2010 Letter to Our Customers

It has been nearly a year since each PES customer received a letter in which we renewed our commitment to providing reliable and convenient services, while operating in an open and responsive manner. Now, after a year of significant change, we would like to share just a few important informational items on PES’ activities over the last twelve months.

The PES Board adopted a number of important policies this year. Chief among them were a purchasing policy, a vehicle policy, a travel policy, and a budget and financial management policy. These policies were enacted to ensure PES uses its resources appropriately.

Over the last year we also made significant cuts in our operating and maintenance budgets, and scaled back our capital work plan. Related to this, we are committed to funding our regular or recurring work from cash-on-hand. Though a large and unavoidable project or emergency may arise, we realize that normal expenditures should be funded through revenues and not borrowings.

We also undertook a comprehensive cost-of-service study to carefully analyze the balance between the cost to provide our electric service and the revenues received. This study, along with expected increases in the cost of power generation, promoted the Board to approve a modest rate increase. This unfortunate action was taken to ensure PES’ financial stability. In no way have we lost focus on the fact that reducing costs comes before increasing revenues.

It is important that our customers understand where ratepayer money goes. First, about three quarters of the money collected is used to purchase electricity from the Tennessee Valley Authority (TVA). Next, PES sends required tax payments to the local municipalities in Giles County. After taxes, we make payments on our outstanding debt. The bulk of what remains goes to cover our operating and maintenance (O&M) expenses. O&M includes the cost to operate our local electric system and serve our customers every day. The money that remains after we cover our O&M expenses is used to pay for system improvements and other capital work projects. These include line extensions, new services, upgrades and other routine or special work projects.

An important capital project that has received a lot of attention is our Automated Metering Infrastructure (AMI) program. Over a period of time (likely five to ten years), we are updating customer meters to units capable of automatically sending usage data to our office. These meters are no different from any other digital electric meter except they come with a communication module that transmits meter readings wirelessly. All meters are designed and tested to meet industry safety standards.

It is important to know that these meters cannot discern what devices are running within a premise; all they know is the voltage and the amount of energy being consumed by the home or business. PES is currently using this information for troubleshooting and system analyses purposes. Also, we are reducing operating costs by decreasing the number of manual meter reads each month. Importantly, those with new meters are billed using the same rates, calculations and standards as all other customers. If you have any questions about this program, please let us know.

We encourage you to check out our website at www.pesenergize.com or our page on Facebook at www.facebook.com/pesenergize. Also, while online, consider paying your bill using our new online bill payment system. It provides a convenient way to keep your account up to date.

Much work remains to be done as we strive to provide this community with robust and efficient utility services, but please feel free to contact us with questions or concerns.

Sincerely,

Jerry Bryant, Chairman

Wes Kelley, President/CEO