gray column on the Net utility plant 6

~ 24,389,149 t 20,321,254 4,067,895 left side of the Balance Sheet are Electric plant acquisition ' $28,767,794 which includes assets of Ver-i.

adjustment t 52,643 63,172 ( 10,529) mont Electric Generation and Transmis-Electric plant held for sion Cooperative of $10,314,062 invested future use 10.825 2,800 8,025 in power plants (an increase of Nuclear fuelin process (Note 2) i 716,844 I 474,714 242,130 $2,876,152) and nuclear fuelin process of 780,312 ' 540,686 239,626 $716,844 (an increase of $242,130). The Investment in Utility Plant 25,169,461 20,861,940 4,307,521 nvestments represent progress payments m Seabrook #1 and #2 and Millstone #3, and in Pilgrim #2 (cancelled in 1981).

Other Property and Investment- 4 Utility Plant At Cost: The wires, poles, equipment needed to Non-utility property (Note 3) F 42,952 , 42,952 -

provide electric service, this is the Co-Patronage capital from asso- .

operative's major asset. The increase of ciated organizations (Note 4) ; 35,405 ~ ; 22,480 12,925 $1,185,914 during 1981 included:

Investments in associated 3 - $298,950 for connecting new mem-organizations (Note 5) : 503,185 400,557 102,628 bers who paid $199,269 of that amount.

Other investments , ~ $60,667' 560,667 -

The $199,269 went directly to Patronage Restricted funds 23,952 j 22,421 1,531 Capital, is assigned to each member who

~ 1,166.161, I,049,077 117,084 contributed it, and adds to Total Equities

i and Margins (TEAM).

CErrent Assets: 1 -$111,541 which was invested in build-Cash-general funds '

-52,756 ; 40,400 12,356 ings and equipment.

Cash-construction funds 169,398 18,845 150,553 -the balance was invested in system Temporary cash investments 60,385 ( $7,316 3,069 improvement and construction.

Special deposits 675 475 200 Other Property and Investments Notes receivable-net (Note 6) . 315,146 276,321 38,825 Income received from these investments Accounts receivable- reduces the amount members must pay in net (Note 7) !'

496,431 454,984 41,447 rates in order to provide the total Accounts receivable-asso- revenues required for the operation of the ciated company - 67,026 . 32,941 34,085 Cooperative. These investments which M:terials and supplies 578.351 486,234 92,117 now total over $1,000,000 include stock in Prepayments #

$5,224 52,123 3,101 Vermont Yankee Nuclear Corporation TotalCurrent Assets 1,795,392 1,419,639 375,753 and Vermont Electric Power Company.

Deferred Charges and Debits 636,780 - 903,185 ( 266,405) nu t TOTAI, ASSETS 3 $28,767.794 $24,233,841 14,533,953

afs vestment in the National Rural Utilities Cooperatise Finance Corporation (CFC).

l (The accompanying notes are an integral part of this statement) The Cooperative increased its investments 1981 Annual Report 20 Vermont Electric Cooperative, Inc.

l l

i Sheet in the Capital Term Certificates from BALANCESHEEF Exhibit 1 CFC by $102,528 during 1981. This in- DECEMBER 31,1980 A ND 1981 vestment is an obligation under the loan LIABILITIES AND OTHER CREDITS increase agreements with CFC. The extent of this ..

obligation is set forth in Auditor's Note n_1981 M g 1980 (Decrease)

(

N2. 5. The Cooperative earns approx- Equities and Margins: 9 imately $100,000 each year from these in- Memberships } $ ' _ 46,210 ; $ 47,825 ($ 1,615) vestments. Patronage capital (Note 8) U 3,157,049j 2,748,877 408,172 Current Assets Other equities j 21,165j ( $6,900) 78,065 These assets include cash and other Donated capital 47,9401 41,603 6,337 assets which will be turned into cash Total Equities and Margins 3.272,364 I( : ~ 2,781,4051" 490,959I within the following year. In 1981 these i ,

t assets increased by $375,753. Long-Term Debt- 4, . .

l Thiincrease of $38,825 in Notes REA,CFC,FFB (Note 9) ; 24.594,686 4 i 18,445,813 _ , - 6.147,873,;

Receivible represents the increase in the Note Payable-D.O.E. k 40,050! 40,050 l

cmounts financed by the Cooperative for C'

• l members building line extensions to serve Current Liabilities:

Notes payable L174,548 2,405,804 ( 2,231,256) their homes. The notes are for a max-imum of % months, and are secured by Accounts payable-associated g , ,

company s 355,625l - 355,625 mortgages upon the property receiving Accounts payable  ? 117,483s 370,039 ( 252,556) service. The item entitled Accounts Receivable- Associated Company shows Consumers' deposits  ! ;82,130: 72,671 9,459 Taxes accrued and payable 44,590 j 37,247 7,343 the tmounts owed to the Cooperative by ;_

the Vermont Electric Generation & Trans- Other current and accrued '

~l liabilities 9 50,764 j 79,427 ( 28,663) mission Cooperative, Inc.

