2015 ANNUAL REPORT

GUIDING PRINCIPLESOwned by you, working for you

Jackson Purchase Energy Corporation is proud to be unique. We are unique in that we are a cooperative business, owned by you, working for you, and guided by The Seven Cooperative Prin-ciples, which 171 years after they were first

written, are still relevant today.

This annual report highlights the achieve-ments JPEC has made by adhering to these principles.

For instance, we rely on the principle of Cooperation Among Cooperatives as we work with our partner co-ops to deal with costly new EPA regulations.

Kentucky enjoys inexpensive and reliable electricity thanks to its coal-fired power plants, which supply about 90 percent of our electricity. As the EPA’s so-called Clean Power Plan places steep limits on carbon emissions from those plants, JPEC is work-

ing with our wholesale power supplier, Big Rivers Electric Corporation; our national association; and a network of 900 co-ops across the country to craft innovative solu-tions and a united response.

While the regulations may ultimately impact how we generate your energy, our mission of providing safe, reliable, and affordable electric service will not change.

KEEPING ENERGY AFFORDABLEThe principles of Open and Voluntary Membership and Democratic Member Control ensure you have a say in how JPEC does business.

Elected by you, our board of directors sets policy and works with our president and CEO, who in turn hires professionals, to carry out our mission.

JPEC exerts its Autonomy and Independence in crafting strategy and hiring decisions.

Cover: John and Tammy Summers of Kevil discuss the $100 incentive payment that they received from JPEC with Cassidy McClain, one of JPEC’s customer service representatives. The Summers received the $100 payment when they purchased a new energy-efficient, Energy Star refrigerator and provided documentation to JPEC that their old, inefficient refrigerator had been recycled.

Right: Front row, seated, Scott Ribble, Vice President of Engineering & Operations. Back row, Me’Chelle Bradford, Accounts Payable Accountant; Josh Franklin, Line Technician; Tom Dillworth, Staker; Lauren Lampley, Customer Service Representative; and, Keith Burrow, Electronic Technician, adhere to the 7 Cooperative Principles making for a better electric cooperative for Jackson Purchase Energy members. Photos: Joe Imel

THE GUIDING PRINCIPLES

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We employ experts in the fields of engi-neering, operations, information technol-ogy, finance, and customer service. Some of the best, brightest, most creative, and dedicated people in our region have chosen careers that serve their friends and neighbors working at JPEC.

HOW REGULATIONS IMPACT YOUR ELECTRIC RATESCurrent and yet-to-be implemented regulations affect the cost to generate electricity. To comply, our power sup-plier, Big Rivers Electric, has invested hundreds of millions of dollars in envi-ronmental control equipment.

Because the new EPA regulations will force us to pay more to use coal to gen-erate electricity, we expect to see energy prices increase for Kentuckians over the next several years.

We take our Members’ Economic

Participation very seriously as we watch out for your interests. Unlike investor- owned utilities, JPEC does not create profits for investors and shareholders. Any excess dollars or margins are allo-cated to the members as capital credits and reinvested in the co-op to improve service and help keep rates stable. Ulti-mately those funds may be returned to members as patronage refunds.

We provide energy audits, rebates, and energy-efficiency tools to encourage you to actually use less electricity, which keeps costs lower for all members.

STAYING SAFE AND STAYING INFORMEDSince delivery of electricity is a com-plex process, JPEC places a high value on providing Education, Training, and Information.

Working with safety experts from our statewide association and our power supplier, we offer ongoing training to our employees on a wide range of topics.

JPEC also works to keep our members and the public safe by providing electrical safety presentations to countless schools, fire departments, and civic organizations throughout our six-county service area.

We’re also working hard to ensure that you have information about your cooperative and your electricity use at your fingertips 24 hours a day, seven days a week.

Our newest and most exciting infor-mation technology offering is SmartHub. SmartHub provides convenient account access and two-way communication with JPEC via your mobile device or computer.

