Modern Electric Water Company

“In modern's ongoing commitment to uphold the integrity and operational effectiveness of the organization, the board has undertaken a comprehensive review and subsequent amendment of the bylaws. This initiative was driven by several crucial factors. 1. Modern amended its articles of incorporation, to comply with washington law. This in turn, necessitates modern adjust the bylaws to ensure alignment and consistency between these foundational documents. 2. Modern recognized the need to integrate multiple updates that were made to the prior bylaws over decades into a single, coherent document. This step aligns with best practices, enhancing both clarity and governance. 3. Modern has updated the bylaws to comply with current washington law and to incorporate modern language and practices, ensuring our operations remain both compliant and relevant in today's dynamic environment. The following summarizes the major changes and the rationale for the change: required by law, shareholder's quorum for annual meeting was amended from "20 stockholders" to "1/3 of stockholders". The notice for annual meeting was also amended from "at least 15 days before" to "at least 15 days before but not more than 60 days in advance". To increase stability of the board, vacancy was amended from "board appoints until next annual meeting" to "board appoints to fulfill remainder of three-year term". To increase board consistency in light of historical challenges obtaining a quorum, the no successor board member elected was amended from "board may appoint" to "current director automatically serves". To be consistent with the best practices, employee hiring/firing was amended from "board had authority to hire/fire" to "board hires/fires ceo only. Ceo handles subordinate employment". To reflect changes in technology, participation via electronic means was amended from "silent" to "via electronic means so long as individuals can hear and be heard". The forms of signatures were also amended from "silent" to "electronic signatures authorized". To reflect current business structure and language, the title of top director was amended from "president/ceo" to "president/chairman". The title of highest employee was amended from "general manager" to "chief executive officer". To reflect best practices, amending bylaws by board was amended from "unclear whether a simple majority sufficed" to "requires a super-majority of the board to amend bylaws". The indemnification of officers and directors was also amended from "permitted board to grant indemnification of directors, officers, employees, agents" to "further specified criteria for indemnification and process for evaluating". For clarity to reflect best/current practices, the duties of officers was amended from "requires officers to create certain documents" to "allows officers to supervise the creation of documents such as minutes".”

“The company was formed by the customer-owners to provide electric and water service on a mutual basis.”

“Members of the board of directors are elected to three-year terms. The terms are staggered such that each year either one or two members of the board are up for election. The election occurs at the annual shareholder's meeting.”

“The company has no committees with authority to act on behalf of the governing body. Therefore, and pursuant to form 990 instructions, the question has been answered "no".”

“Management reviewed the form 990 before filing. The board members were provided a copy of the form 990 for review subsequently to the filing.”

“On an annual basis, the company will require the board of directors and officers to complete and sign a conflict of interest certification and disclosure form. Directors and officers are required to disclose any action or situation that might violate the policy to the full board of directors as soon as possible.”

“Each year the board reviews the northwest utilities salary, wage & benefit survey to determine the salary of the ceo. Each year, the board reviews and approves the salaries of other officers and key employees. While those whose salaries are being discussed, officers and key employees are excused from the board meeting.”

“The company will provide a complete copy of its governing documents, conflict of interest policy, and financial statements to any customer-owner who requests a copy of any such document. A complete copy of the audited financial statements was provided to the customer-owners for the annual meeting.”

“In order to provide retirement benefits to its employees, the company has established a defined contribution plan and defined benefit plan for the respected groups of employees. Employer contributions to the plan are made pursuant to the plan document. The company also provides health, dental and life insurance to all eligible employees through a qualified plan. The amounts reported on part vii, column (f) for the officers, key employees and highly compensated employees is comprised of actuarial increase in the defined benefit plan, the total amount contributed by the company to the defined contribution plan and insurance paid on behalf of and for their benefit.”

“Patronage dividends result from the payment of interest from cooperative banks and the purchase of supplies and services from other cooperative organizations. The expenses associated with purchases from and payments to such cooperative organizations are a direct component of cost of the electric and water services provided by the company to its consumer-owners.”

“The accounting records of the company are maintained in accordance with the uniform system of accounts (usoa) as prescribed by the federal energy regulatory commission for class a and b electric utilities. The usoa does not record expenses in the general expense categories provided on part ix lines 1-23. The company separately reports salaries and wages, employee benefits and payroll taxes that are allocated in accordance with their accounting system, but other expenses that are described in lines 1-23 are reported on line 24 under the expense categories required by the usoa.”

“Salaries and wages are allocated to asset, liability, and expense accounts based on the accounting system described above. The following schedule reconciles amounts reported on lines 5-7 to total wages accrued and/or paid: total per lines 5-7 $ 2,694,339 less: director fees reported on forms 1099-nec (54,800) less: employee officer benefits included in line 5 (95,118) plus: salaries and wages capitalized directly to plant 637,702 plus: salaries and wages capitalized/expensed indirectly through clearing and other accounts 86,302 total wages accrued and/or paid $ 3,268,425”

“Administrative & general expense is comprised of the following: administrative & general salaries, benefits & other $ 1,554,172 office supplies 286,236 outside services 349,918 insurances and damages 228,784 customer collection 38,743 dues and subscriptions 110,480 maintenance of general plant 182,289 real estate taxes 130,552 bank fees 104,246 miscellaneous general 293,411 total admin & general exp per financial statements $ 3,278,831 less: reclass of director fees to part ix, line 5 (54,800) less: reclass of labor to part ix, lines 5 & 7 (1,356,879) less: reclass of benefits to part ix, lines 8-10 (438,748) total admin & general expense per form 990, part ix $ 1,428,404”

“Actuarial gain -653,198. Post retirement benefit amortization 693,193. Valuation adjustment on investments 938,527.”