The increase in materials and supplies Total Current Liabilities b - 825,140l 2, % 5,188 ( 2,140,048) reflects the increase in the cost of the L - - 1 Deferred Credits

14,165) 20,133 ( 5,%8) items maintained and the material re-quired for line maintenance, not in the Operating Reserves 21,3895 20,302 1,087 qu ntity of material in stock. The ,n-i >

ventory items are constantly balanced with TOTAL LIABILITIES AND L. -)

the requirements to keep the investment in OTIIER CREDITS L $28,767,794 : $24,233,841 $4,533,953 this item as low as practicable. The Ac-  ! . J counts Receivable decreased from 8.2% of (The accompanying notes are an integral part of this statement) operating revenues in 1980 to 7% of operating revenues in 1981. This is due to Tota / Equities and Margins -and $1,838,979 from the National the Co-op's strict collection policy. This in 1981, TEAM increased $490,959 over Rural Utilities Cooperatis e Finance Cor-prompt payment by members gives us the 1980, $208,903 of which was provided by poration (CFC).

cash flow needed to pay our bills and cut the Operating Margin for 1981, and Long-term Debt (REA, CFC, FFB) in-short-term borrowing to a minimum. $199,269 of which was provided by new creased $6,147,873 in 1981:

l Deferred Charges and Debsts members for their share of line extensions, -$2,851,323 was in REA Insured 5%

Deferred Charges and Debits decreased $78,%5 came from r.onoperating margins loans ($233,892 for Distribution,

$266,405. This decrease is due to the re- during 1981, and $4,722 was from $2,617,431 for Generation);

classification of the North Hartland membership fees and other donated -$1,115,550 for Distribution from CFC l Ilydro Electric Project from a preliminary capital. and l survey to a construction work in progress Long-Term Debt -52,181,000 under the REA Guaran-l account and the amortization of deferred Long-Term Debt is the major source of teed program from the Federal Financing ch'.rges pertaining to generation, load capital used for system improvement and Bank.

! control and rate case expenses. additions made as the system grows. At December 31, the Cooperative had Growth must also be paid out of the elec- $30,005,597* in unadvanced long-term

IC c perative's other major source of funds committed by REA and CFC. Of BALANCE SHEET: RIGHT SIDE: .

capital, equity. (TEAM). The utility with this amount, LIABILITIES AND the best ratio between debt and equity -$1,311,597 was for commitments un-OTHER CREDITS (usually 70% debt and 30% equity) bor- der Distribution Loans from REA and This schedule shows what the Coopera- rows money on the best terms. At CFC, tive owes. The two most important December 31,1981, the Cooperative's -$7,420,000 committed unoer the 5%

cntegories are Total Equities and Margins long-term debt (REA, CFC, FFB) totalled REA Generation Loan,

! (TEAM) and Long-Term Debt. These are $24,594,686. Of this amount, -$7,719,000 from the REA Guaranteed the sources from which the Cooperative -$7,000,673 was 2% loans from REA; FFB Loan for progress payrnents in the

, acquires the funds necessary for making -$13,574,034 was 5% loans from REA; joint-owned nuclear generating facilities, l the purchases and plant improvements -52,181,000 from the REA Guaranteed and which tre reflected in the assets portion of Loan Program through the Federal Finan-the balance sheet, cing Bank (FFB); %nty ror me ions-ranse no-er arr ya presran 1981 Annual Report 21 Vermont Electric Cooperative, Inc.

I

Financial Report /81

-$13,555,000 for the construction of the use of short-: erin borrowing. This in- vestment can then be returned to the the North Hartland Hydro-electric ciudes a day-by-day evaluation of the cash patron in the form of capital credits. For generating facility. The Cooperative main- position of the Cooperative. the year ended December 31,1981, tdns a strict cash management program by The item entitled, Accounts Payable- patronage capital increased $408,172 over which it borrows money from these com- Associated Company shows the amount 1980. $199,269 was from new members as mitments on ly as it is required. The Coop- owed at December 31, to the Vermont their contribution toward the construction critive does not incur t ny interest expense Electric Generation & Transmission ci the line extensions to serve their homes.

for any of the generation loans and so Cooperative, Inc. This amount is for $208,903 is the increase in patronage cooperative members are not paying in power bills received in December but paid capital resulting from the operating rites any interest on power plant invest- in January,1982. margins earned by the Cooperative in ment. 1981.

