Dairyland Power Cooperative

“Two Bylaw amendments were approved at the seventy-second meeting of the Members of Dairyland Power Cooperative on June 5th, 2013. The first Bylaw amendment addressed qualifications to serve as a delegate of a Class A member at Dairyland member meetings, specifically, that the delegate must be a member of the cooperative he or she is selected to represent. As amended, Article II, Section 5 of the Bylaws state "Each Class A member, acting through its members or board of directors, as permitted by its bylaws or rules, may elect from its membership one voting delegate to this Cooperative for each four hundred (400) of its members or major fraction thereof of such Class A member, provided that any Class A member may elect a number of voting delegates equal to the number of its directors." The second amendment concerns the qualifications for serving as an officer or other member of the Executive Committee. As amended, Article V, Section 1 and Article VII, Section 2 state: (Section 1) "The Board of Directors may elect from the representatives of the Class A members on the Board an executive committee to consist of not less than five or more than eight directors, including the Chairman and Secretary as ex-officio members." (Section 2) "The officers shall be elected by ballot annually by the Board of Directors from the representatives of the Class A members on the Board after each annual meeting of the members, except that the Assistant Secretary need not be a director but may be an employee of the Cooperative."”

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

“Member control of Dairyland is vested in its Board of Directors, consisting of representatives from each of the 25 Class A member distribution cooperatives and a representative of the Class B members. 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 July 16, 2014 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 July 18, 2014 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, and a Business Ethics disclosure report to be completed in accordance with the Policy. A similar disclosure report is given to all Dairyland employees in January 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 Vice President of Human Resources. Her 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 General Counsel, and as appropriate by the full Committee.”

“For the President and CEO, the Vice President of Human Resources conducts a salary survey of similar Generation & Transmission Cooperatives. The results of the survey, current salary and salary history for he President and CEO, and the results of the Directors' performance evaluation of the President and CEO, are presented to the Executive Committee and in turn to the full Board. The Executive Committee reviews all pertinent information and then presents its recommendation to the Board in executive session, for action by the Board. For the tax year covered by this return, this process was completed in September of 2013. For Senior Staff/Key Employees, the Vice President of Human Resources conducts a similar survey. The results of the survey, 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 Vice President of Generation, Vice President and CFO, Vice President of Power Delivery, Vice President of Human Resources, Vice President of Strategic Planning, and Vice President of External and Member Relations. For the tax year covered by this return, this was done in September of 2013. The President and CEO and above employees did receive compensation increases in October of 2013.”

“Election Pursuant to Code. Sec 761 to be Wholly Excluded from the Partnership Rules of Subchapter K for tax year ended December 31, 2013. The co-owners of the Weston 4 Generating Station under the Joint Plant Agreement (the Agreement) dated November 23, 2004, hereby elect to be excluded from the application of all the provisions of Subchapter K effective for the tax year ending December 31, 2013, to the return for which year this statement is attached. Qualification for the election is based on meeting the requirements of Reg. Sec. 1.761-2a2 and Reg. Sec. 1.761-2a3. All owners elect that the Weston 4 Generating Station be excluded from all provisions of Subchapter K. The names, addresses and employer identification numbers of the co-owners are: Wisconsin Public Service Corporation, c/o James Schott, CFO, 700 N. Adams Street, Green Bay, WI 54307-9001, EIN: 39-0715160 and Dairyland Power Cooperative, c/o Phillip Moilien, Vice President and CFO, PO Box 817, La Crosse, WI 54602-0817, EIN: 39-0233059.”

“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.”

“Included in the $3,741,950 is investment income on nuclear decommissioning funds of $4,190,508 offset by expenses recorded as decommissioning liabilities of $4,190,508.”

“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, $3,130,015 was retired in 2013. Implementation of this policy is subject to annual review and approval by the Board of Directors and the RUS, and no cash retirements are to be 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, 2013 included 2013 margins allocated/assignable of $17,079,014 and unallocated reserves of $4,936,588. It is our interpretation of federal cooperative tax law to report capital credits allocated during the tax year of $17,079,014 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 B, C, D, and E members, all on a cooperative, non-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 System 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 2013, nuclear-related regulatory assets created from 2008 through 2012 were written-off against a regulatory liability of $37.6 million created when the Cooperative received payment for a breach of contract damages claim against the United States Government. The remainder of that regulatory liability of $18.8 million was refunded to class A members in 2013. Also in 2013, the Cooperative established a regulatory asset of $16.7 million for increased estimated costs of final nuclear decommissioning. The amortization of this regulatory asset will be deferred pending the outcome of the second nuclear contract damages claim with the U.S. Government and Department of Energy. In addition, during 2013, the Cooperative created a regulatory asset of $3.7 million related to the estimated costs of a special early retirement plan to be offered to certain age-eligible employees at specific Cooperative locations in 2014.”

“Other change in net assets or fund balance is a result of: a change in membership fees of $86, patronage capital-retired of -$3,130,015, accumulated other comprehensive income of $4,674,240, allocation of capital credits for 2013 of $17,079,014.”