Below: Area students participate in the Broadway Workshop as part of the Class Acts Education Series offered by the Luther F. Carson Four Rivers Center. JPEC has sponsored the Carson Center’s Class Acts Education Series since its inception. Photo: Carson Center.

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Manage payments, notify customer ser-vice of account and service issues, check your usage, and receive special messaging from JPEC all at the touch of a button. SmartHub is available at no charge on An-droid and iOS smartphones and tablets.

In addition to SmartHub, timely and important information about JPEC may be found on our website—www.jpenergy.com —and in quarterly newsletters provided with billing statements.

YOUR COMMUNITY IS OUR COMMUNITYYour cooperative employees are your friends and neighbors. Because of our

Concern for Community, we support and participate in many area causes and events. JPEC is part of your community, and we will continue to participate in events and activities that help us all. You’ll see co-op employees volunteering for local community groups, conducting school safety programs, and supporting local events.

Each day, JPEC remembers who owns our co-op—you do. Thank you for your trust as we remain guided by The Seven Coopera-tive Principles in each of our decisions to protect and improve the quality of life for our community.

7COOP

ERAT

IVE PR

INCIP

LES Cooperatives operate according to the same core principles and values.

Cooperatives trace the roots of these principles to the first modern cooperative founded in Rochdale, England, in 1844.

VOLUNTARY AND OPEN MEMBERSHIPCooperatives are voluntary organizations, open to all people able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

DEMOCRATIC MEMBER CONTROLCooperatives are democratic organizations controlled by members—those who buy the goods or use the services of the cooperative—who actively participate in setting policies and making decisions.

MEMBERS’ ECONOMIC PARTICIPATIONMembers contribute equally to, and democratically control, the capital of the

cooperative benefiting members in proportion to the business they conduct with the cooperative rather than on the capital invested.

AUTONOMY AND INDEPENDENCECooperatives are autonomous, self-help organizations controlled by members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by members and maintain the cooperative’s autonomy.

EDUCATION, TRAINING, AND INFORMATIONCooperatives provide education and training for members, elected representatives, managers, and employees so they can

contribute effectively to the development of their co-op.

COOPERATION AMONG COOPERATIVESCooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

CONCERN FOR COMMUNITYWhile focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members.

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Dennis L. CannonPresident and CEO

YOUR BOARD OF DIRECTORS

Guidelines for Meeting Participants • In accordance with the bylaws, the annual meeting will

follow parliamentary procedure and Robert’s Rules of Order.

• The Chair will ensure parliamentary procedure and Robert’s Rules of Order are followed.

• Members shall stand if they wish to speak. When recognized by the Chair, the member shall state his/her name and address.

• Each member may speak once on each motion. Exceptions may be granted by the Chair. Discussion will alternate for and against the motion.

• Members may speak for two minutes. An impartial time keeper will notify the member when the time has expired. Exceptions may be granted by the Chair to extend the time limit.

• Cellular phones and pagers shall be turned off or set to silent mode during the meeting.

• Food and drinks are not allowed in the auditorium. Smoking is not allowed in the Luther F. Carson Four Rivers Center.

Gary L. JoinerChair

Jack S. MarshallVice Chair

Wayne ElliottSecretary/Treasurer

Lee BeardenDirector

Dr. Ivus CrouchDirector

Erick Harris Director

Richard Walter General Counsel

Lori ThompsonDirector

William Birney Director

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SERVICE AREA

REVENUE SOURCES

MAJOR COSTS

ACTIVE ACCOUNTS(as of December 31, 2015)

Accounts Billed2015................................... 29,4802005................................... 28,281

Average Kilowatt-hour Use (Residential per month)2015..................................... 1,2492005..................................... 1,299

Miles of Line *2015..................................... 2,9452005..................................... 3,213

Consumers Per Mile2015..................................... 10.012005....................................... 8.80

* JPEC implemented a new, elec-tronic mapping system in 2008. The improved accuracy of this GIS-based system accounts for the decline in the number of miles of line between 2005 and 2015.