Current Liabilitles BALANCE SHEET DETAlL: Other Equities These items generally include debts This shows the increase in equities which will becorne payable during the next STATEMENT OF PATRONAGE resulting from the non-operating margin yerr. The currcnt liabilities decreased by CAPITAL & OTHER EQUITIES carned by the Cooperative in 1981.

52,140,N8 from 1980. The major decrease For a member-owned electric was in Notes Payable. This reflected the cooperative, this is the very heart of the PATRONAGE CAPITAL conversion of the short-term borrowing financial report and shows in detail what AND OTHER CREDITS used to acquire the 0.13215% ownership in makes up the owner's equity (TEAM). This statement shows more detail re-Seibrook Units 1 & 2, which was financed Patronage Capital garding the end of year balances in with short-term borrowing at the end of The very nature of our rural electric Patronage Capital, Patron's Capital 1980. The borrowing from the general line cooperative's systems and the by-laws Credits and Other Equities.

of credit was reduced from $667,000 in under which they are operated provide Operating Revenues and Expenses 1980 to $174,548 in 1981. The use of this that each dollar of payment by the patron This statement shows the revenues line-of-credit is to provide on a temporary in excess of the cost of providing electric earned by the Cooperative during 1981 basis the funds thc Cooperative needs to service, is an investment in the Coopera- and the expenses it incurred in providing meet its obligations until the cash is col- tive by the patron. When the Cooperative electrical service to its members, and the lected to cover them. The Cooperative has reached the financial goals that have key is the Operating Margin of $208,903 continues the application of strict cash been set by the Board of Trustees and its which helped the Cooperative more management policies, as they pertain to primary lenders, this patronage capital in- toward its goal of 30 percent Equity.

Co-op's Portfolio 1000 51498M Growth In Plant

$13.

DISTRIBUTION -

900 Cooperative , GENERATION Finance $12.

800 Corporation

(crc) Si2 $ii. SE 700 $11 $11.

l E $10 $10 l <

, .j600 Other l @ \ Vermont Q Electric Power Company $g $7,g v3 0 s 2

]400 5 $6 5

I

$4.8 300 Vermont $4

' j Yankee Nuclear

$2 $1.7 100 $1.3

$281.000 m -

0 1976 17 7 378 17 9 180 381 1981 Annual Report 22 Vermont Electric Cooperative, Inc.

Exhibit 2 Number of Members STATEMENT OF PATRONAGE CAPITAL AND OTHER EQUITIES '

10,000-FOR THE YEARS ENDED DECEMBER 31 Increase 21 Large Commercial 1981 1980 (Decreane) 284 Small Commercial Patronage Capital:

Assignable $1,659,210 $1,450,307 $208,903 733 Seasonal Assigned 12,212 12,212 -

9,000-Patrons capital credit-G.O. 52 (Assigned) 1,485,627 1,286,358 '199,264

$3,157,049 52,748,877 5408,172 Other Eq> ities: 8,000-Oper ting margin ($ 485,6M) ($ 485,664) -

Non-operating margin 497,031 418,966 78,065 Ccpitti gain 9,798 9,798 -

5 21,165 _{$ 56,900) 1 78, % 5 7,000-Exhibit 2a STATEMENT OF PATRONAGE CAPITAL AND OTHER CREDITS - 6,000- 8,814 Year-Round DECEMBER 31,1981 Residential . . .

PAT 7.ONAGE CAPITAL Assignable Assigned Ratance Balince-January 1,1981 1,450,307 12,212 1 % 42,519 Operating margin 135,476 135,476 5,000-Non-operating margin transfer 73,427 73,427 Balanc2-December 31,1981 1,650,210 12,212 1,671,422 Patrons Caplial Credits G.O. 52: . which Balance-January 1,1981 1,286,358 $1,286,358 include:

Additions 1981-net 199,259 199,269 4'000 i Balance-December 31,1981 1,485,627 1,485,627 OTHER EQUITIES Non-l Operating Operating Capital 3,000-Margin Margin Gain Total l Bal:.nce-January 1,1981 (485,664) 418,966 9,798 (56,900)

(deficit) l Operating margin l Non-operating margin 1981- 2,600 Off-Peak net of transfer 78,065 78,065 2,000- Water Heater Balance-December 31,1981 (485,6 4 ) 497,031 9,798 21,165 Controls (The accompanying notes are an integral part of this statement) 1,000-1,375 Electric I

EOUITY Heat Meters in use.

l POWER 0 42 Storage Heat 1981 Annual Report 23 Vermont Electric Cooperative, Inc.

