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.”

“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 August 8, 2016 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 September 15, 2016 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 2015, the President and CEO was covered by her original employment contract dated November 19, 2014, including a supplemental offer letter dated December 19, 2014. The President and CEO's 2016 salary determination was conducted in 2015 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. For Executive Staff/Key Employees, the Vice President of Human Resources conducts a salary survey of similar Generation & Transmission Cooperatives. 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 2015. The Executive Staff/Key Employees did receive compensation increases in October of 2015.”

“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%.”

“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 from transmission service and is recorded as services are provided. During 2015 and 2014, Dairyland's Board of Directors implemented revenue deferral plans which were approved by the Rural Utilities Service in February 2016 and February 2015, respectively. Other operating revenue for 2015 was reduced by $4,400,000 which will be deferred into 2016 revenue recognition. Other operating revenue for 2014 was reduced by $2,200,000 and was deferred into 2015 revenue recognition. As a condition of the Rural Utilities Service approval for the plans, Dairyland is to maintain a segregated cash balance of at least the amount of unrecognized deferred revenue during the year. Dairyland has met this requirement through its deposits in the Rural Utilities Service debt prepayment program.”

“Included in the $8,305,735 is an investment loss, including fund expenses, on nuclear decommissioning funds of $1,373,804 recorded as decommissioning liabilities of $1,373,804.”

“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, $3,656,474 was retired in 2015. 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 made which would impair the financial condition of the Cooperative or violate any terms of its agreements. Since 2003, the amount of nonoperating margins assigned to members each year is at the discretion of the Board of Directors. Any unassigned nonoperating margins will become unallocated reserves and part of permanent equity. Patronage capital as of December 31, 2015 included 2015 margins allocated/assignable of $16,358,952 and unallocated reserves of $10,366,723. It is our interpretation of federal cooperative tax law to report capital credits allocated during the tax year of $16,358,952 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, 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 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 2015, Dairyland established a regulatory asset for a contract termination fee, in the amount of $20,958,000, related to a power purchase agreement. This is being amortized to purchased power expense over the 5 year remaining term of the original contract beginning November 2015. 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 with the expected following year's portion included in other current assets at December 31, 2015 and 2014, respectively. The balance as of December 2015 was $16,541,000. During 2013, Dairyland established a regulatory asset of $16,700,000 for increased estimated costs in the nuclear decommissioning liability. 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.”

“Other change in net assets or fund balance is a result of: a change in membership fees of -$50, patronage capital-retired of -$3,656,474, accumulated other comprehensive income of -$304,557, allocation of capital credits for 2015 of $16,358,952.”