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Welcome to the “Introducing the Balanced Performance Scorecard ” Web Conference. December 8, 2009 How to Submit your Question Step 1: Type in your question here. Step 2: Click on the Send button.

Tim Sullivan Director, C&I Business Development, NRECA Today’s Agenda • Learn about the Balanced Performance Scorecard and how it can help. • Review the new Balanced Performance Scorecard website on Cooperative.com. • Hear from two cooperative CEOs who are using a Balanced Performance Scorecard. • Take your comments and questions. Polling Question Are you familiar with Balanced Performance Scorecards? A. Yes, very familiar B. Yes, vaguely familiar C. No, not familiar

Polling Question Does your cooperative use one? A. Yes B. No Are We Achieving Our Mission? A Situation Overview • Based on mission statements, electric cooperatives exist to provide safe, reliable, affordable energy to the satisfaction of our members. • Yet, most distribution systems do not systematically measure their performance in reliability, safety, cost control and member satisfaction. • In general, systems do not have an easy means to compare/benchmark their performance against their goals, peers, competitors, or other industries. • Survey research and field experience show that many best-in-class systems already use some form 8 of Balanced Scorecard. The Goal: Realize Our Mission • Consequently, due to lack of measures, tools, and benchmarks, electric cooperatives may underperform on one or more of their critical performance areas. • Even if systems want to improve, without measures, tools, and benchmarks, they often do not know where or how to begin . • Underperformance prohibits electric cooperatives from fully achieving their mission . • By bringing measures, tools, and benchmarks to electric cooperatives, the situation can be improved…and we can better realize our mission. 9

The Balanced Performance Scorecard • Touchstone Energy has teamed with NRECA and CFC to develop: – A standardized set of metrics to measure reliability, safety, cost control, and member satisfaction for electric cooperatives. – A standardized Balanced Performance Dashboard , which will help system’s compare performance against goals and peers. – An on-line database where reliability, safety, cost control and member satisfaction information can be easily accessed and obtained. 10 Proposed Metrics – Balanced View Cooperative Cooperative Mission Mission Reliability Safety Cost Member Satisfaction � American Customer � System Average � Cost per KWH Sold � All Injury Incident Rate Satisfaction Index Interruption Duration � Days Away Incident Rate � Percent Change Total (ACSI) Index (SAIDI) * Investment per Mile of � Severity Incident Rate � System Average Line (OSHA reporting standards) Interruption Frequency � Percent Change Total Index (SAIFI) Controllable Expenses � Customer Average Per Consumer Interruption Duration Index (CAIDI) * With and without major event days and power supply interruptions 11 Scorecard Dashboards • Convened and collected feedback from a focus group of seven CEOs, including several current scorecard users. • They reviewed different drafts and made recommendations on individual metrics and on Dashboard formats. • Key suggestion: wanted the ability to compare by quartile, peer group, and trend.

Touchstone Energy Cooperatives - Distribution of ACSI Scores, Year 2008 86 90 80 Number of Cooperatives 71 66 70 57 60 50 36 Descriptives : 40 30 N = 343 16 20 11 High = 91 Low = 53 10 Mean = 0 82.72 74 and 90 and 75-78 79-81 82-83 84-85 86-89 below Over St. Dev. = 4.68

Balanced Scorecard: Next Steps • Vision: significantly expand the amount of benchmark information available. • Create a more interactive website in 2010. • Would allow users to customize their information and compare more closely with peers. • Share success stories. Henry Cano Sr. Principal Strategic Practice NRECA Critical Performing Area: Reliability “Distribution system reliability is among the top issues facing cooperatives today” Performance Measures: •Yearly day-to-day performance System Average Interruptible Duration Index (SAIDI) •Yearly day-to-day performance System Average Interruptible Frequency Index (SAIFI) •Yearly day-to-day performance Customer Average Interruptible Duration Index (CAIDI) Page 21

Reliability: • Data collection and reporting applies RUS Bulletin 1730A-119 and IEEE Guideline: “Collecting, Categorizing, and Utilization of Information to Electric Power Distribution Interruption Events” � Applies a statistical methodology to determine major event days � Applies a consistent means for reporting and comparing reliability performance results (RUS Form 7 – SAIDI) • Initial performance results are based on NRECA’s T&D recently formed a Cooperative Reliability Benchmarking Group � Reliability benchmarking is emerging as a vitally important tool to capture and communicate the competitiveness of cooperatives. � For more information on participating on NRECA’s Reliability Benchmarking Group, contact Alvin Razon (alvin.razon@nreca.coop) Page 22 Reliability Benchmark Results: Improving Reliability Results – Key Points: •Seek resources to understand best practices •Analyze reliability performance •Focus on worst performing distribution feeders •Develop an outage response member communication plan •Engage employees throughout the process •Create a strategic reliability improvement plan Page 23 Critical Performing Area: Safety “Studies show there is a direct correlation between safety performance and organizational success” Performance Measures: •All Injury Incident Rate: total OSHA recordable injuries reported per 100 employees •Days Away Incident Rate: total number of OSHA recordable injuries resulting in lost work days, transfers, or restrictive duty per 100 employees •Severity Rate: average number of workdays lost per OSHA recordable injuries Page 24

Measuring Safety Performance • For comparison purposes, the All Injury Incident Rate and Days Away Incident Rate are computed by normalizing for 100 employees or 200,000 man-hours as follows: OSHA Recordable Injuries X 200,000 / Actual Man-Hours Worked • Consider all three safety performance measures in order to understand total performance • The incident rates are important because it statistically correlates to the number of unsafe behaviors and/or conditions occurring within the same time period. The rates can be viewed as an injury risk factor for employees • Focus on performance trends rather than reacting to short- term results Page 25 Safety Benchmark Results (based on Rural Electric Safety Accreditation Program) All Injury Incident Rate Safety Days Away Incident Rate Severity Rate Improving Safety Performance – Key Points � Organization leaders own the culture that drives safety performance. � Organization leaders take ownership for safety outcomes and the system, conditions, and processes that create those results. � Sustainable safety improvement is achieved by engaging and motivating employees to actively participate in safety systems. � Safety systems focus on reducing exposure to injuries by increasing safe behaviors and reducing unsafe acts. � Safety must be a core value within the organization. Page 26 Critical Performing Area: Cost “Today’s cost pressures require cooperatives to examine all aspects of their cost structure in order to maximize efficiency and effectiveness” Performance Measures: •Total Cost of Electric Service per kWh Sold: measures the average effective rate •Average Percent Change in Total Controllable Cost per Consumer: measures the rate of change in controllable cost •Average Percent Change in Total Utility Plant Investment per Mile of Line: measures the rate of change in the investment in plant Page 27

Measuring Cost Performance • Bring attention on the total cost of delivering electricity balanced sound cost control business practice and investments to achieve strategic objectives • Strong organization discipline and effective leadership are required to effective manage cost and investments to achieve overall value for the membership • Measures emphasize monitoring the average percent change for trends, performance comparisons, and related analysis for improvement Page 28 Benchmarking Cost Performance (based on CFC KRTA data): Improving Cost Performance – Key Points: � Analyze the underlying factors impacting cost performance � Establish process study teams to identify ways to improve resource efficiencies and minimize waste (non-value added activities) throughout the organization � Seek an optimization approach: balance cost control objectives while meeting service and operating performance goals. Page 29 • Building Your Performance Scorecard Page 30