J

u .

Financial Report /81 Operating Revenues Members used 103,163,570 KWH during 1981. This is an increase of 9,507,452 or a perat ng Revenues M percent increase over 1980. Howeser, of that amount,6,075,126 kilowatt hours creased KWH use mainly by new s -. .e e u were used by Butterfield Div. Litton in- members, including the Butterfield Plant, dustries in Derby Line which became a and the effects of the rate case filed in lj I/ new industrial member of the Cooperative May of 1980 for which revenues were not

,m

- 0!/

U] during 1981. Without Butterfield, kilcwatt collected until 1981. These were mainly 2(( f y'J hour use increased 3.7 percent, or " catch-up" increases following the deficit WP "

> 3,432,326 over 1980. Total operating of 1980.

revenues for 1981 increased by 27.7Wo over Operating &per.ses

""" R ",. C

. w, .

"' ' go ,m" 1980. The chart (left) shows the factors There are four major categories of v which contributed to this increase, the Operating Expenses for the Cooperative.

6~ 17 greatest share of this increase beMg in- All told, operating expenses increased 16.7

~ ' - = ~ ' percent during 1981.

STATEMENT OF OPERATING REVENUES AND EXPENSES Exhibit 2b

' FOR THE i EARS ENDED DECEMBER 31 Increase t on 1 C t 1981 1980 (Decrease) 111. Utility Plant-Related Fixed Costs Operating Revenues $7,033,929 $5,508,867 $1,525,062 IV. Patronage Capital Margins We will review each of these categories

~

13 OEEhATING EXPENSES separately below.

i Codof Power 3,241,871 - 2,768,481 ' 473,390 < I. Cost of Power

. Transmission expense-by Although the members used only 10To I othe+s $66,599 - 489,248 77,351 more KWH in 1981, the Cost of Power, g Subtetal_ , $3,808,470 $3,257,729 $ 550,741 rati g Ex ns i cre e $550,741 I de an CONSUMER SERVICE-R'ELATED OPENATIONAL' COSTS [*i[t\" }$f p ch d ,er of Transmision expense- operation 139 -' 139 . c$473,390 (17.lfe over 1980) and in trans-Distribut on exp:nse-op:rauon - 245,237 . 243,082 _ 2,155 mission costs of $77,351 (15.8to over r1 on expeno -

1980). Part of the increase in these costs II Di.;tributionraaintenance expense-

+ 20,301 2,228 18,073 is related to the increased sales the Cooperative had to its members during npintenatice - .. 422,899 323,452 99,447 1981. However, the cost per KWH of Pur-1 Ger cral plant maintenance 14,337 15,339 ( 1,002). chased Power increased 8.4Wo. What this Customer accounts expense 380,489 ; 303,007 77,482 means is if the Cooperative had purchased t" , Sales,expens,e ,

32,458 19,386 13,072 only the same number of kilowatt-hours as fa - Admmistrativ:: and general expense it purchaced in 1980 and none of the (Schedule I) 620,506. 555,137

,4 ._ _ 65,369 - directly related costs such as load dispatch-gK, "

Subtetal. ,

$1,736,366 $1,461,631 $ 274,735 ing and other power expenses had in-m_# . . ; .

creased, the cost of buying the same M UTILITY PLANT-RELATED FIXED COSTS number of KWH would have increased a AmoMtstion s 10.529 10,529 -

$220,815.

Depredethn 537,725 512,542 25,183 ' //. Consumer-Related Operational Tr> expemec _

. 237,244 207,574 29,670 &penses e Jinteres oniong-termdebt--net 957,295 649,982 307,313 We refer to these costs as " controllable,"

y A!!owance for borrowed funds used but only relatively speaking. As wages,

< during vonstructica -( 467,048). ( 222,972) ( 244,076)! materials and sersices increase, so do these

? Otherinte est chtrges : 60,949 18,977 41,972 costs. They are controllable only to the ex-g [. jSa! total ' $_l,336,694 $1,176,632 $ 160,062 tent that we have a more direct involve-ment in the decisions regarding the ac-Miscellaneous income deductions 16,923- 16,814 109 tivities for which these costs are incurred, I' TTEal Operating Expenses d ;

_6,898,453 5,912,806 - 985,647 _ versus the cost of power, transmission, taxes and interest which are determined to I SATRONAGE CAPITAL AND' MARGINS the greatest extent outside of our direct 135,476 539,415 control. Many of the costs included in this

