Dairyland Power Cooperative

“Dairyland's Board of Directors receive advice and recommendations for action from an Executive Committee, made up of members of the Board of Directors only. The Executive Committee is authorized by the bylaws to act on behalf of the Board on certain matters between meetings of the full Board.”

“Several Articles and Bylaw amendments were approved at the 76th meeting of the Members of Dairyland Power Cooperative on June 7, 2017. The first Article and Bylaw amendments updated the descriptions of the member classes referenced in Article VII, Section 2 of the Articles and Article I, Sections 8 and 9 of the Bylaws, to reflect how power and energy are now bought and sold in the market and to reflect the differences in the classes' financial responsibility for Dairyland's costs. As amended Article VII, Section 2 and Article I, Sections 8 and 9 state: "(Article VII, Section 2 and Article I, Section 8) Classes of Membership: Members of the Cooperative (sometimes hereinafter referred to as "Dairyland") shall be divided into six classes, designated as Class A, Class B, Class C, Class D, Class E, and Class F, respectively. Class A members shall consist of rural electric distribution cooperatives, the power requirements of which are served at wholesale by Dairyland under wholesale power contracts. Class B members shall consist of rural electric distribution cooperatives to each of which Dairyland supplies the major portion of that cooperative's power and energy requirements but not to the extent or on terms that would be substantially similar to those of any Class A member, in the judgment of the Board of Directors. Class C members shall consist of any federated power supply cooperative association furnishing energy to member distribution cooperatives at wholesale and which has entered into contractual arrangements whereby Dairyland furnishes or will furnish some power and energy. Class D members shall consist of municipalities, municipal utilities, public power districts or corporate combinations thereof, the wholesale purchase power requirements of which are furnished at least in part by Dairyland under contracts therefor. Class E members shall consist of all other members which purchase power, energy, or transmission or other utility or energy services from the Cooperative, other than those classified as Class F or as special services members pursuant to the bylaws. Class F members shall consist of cooperative associations that purchase power and energy from Dairyland and market that power and energy on Dairyland's behalf. (Article VII, Section 2 only) The Board may also allow for Special Services Memberships, subject to any requirements or limitations set in the Bylaws. (Article I, Section 9) Special Services Membership: Notwithstanding any provision above contained relating to electric service memberships, at the discretion of the Board of Directors there shall also be memberships available to any cooperative or municipality which desires to patronize solely special services rendered by the Cooperative other than the furnishing of electric service. The membership fee for such Special Services Membership shall be $10.00 and Special Services Members shall be entitled to one vote at any membership meeting. Special Services Members shall not be entitled to be represented on the Board of Directors by a voting director but, at the discretion of the Board of Directors, they may be invited to participate in an advisory body that may be convened by the Board from time to time. The Board may also invite representatives of other membership classes or of non-member cooperatives to participate." The second Bylaw amendments define the responsibilities of the Board's new Governance Committee, which includes the responsibilities that had been assigned to the Rules and Resolutions Committee. As amended Article II, Sections 6 and 7 state: (Article II, Section 6) Procedure: "...The latest edition of Roberts Rules of Order shall govern all procedural matters at said meeting not addressed by the meeting rules and procedures adopted by the Governance Committee as provided in Section 7, below. (Article II, Section 7) Governance Committee: The Board of Directors shall appoint a Governance Committee. In addition to such responsibilities as the Board”

“Dairyland Power Cooperative provides wholesale electric service and other services to five classes of members (A, C, D, E and Special Services).”

“Member control of Dairyland is vested in its Board of Directors, consisting of representatives from each of the 24 Class A member distribution cooperatives. Each director is nominated by his or her member cooperative, and then elected by Dairyland's membership at Dairyland's annual meeting in June to serve a one-year term.”

“Pursuant to Dairyland's Bylaws, the Board of Directors is charged with directing the management of the Cooperative. The Bylaws provide for the Board to be advised by a technical advisory committee consisting of the managers of the member distribution cooperatives. Member approval is required for amendments to the Articles of Incorporation or Bylaws, for merger or consolidation, or for sale of more than 10% of the Cooperative's property.”

“Prior to filing the Form 990, approval of the draft return was obtained at the August 2, 2018 meeting of the Board of Directors' Audit & Risk Management Committee. The Committee then presented its report on the return to the full Board at its August 2018 meeting. A copy of the draft return was provided to each board member. Following approval by the Board, the Form 990 was finalized and filed.”

“During June of each year, each director on the newly-elected Board is given a copy of Dairyland's Board Policy #46, Business Ethics, Board Policy #46A, Policy on Suspected Dishonesty or Similar Misconduct, and a Business Ethics disclosure report to be completed in accordance with Policy #46. A similar disclosure report is required of all Dairyland employees during the first quarter of each year. Each Director's completed report is reviewed by the Chairman of the Audit & Risk Management Committee. Any questions are reviewed by Dairyland's outside General Counsel. Any unique responses are presented to the full Committee in executive session. Each employee's report is reviewed by the Executive Vice President of Human Resources. The Executive Vice President's report, the report of the President and CEO, and the report of any other employee containing any unique responses are reviewed by the Chairman of the Audit & Risk Management Committee, and as appropriate by General Counsel and the full Committee.”