69.5% 15.7% 8.8% 4.0% 0.1%

PURCHASED POWER

OPERATING THE SYSTEM

DEPRECIATION

INTEREST EXPENSE

TAXES

RESIDENTIAL 62.2%

COMMERCIAL 29.6%

INDUSTRIAL 8.0%

OTHER 0.2%

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Ballard .................3,084 Carlisle ...................541Graves .................2,405Livingston ...........5,793Marshall ..............4,807McCracken ........12,886Total ...................29,480

10.3%1.8%8.2%

19.7%16.3%43.7%

100.0%

STATEMENT OF OPERATIONSFor the Year Ending December 31, 2015

Operating Revenue ...................$61,651,276Operating Expenses Purchased Power ...................... $42,857,018 Operating the System .................. 9,664,417 Depreciation ................................. 5,428,626 Taxes ....................................................74,428 Interest Expense .......................... 2,464,782 Other Expenses ...................................4,582

Cost to Provide Electric Service .......................$60,493,853

Operating Margins ......................... $1,157,423 Other Income .......................................363,140 Capital Credits from Other Co-ops ....267,549

Total Margins ..............................$1,788,112

BALANCE SHEETAs of December 31, 2015

ASSETS

Total Utility Plant ............................$152,848,225

Less Depreciation ............................(57,897,694

Net Utility Plant ............................. $94,950,531

Investments in Assoc. Organizations ... $3,240,156

Cash & Temporary Investments .......... 4,647,761

Accounts Receivable ............................. 4,722,529

Inventory ............................................... 1,888,580

Expenses Paid in Advance ........................301,794

Deferred Debits and Other Assets ....... 2,525,890

Total Assets .................................. $112,277,241

LIABILITIES AND MEMBER EQUITY

Membership and Other Member Equities ................ $46,305,893

Long-Term Debt ................................... 54,680,799

Accounts Payable .................................. 4,067,410

Consumer Deposits .............................. 2,015,216

Other Current and Accrued Liabilities ............................ 4,343,324

Deferred Credits ........................................864,599

Total Liabilities and Member Equity ............................$112,277,241

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100.0%

69.5%15.7%

8.8%0.1%4.0%0.0%

98.1%

1.9%0.6%0.4%

2.9%

)

4:00 p.m. Registration Begins

4:45 p.m. Entertainment:

Kentucky Blue

6:00 p.m. Platform Activities

• Welcome Gary Joiner, Chair

• Invocation

• Presentation of Colors and Pledge of Allegiance to the Flag of the United States of America Paducah Tilghman High School Navy Junior Reserve Officer Training Corps

• Introductions Gary Joiner, Chair

• Board of Directors

• General Counsel

• Notable Guests

• Management’s Report Dennis L. Cannon, President and CEO

• Introduction of Scholarship Recipients Erick Harris, Director, and Lee Bearden, Director

• Introduction of Youth Tour Participants Lori Thompson, Director, and William Birney, Director

• Presentation of Guidelines for Meeting Participants (See Page 5) Gary Joiner, Chair

• Official Business Meeting

1. Adoption of Guidelines for Meeting Participants.

2. Report on the number of members present in person in order to determine the existence of a quorum.

3. Reading of the notice of the meeting and proof of the due publication or mailing thereof, or the waiver or waivers of notice of the meeting, as the case may be.

4. Reading of unapproved minutes of previous meetings of the members and the taking of necessary action thereon.

5. Presentation and consideration of reports of officers, directors, and committees.

• Financial Report

6. Tellers’ report of election of directors and any other balloting. Bill Wright, Chair, Tellers Committee

7. Unfinished business (none).

8. New business.

9. Adjournment.

• Comments from the Floor Questions or comments not in the form of a motion. 20 minutes maximum.

• Drawings for Door Prizes Roby Foree

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AGENDA2016 Annual Meeting of Members

Luther F. Carson Four Rivers CenterTuesday, June 21, 2016