( 403.939)

IIV Net Operating Margin (Deficit)

Income Applicable to Prior Years 1981 Vt. Yankee and Velco

- 52,349 -( 52,349): category are also greatly influenced by fac-tors which cannot be controlled directly by

, e ._ . Dividends . 73,427 73,427 - the Cooperative. For example, if we are

~ J hit with a major storm, we must meur

! -O perating Margin 1 ' 208,903 " L(~ 278,163) 487,066 whatever costs are necessary to restore ser-(The accompan>ing notes are an integral part of this statement) vice. We have no option at that point to l 1981 Annual Report 24 Vermont Electric Cooperative, Inc.

l

IV m RJW1&IQLlitta And Expenses deterrrdne whether or not :he cost can be r , "' gQs

,_,r., _

IGT 4L RE \l W.

avoided. This area of cost is a necessay i x s component of providing the reliable elec. cgr _ ,

,N tric service that you have a'.! come to de- rowra umuu

" " * \

pend on. Coasumer.P.ciated Operational "y,^l,"'

Expenses increased 18.6To in 1981.

DistributMn Expense- As a category

• \erm.u o,l, %

a 4%

,/

7' this includs transmission, operation and \ / m one a maintenance expense, plus distnbution \ x ^' T operation and maintenaner expense. As a N Amisin4mt /

croup, these costs increased $119,814 or 21.I'7e during 1981,553,248 of this h-

\

• T7 crease being directly related to our contin- gAQ5 uing right-of-way maintenance program.

$10,426 was incurred for our systern-wide The remaining cost in this are a increased cases expenses, as prescribed in the Public meter reading program in November of 19fe in 1981. This not only reflects an in- Service Board Orders. Administrative and 1931, at the beginning of the implementa- crease in wages but more subentially, the Ge :rral salaries increased by 9.7'*e.

tion of the winter / summer differential additional costs incurred by the Coopera- III. Utility Plant-Related Fired Costs rates. If you take out the right-of-way tive in items such as postage, paper, print- In order to provide for the proper ac-maintenance increase and the meter ing and other materials and exry.nses counting treatment, the interest charges on reading, in:reases in this category directly related to the billing and collection long term debt for work in progress amounted to 9.9 percent. functions performed by the const'mer ac- (generating plants under construction) is Customer Accounts Expense. This ex- counts department. included !n the item entitled Interest on pease increased S77,482 in 1981,519,5tfM Ac*minntrative and General Expenses. Long-Term Debt, in the ,tmount of of which was in uncollectible accounts ex- The osts in this category increa' sed by $957,295. However, it is then removed pense. This expense was incurred in erder $/.,,369 or 11.8'7e in 1981. Of this in- from the Openting Expenses as shown in to increase the allowance for uncolle-tible c :ase,540,885 was directly related to of- the item entitled, Allowance for Borrowed accounts to be satisfied in relationship to fne supp'ies and expense, which retlects Funds Used During Construction. The our accounts treivsble from sis. This tie increase in costs of postage, paper and $467,048 is not paid in rates. The amount represents 0.3% of cperating revenues dur- other office supplies and office machine of interest expense on long-term debt ins 1981. This fuorable relationship is a maintenar.ce, employee benefits for which is included in the Cooperative's direct result of the Cocperative's strict coi- medical and retirement and security pro- Operating Expenses for 1981 is $490,247.

lection policies and tie prortripayment grams and Public Service Board expense. This is the amount upon which the h abits of our memben. which consists of the amortization of rate Cooperative's TIER is computed. The ex-I penses and related increases in this category are the result of growth in the distribution facilities. All of these costs are directly related to the value of the Cooperative's utility plant and other prop-ADMINISTRATIVE AND GENERAL EXPENSES Schedule i erty and investments.

YOR TliE YEAR 1981 IV. Afargins and Patronage Capital Margins have been discussed in detailin Administtative and General Salaries $103,113.52 other parts of this report. They, however, 42,714.29 cannot be over-emphasized as they are the Office supplies and expenses 48,409.76 only source of equity capital to the Outside sertices employed Cooperative. The statement of operating Insurance $4,410.91 revenues and expenses shows the transfer Bit:e Cross, Blue Shield coverap 43,400.05 of the operating margin earned during Retirement 84,601.63 1981 to patronage capital and as has been Employee long-term disability and life insurance 18,309.38 pointed out previously, this was the largest Regulatory commission expenses 43,068.74 single contribution to the Cooperative's in-G.neral advertising 439.00 creased equity position at the end of 1981.