“The President and CEO's 2017 salary determination was conducted in 2017 by all three of the processes for determining compensation - review and approval by independent persons, comparability data, and contemporaneous substantiation of the deliberation and decision. The President and CEO received a compensation increase in October of 2017. This increase was a result of reviews conducted by the Board's Governance Committee, with assistance from the Executive Vice President of Human Resources, who performed compensation surveys of other Generation and Transmission Cooperatives. Results of the surveys, input from a compensation consultant and individual board member's reviews of the CEO's performance were presented to the Governance Committee, who then presented to the full Board for vote as part of an executive session (only Board Members, outside legal counsel and Board recording secretary). For Executive Staff/Key Employees, the Executive Vice President of Human Resources conducts an annual salary increase percentages survey of similar Generation & Transmission Cooperatives and obtains comparable salary data compiled by NRECA. The results of the surveys, along with current and previous salary information, are presented to the President and CEO. Based on the information provided, the President and CEO determines the applicable compensation for each Key Employee. They included Executive Vice President of Human Resources, Chief Financial and Administrative Officer, Vice President of Power Delivery, Vice President of Strategic Planning, Vice President of External and Member Relations, and Vice President of Generation. For the tax year covered by this return, this was done in September of 2017. The Executive Staff/Key Employees did receive compensation increases in October of 2017.”

“Weston 4, near Wausau, in central Wisconsin, is a 595-megawatt electric generator that uses clean coal technologies. Weston 4 began operating on June 30, 2008. Wisconsin Public Services owns 70% and Dairyland Power Cooperative owns 30%. It is not operated as a joint venture or similar arrangement.”

“Dairyland Power Cooperative makes its governing documents, conflict of interest policy, and financial statements available upon request to the public.”

“Members of the Board of Directors of Dairyland serve annual terms that run from the annual meeting of members in June of the year of election to the annual meeting in June of the following year. All average hours worked per week were based on a separate questionnaire, specific to the Form 990 filing, that was completed by all directors, officers, key employees and highly compensated employees.”

“Other operating revenue primarily includes revenue received from transmission service and is recorded as services are provided.”

“Included in the $8,864,820 is an investment gain, including fund expenses, on nuclear decommissioning funds of $1,098,603 recorded as decommissioning liabilities of $1,098,603.”

“The consolidated financial statements include the accounts of Dairyland Power Cooperative and Dairyland's wholly owned subsidiary, Genoa FuelTech, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.”

“Dairyland Power Cooperative's Board of Directors has adopted a policy of retiring capital credits allocated to members on a first-in, first-out basis. As part of an equity development strategy adopted in 2003, patronage capital retired will be limited to no greater than 2% of the total assigned patronage capital balance as of December 31 of the prior year. Accordingly, $4,109,692 was retired in 2017. Implementation of this policy is subject to annual review and approval by the Board of Directors and the Rural Utilities Service, and no cash retirements are to made which would impair the financial condition of the Cooperative or violate any terms of its agreements. Since 2003, the amount of non-operating margins assigned to members each year is at the discretion of the Board of Directors. Any unassigned non-operating margins will become unallocated reserves and part of permanent equity. Patronage capital as of December 31, 2017 included 2017 margins allocated/assignable of $17,250,035 and unallocated reserves of $9,748,124. It is our interpretation of federal cooperative tax law to report capital credits allocated during the tax year of $17,250,035 on Form 990, Part IX, Line 4.”

“Dairyland Power is a 501(c)12 electric generation and transmission cooperative association organized under the laws of WI and MN. The Cooperative, whose principal offices are located in Wisconsin, provides wholesale electric service to Class A members engaged in the retail sale of electricity to member consumers located in WI, MN, IA and IL and provides electric and other services to Class C, D, E and Special Services members, all on a cooperative, not-for-profit basis. Dairyland Power Cooperative is under the jurisdiction of the Rural Utilities Service, which requires Dairyland's accounting records to be maintained, with minor modifications, in accordance with the Uniform Systems of Accounts for Public Utilities, as prescribed by the Federal Energy Regulatory Commission (F.E.R.C.). Because of this, we do not have our expenses grouped by function as shown on the Form 990.”

“Dairyland Power Cooperative's accounting policies and the consolidated financial statements conform to accounting principles generally accepted in the United States of America applicable to electric cooperatives. During 2017, Dairyland established a regulatory asset for the unrecovered plant balance and termination of gas purchase agreement related to the discontinuation of landfill operations at the Seven Mile Creek site. The amount is being amortized through rates over 36 months beginning in July 2017. As of December 31, 2017, the regulatory asset balance associated with the Seven Mile unrecovered plant balance and termination fee was $2,484,000. During 2015, Dairyland established a regulatory asset for a contract termination fee related to a power purchase agreement. This is being amortized to purchased power expense over the five-year remaining term of the original contract which began November 2015. As of December 31, 2017, the regulatory asset balance associated with the contract termination fee was $10,023,000. During 2014, Dairyland established a regulatory asset related to unrecovered plant balances upon closure of the Alma 4 & 5 generating stations. This is being amortized through rates over 10 years beginning in 2015. The December 31, 2017 balance associated with the unrecovered plant balance was $12,432,000. The expected following year's portion of these regulatory assets is included in prepaid expenses and other current assets at December 31, 2017 and 2016, respectively.”

“Other change in net assets or fund balance is a result of: patronage capital-retired of -$4,109,692, accumulated other comprehensive income of $107,088, allocation of capital credits for 2017 of $17,250,035.”