9 Association dues 10,955.96 However, other sources do contribute and Association meetings 19,880.05 help increase the member's equity in the Cooperative district and annual meetings 18,509.79 Cooperative. These items include income 69,773.13 from investments and from the Member Dimetor, fees and expenses Services Department (mainly the sale of Co-op Life 49,665.76 apphances). As well as the money paid by Rescarch expmses 8,254.00 members when the Cooperat,ne connects

$620,505.97 them to the system.

i931 Annual Report 25 Vermont Electric Cooperative, Inc.

Financial Report /81 Merchandising, Interest & Other Income Exhibit 2c Storement of Non-Operating Revenues and STATEMENT OF NON.0PERATING REVENUES AND EXPENSES Expenses FOR TIIE YEARS ENDED DECEMBER 31

'Ihis statement shows the revenue 1981 1980 brought in by the sale of appliances. This Merchandising revenues $357,206 $336,022 revenue also contributes to the equity in Merchandising costs 354,062 333,645 the Cooperative (TEAM), and helps Net Merchandising 3,144 2,377 defray the overall labor costs of the department. Allowance for funds used during The other source of non-operating construction (A) 14,443 37,348 revenue is from interest and dividend in. Miscellaneous income an; a .g

[ 2,477 1,117

7. . *( ,'g' Jobbing Revenue 15,580 8,532 '

g' T *"

gJ

, , " , , ,,M,i

. Expense 16,875 12,2M $2,500

( l.295)- ( 3,615)i P; { g 7.[; 7

' Service Out of Warranty Revenue 23,736 24,379 CO. OPS INVESTOR-

? Expense 35,046 36,515

, (11,310) (12,137) OWNED i Total Revenue 357,266 336,022 UTlLITIES Total Expense 354,122 333,M5 3,144 2,377 L_ _ - .

1981 Annual Report 26 Vermont Electric Cooperative, Inc,

Changes In Financial Position Storement of Changes in Financial STATEMENT OF CIIANGES IN FINANCIAL POSITION Pourion FOR Tile YEARS ENDED DECEMBER 31 T his statement could also be described 1981 1980 as a statement of the sources and applica- Funds Were Prosided By tions of funds. It is intended to show Operating margin-net $ 135,476 ($ 278,163) where the Cooperative receises the funds it Non-operating margin 151,492 84,240 requires in order to perform system tm- Depreciation and amortization expense 548,254 523,071 provement and additions and meet its 835,222 329,148 repayment obligations on long-term debt.

Reduction patronage capital assignable -

( 71,943)

The increase in advances front REA and CFC and the increase in workira capital Depreciation allocated 45,538 42,874 are directly related to the conversion of Memberships ( 1,615) 2,050 short-term debt held at December 31, Advances from R.E. A., C.F.C., & F.F.B. 6,540,550 3,201,000 f 1980, to long-term debt during 1981. The Retirement salvage 85,727 74,134 c* rces from the loans the Cooperative Decrease in working capital (increase) ( 2,475,751) 1,451,293 Operating reserve 1,087 1,688 ha with CFC and REA continue to be the Cooperative's major source of funds to Donated capital 6,337 3,746 replace, improve or add to tne distribution Other patronage capital-G.O. 52 199,269 220,997 system and buy into power plants and the $5,236,364 $5,254,347 extension and replacement of classified (distribution) plant and additions to plant Funds Were Used For:

unclassified and under co,nstruction (this Extension and replacement of pertains to both distribution and genera- classified plant $1,412,099 $ 950,329 tion). Classified plant is an accountmg Payments on long term debt 392,677 389,359 term for describing the cost of facilities Cost of plant retirement 101,894 35,2 %

(wires and poles) which have been assigned increase in other property and investments 117,085 $7,975 to the various accounts which make up the Increase in net deferred debits over asset component called Utility Plant In ( 260,437) 546,724 deferred credits Service. % hen plant is desenbed as . Electric plant held for future me 8,025 -

unclassified, this describes the situation Addition to plant unclassified and where the facilities are under construction under construction 3,223,893 3,035,990 or esen if construction has been com- Addition to nucicar assets 242,130 235,074 pleted, they have not yet been assigned i Retirement work in progress-credit (debit) ( 993) 3,600 the appropriate utility plant account. 55,236,364 $5,254,347 Average Residential and Farm Price Per Month For 1000 KWil, Averaging Summer / Winter Differential

$ DOLLARS 0 10 20 3,0 40 5,0 60 70 8,0 90 $100 Nil Electne Co-op _

CVPSC '

liardwick -

Washington Electric Co-op J Allied Power & Light -

GMP COOPERATIVE Morrissille -

Stowe  :

Rochester  :

Jacksomille '

Barton '

liyde Park ~

Citiiens Utilities '

Readsboro -

Burhnston i Orleans '

Lyndonville '

Franklin '

Ludlow '

Sw anton -

Northfield -

Enosburg  :

Johnson  :  % vm.,, or i 7%,n, y m %

1981 Annual Report 27 Vermont Electric Cooperative, Inc.

Financial Report /81 l Notes to Financial Statements DECEMBER 31,1981

1. Assets Pledged:

All assets are subject to the first mortgage lien held by the United States Government.

2. Electric Plant and Depreciation Procedures:

The major classification of plant is as follows:

1981 _

1980 Intangible plant $ 1,547.99 $ 1,547.99 Transmission plant 960,664.54 960,639.66 Distribution plant 15,360,361.52 14,285,879.14 General plant 1,697,517.01 1,586,110.33 Completed construction unclassified 980,237.47 651,080.35 i

Construction work in progress (A) 10,599,768.74 7,705,032.38

$29,600,097.27 $25,190,289.85 _

(A) Pilgrim Nuclear Unit #2 was cancelled October 23,1981 by Boston Edison Company, the lead participant. As at Balance Sheet date the Cooperative had an investment of $907,111.33 as nuclear proj-ect under construction and $33,864.02 as nuclear fuelin process.

Of the total $940,975.35, the interest capitalized as allowance for funds used during construction was $119,350.16. At this time the net loss due to the cancellation cannot be accurately determined. It is management's contention that, as the investment was largely to acquire equipment, substantial salvage is possible.

General plant depreciation rates have been applied on a straight line basis at the following rates:

Leasehold improvements 2 years Buildings Composite rate Office furniture and equipment Composite rate Stores equipment 10 years Shop equipment Composite rate Laboratory equipment Composite rate Power operated equipment Based on usage Communication equipment 8 years Miscellaneous equipment Composite rate Demonstration equipment Composite rate Transportation equipment 3-10 years Electric plant acquisition is being amortized over a fifteen year period. As at December 31,1981 the amortization totaled $105,288.00.

Electric plant held for future us: represents the cost c.' the Waterville pump storage project.

Nuclear fuelin process re,, esents the cost aggregates of the proportionate share of the fuel costs to date of:

Seabrook Nuc! ear units $592,424.90 Pilgrim Nuclear units (A) 33,864.02 Millstone Nuclear Units 90,554.78 $716,843.70

3. Represents 20 acres located in the town of Troy, Vermont, the Van Everest property and properties in Jay Valley.

1981 Annual Report 28 Vermont Electric Cooperative, Inc.

4. Patronage capital from associated organizations: }' " " ~ ~ ~ ~~~ ]

The balance represents the patronage capital certificates received of the  : . '

National Rural Utilities Cooperative Finance Corporation. !Certificat10n -

5. Capital term cert!llcates: !Of Certified '

Investments in associated organizations include capital term certificates  !

(CTC) of the National Rural Utilities Cooperative Finance Corporation :Pubh.c Accountant  ;

in the following amounts: ,

1981 1980 .

3 Capital term certificates $502,085.00 $399,557.00 [ PETER A. CASTALDE 4

• Certified Public Accountant i The Cooperative is obligated to purchase additional CTCs in 1982 f 44 Highland Place  ! _

through 1985 in the amount of $343,497.00 in annual installments based  ; Ridgefleid Park, N.J. 07660 i on the estimated resenue of the years. t - --

i April 1,1962 , .

6. Net of the following provisions for doubtful accounts: i 1

1981 1980 i The Board ofDirectors

$4,185.34 $4,185.34 L Vermont Electric Cooperettw, Inc.  ;

7. Net of tne following provisions for doubtful accounts: l We how emmined the Balance Sheet :

560,220.58 $43,773.96  ! of the Vermont EJectric Cooperettw, j t Inc. (a Vermont corporatior0 as at  ;

4

8. Under the provisions of the first mortgage note agreements with the U.S.D.A. accumulated patronage credits may not be remitted the ap- ((the December J1, INO relatedstatements and lNI, and of Operating plicable patrons until the total of equities and margins equals or exceeds ( Rewnue and Expense, income and ,

40 percentum of the total assets of the Cooperative.  ; Earned Surplus and Source and'  ;

! Application of Amdefor the tweln 1

9. The long-term debt to the R.E.A. is represented by two percentum first  ! months then ended. Our emmination I mortgage notes payable to the United States Government, totaling i was made in accordance with general ;

$10,535,197.27 remaining balance and five percentum notes of i ly accepted auditing standards and,

$15,670,000.00 outstanding balance. The notes are for 35-year periods  ; accordingly, included such tests of thel each and principal and interest installments are due quarterly in equal accounting records andsuch other amounts of approximately $295,000.00. It is estimated that installments  ; auditing procedures as we considered - '

of $1,180,000.00 due within the next twelve months willinclude ' neces:ary in ths circumstances.

i

$386,000.00 in principal. The notes are scheduled to be fully repaid at various times from April,1979 to Sept.,2016. Long-term debt to  ! In our opinion,'thefinancial-  !

N.R.U.C.F.C.' was $1,838,978.74 at December 31,1981. Long-term  ! statements referred to abowpresent !

debt to F.F.B.8 was $2,181,000.00 at December 31,1981. [ fairly thefinancialposition of the ,

10* LitiRation- '

. . December 31, INO and INI, and the '

We have requested that corporate counsel advise us of any litigation of  ! results ofits operpflon and changes in i which he is cognizant, fj g ,,jj g

11. Pension benefits are provided for all eligible employees under the retire.  ! months then ended in cortformity with ;

ment and security program of the National Rural Electric Cooperative  ! Reatr#lly accepted utility accounting ,

Association. l principals applied as a basis consistent !

with that of thepreceding period. 1

12. The Cooperative has a financialinterest in the Vermont Electric Genera- +

j tion and Transmission Cooperative. Inc., represented by account receivable from associated company. ,

13. Vacation, IIollday and Sick Leave: ) Peter A. Castalde, C. AA.

Vacation and holiday time is accrued and charged the appropriate '

accounts.

Sick time is not accrued; it is charged the appropriate accounts when taken. It is management's opinion that, as the employees have no vested sick leave rights, the procedure is consistent with that prescribed in I-R.E. A. Bulletin 181-1.

<j ygggy cmmm. r=.au core- .

E 1981 Annual Report 29 Vermont Electric Cooperative, Inc.

Staff: 40 Years. Administrative: 14 Years. '

l Bryant hl. Watson Robert E. Lamb d O. John Bohn Jerry L. Bucholz Nora Winckler and Computer: Kathy hicCuin 4 Years.

&4.

.'. X Communication:

E -

46 Years.

I Manager since 1979, ).

h1ary Nye, 13 Years with Co-op. ,

), ' Eleanor hiilo, C- * -

Rhoda Kimble Bob Carlson '

g

~

'o h1 ark Perry Accounting:

Jennifer Lynch and

1. hlary Ann Parker W

k' Lois Beard and Linda Reeve William J. Gallagher _ Member Accounts- .

lIl M 59 Years. ,

,  % j?

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h1ary Sylvester, Shirley hiessier, ~'

! h1arie Walker, hielissa Gillen, w

z --

Ruby hicNally, Jane Tallman and Gail Carpenter s

..e b/

Y, Member Services:

122 Years.

Bill Lamb, h1ary Gates, Clayt Russell, Larry Perry, Debbie Cole and Ernie Audibert a4 . r Numbers show total number of years of service in each department, for a total of 712 years of service!

The Team: Reliable Power, Purchasing & Mechanic: 22 Years.

Highest Quality Service Roger Duffy, Gary Friedrich, ,

These pages show the entire Cooperative Team Bob Dubray - .

g; that keeps power flowing, lines in repair, bills -% y going out, money counted, books kept, com- ' 1 vll *IA .

puters humming, stock supplied, financing 5 i flowing, costs controlled, meters repaired, appliances running, maps up to date, calls answered, engineering performed and outages  ;-

at a minimum-all with courage, courtesy and intelligence.

Meter: 34 Years. _ y .

Engineering: 52 Years. Danny Perkins, Lloyd Tilton.,b;

Bud Smith, Dorice Allaire, Peter Rodir, Doug Bryer Don Gillen

• , .W .

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Line: 246 Years. =H y

Dick Parker andt

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Dick Simays Bruce Lamb, Leonard Sweetser, I '*~' t i: _ f9{, k J. Alain Paquette, Louis Audibert, ,

, t.j .w.:

Ken Locke, Richard Perkins, l iJ ' - - '

Stan Ellow, Roland Sargent, j[- ordon Smith

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Electricity Delivery System 1981 AnnualReport ,a ,-

Verm'ont Electric Cooperative, Inc. ]-3l;",[

Johnson, Vermont 05656 s

i r .

_ _ _ __. _