2015-11-04T11:17:17-06:00 2014-12-31 750882037 BOLINGER SEGARS GILBERT AND MOSS LLP 8215 NASHVILLE AVENUE LUBBOCK TX 79423 990 2014-01-01 850096243 LEA COUNTY ELECTRIC COOPERATIVE INC LEAC 5753963631 PO BOX 1447 LOVINGTON NM 882601447 GARY HURSE EVP & GENERAL MANAGER 5753963631 2015-11-01 1 William M Miller P00439459 8067473806 2015-11-01 X 2014 2016-04-25 22:37:26Z GARY HURSE PO BOX 1447 LOVINGTON NM 882601447 93419950 0 X WWW.LCECNET.COM X 1949 NM TO PROVIDE ELECTRIC ENERGY TO RURAL AREAS AT COST ON A COOPERATIVE BASIS. 9 9 100 0 3600 2600 0 0 86272737 92171467 505035 887422 163767 150310 86941539 93209199 26942 16635 7439086 8162504 5705156 5572679 0 0 0 73770355 79457381 86941539 93209199 0 0 215413647 183782111 133994038 97341137 81419609 86440974 THE COOPERATIVE'S RESPONSIBILITY AND AIM IS TO PROVIDE EXCELLENT AND INNOVATIVE CUSTOMER SERVICE AS REFLECTED IN TOP QUALITY ELECTRIC SERVICE RELIABILITY, AFFORDABLE RATES, EMPLOYEE TEAMWORK AND THE HIGHEST DEGREE OF INTEGRITY IN ALL COOPERATIVE ENDEAVORS. 0 0 SALE OF ELECTRIC POWER TO MEMBERS - 15,893 CONNECTED METERS WERE PROVIDED POWER AT YEAR END AT COST ON A COOPERATIVE BASIS THROUGH THE ALLOCATION OF PATRONAGE CAPITAL. 0 0 0 0 0 0 0 0 0 1 1 1 0 1 1 1 0 0 0 0 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 0 0 0 0 1 1 1 1 0 1 60 0 100 1 1 1 0 0 0 0 92266090 2693908 0 X 9 9 1 0 0 0 1 1 1 1 1 0 0 1 0 0 0 1 0 0 X GARY HURSE EVP & GM 5753963631 1300 W AVENUE D LOVINGTON NM 882601447 X JOHN INGLE PRESIDENT 7.80 X X 16435 0 0 DEAN K KINSOLVING VICE-PRESIDENT 1.10 X X 10016 0 0 DAN HARDIN SECRETARY/TREASURER 1.80 X X 4805 0 0 TERRY DAVIS TRUSTEE 2.70 X 10657 0 0 JOHN GRAHAM TRUSTEE 6.00 X 27735 0 0 ROBERT CAUDLE TRUSTEE 8.60 X 16511 0 0 WK ROBERTS TRUSTEE (1/2014 - 4/2014) 1.90 X 4054 0 0 RAY HILBURN TRUSTEE 4.20 X 9512 0 0 KENNY WALLACE TRUSTEE 1.40 X 5458 0 0 CHARLES GARNER JR TRUSTEE (4/2014 - 12/2014) 2.30 X 16053 0 0 GARY HURSE EVP & GENERAL MANAGER 60.00 X 340570 0 73526 BOBBY KIMBRO SYSTEMS OPERATIONS MANAGER 55.00 X 158942 0 76905 JOHN BENARD DISTRIBUTION MANAGER 50.00 X 128617 0 78585 MICHAEL FARIS ACCOUNTING MANAGER 50.00 X 129823 0 91611 JANETTE FARIS ADMINISTRATIVE SERVICE MAN 50.00 X 117469 0 81992 GREG FAITH DIRECTOR OF SYSTEM OPERATIONS 50.00 X 102945 0 51508 DOUG GRUENWALD LINE FOREMAN 50.00 X 106019 0 57022 1205621 0 511149 7 0 1 0 SENTRY ENGINEERING 401 50TH STREET LUBBOCK TX 79404 UTILITY LINE CONSTRUCTION 831832 JTS 5310 S COCKRELL HILL ROAD DALLAS TX 75236 COMMUNICATIONS CONSTRUCTION 568665 SGS ENGINEERING 1032 OLD PEACHTREE ROAD LAWRENCEVILLE GA 30043 ENGINEERING & SYSTEM DESIGN 226541 3 X SALES OF ELECTRICITY 221000 89197074 89197074 POWER SUPPLY EQUITY 221000 1929300 1929300 PATRONAGE DIVIDENDS 221000 873446 873446 SERVICE FEES & OTHER PROGRAM REV 221000 171647 171647 92171467 642780 642780 142070 0 142070 142070 3600 138470 307602 62960 244642 244642 244642 156031 147791 8240 8240 93209199 92179707 3600 1025892 X 16635 8162504 771179 3196019 653798 697069 254614 2056290 3728503 COST OF PURCHASED POWER 66997511 DISTRIBUTION EXPENSE 2386097 ADMIN AND GENERAL 1836545 GENERATION 1368421 1084014 93209199 X 4905025 1173819 7710002 10530301 10163683 6585858 3320142 2480926 4712686 5021710 145664525 63193150 128167184 82471375 40700909 41430276 7200611 24978191 8533405 9109655 215413647 183782111 5498654 6129063 416985 349243 81719245 43864180 46359154 46998651 133994038 97341137 X 34505 35162 0 0 81385104 86405812 81419609 86440974 215413647 183782111 X 0 5021365 X X 0 1 X 0 0 379322 379322 6020903 2127689 3893214 133121434 61065461 72055973 6142866 6142866 82471375 LIFE INSURANCE CASH VALUE 798762 C RESTRICTED COR INVESTMENTS - MONEY FUNDS, TREASURIES & BONDS 34972624 C OTHER INVESTMENTS NOT RESTRICTED - CDS, TREASURIES & BONDS 5658890 C 41430276 CAPITAL TERM CERTIFICATES - CFC 146325 C PATRONAGE CAPITAL - CFC 196113 C PATRONAGE CAPITAL - WFEC 643162 C PATRONAGE CAPITAL - TEC 194584 C OTHER INVESTMENTS IN ASSOCIATED ORGANIZATIONS 546813 C EQUITY CONTRIBUTION - WFEC 23251194 C 24978191 COST OF REMOVAL LIABILITY 35834071 CONSUMER DEPOSITS 2665765 CURRENT ACCRUED LIABILITIES 4209641 POWER COST-OVERCOLLECTED 1585364 DEFERRED CREDIT - UNCLAIMED PROPERTY 2703810 46998651 X 93209199 0 93209199 0 93209199 85046695 0 85046695 8162504 8162504 93209199 Part X, Line 2: THE COOPERATIVE HAS ADOPTED THE "UNCERTAIN TAX POSITIONS" PROVISIONS OF ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA. THE PRIMARY TAX POSITION OF THE COOPERATIVE IS ITS FILING STATUS AS A TAX EXEMPT ENTITY. THE COOPERATIVE DETERMINED THAT IT IS MORE LIKELY THAN NOT THAT ITS TAX POSITION WILL BE SUSTAINED UPON EXAMINATION BY THE INTERNAL REVENUE SERVICE OR OTHER STATE TAXING AUTHORITY AND THAT ALL TAX BENEFITS ARE LIKELY TO BE REALIZED UPON SETTLEMENT WITH TAXING AUTHORITIES. Part XII, Line 4b - Other Adjustments: PATRONAGE CAPITAL ASSIGNABLE 8,162,504. SCHEDULE D Part IX: THE AMOUNT OF OTHER ASSETS ON FORM 990, PAGE 11, PART X, LINE 15 DOES NOT EQUAL OR EXCEED 5 PERCENT OF THE TOTAL ASSETS ON FORM 990, PAGE 11, PART X, LINE 16, COLUMN B. CONSEQUENTLY IN ACCORDANCE WITH IRS INSTRUCTIONS SCHEDULE D, PART IX HAS BEEN LEFT BLANK. 1 UNIVERSITY OF THE SOUTHWEST 6610 N LOVINGTON HWY HOBBS NM 88240 850164940 501(C)(3) 6000 HIGHER EDUCATION 1 SCHEDULE I, PART II ALL GRANTS, SPONSORSHIPS AND DONATIONS ARE MADE TO NON-PROFIT AND CIVIC ORGANIZATIONS THAT ARE LOCATED IN THE COOPERATIVE'S SERVICE AREA. ALL DONATIONS ARE INTENDED TO IMPROVE THE COMMUNITIES IN WHICH OUR MEMBERS RESIDE. X 1 1 X X 0 0 0 GARY HURSE EVP & GENERAL MANAGER 314812 0 21638 0 4120 0 59572 0 13954 0 414096 0 0 0 BOBBY KIMBRO SYSTEMS OPERATIONS MANAGER 156292 0 1116 0 1534 0 62951 0 13954 0 235847 0 0 0 JOHN BENARD DISTRIBUTION MANAGER 125680 0 1733 0 1204 0 64630 0 13955 0 207202 0 0 0 MICHAEL FARIS ACCOUNTING MANAGER 120166 0 1711 0 7946 0 78353 0 13258 0 221434 0 0 0 JANETTE FARIS ADMINISTRATIVE SERVICE MAN 109648 0 1733 0 6088 0 81992 0 0 0 199461 0 0 0 GREG FAITH DIRECTOR OF SYSTEM OPERATIONS 98079 0 1733 0 3133 0 34155 0 17353 0 154453 0 0 0 DOUG GRUENWALD LINE FOREMAN 103166 0 1733 0 1120 0 43067 0 13955 0 163041 0 0 0 FORM 990, PART II, COLUMN C INCLUDED IN THIS AMOUNT IS THE ACTUARIAL VALUE OF BENEFITS PAYABLE UNDER A DEFINED BENEFIT RETIREMENT PLAN. THE CONTRIBUTION RATE FOR PARTICIPANTS IN THE NRECA R&S DEFINED BENEFIT PENSION PLAN ARE THE SAME FOR ALL INDIVIDUALS IN THE PLAN. THE CHANGE IN ACTUARIAL VALUE FOR EACH PARTICIPANT, HOWEVER, VARIES WITH AGE. IN OTHER WORDS, THE OLDER A PLAN PARTICIPANT IS, THE GREATER THE INCREASE IN THAT INDIVIDUAL'S CHANGE IN ACTUARIAL VALUE, ALL OTHER THINGS BEING EQUAL. GARY HURSE ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 52,282 401(K) EMPLOYER CONTRIBUTION 7,290 TOTAL COLUMN C $ 59,572 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (52,282) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 77,813 EXPENSE TO COOPERATIVE $ 85,103 BOBBY KIMBRO ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 58,267 401(K) EMPLOYER CONTRIBUTION 4,684 TOTAL COLUMN C $ 62,951 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (58,267) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 48,544 EXPENSE TO COOPERATIVE $ 53,228 JOHN BENARD ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 60,914 401(K) EMPLOYER CONTRIBUTION 3,716 TOTAL COLUMN C $ 64,630 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (60,914) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 38,512 EXPENSE TO COOPERATIVE $ 42,228 MICHAEL FARIS ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 74,839 401(K) EMPLOYER CONTRIBUTION 3,514 TOTAL COLUMN C $ 78,353 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (74,839) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 35,064 EXPENSE TO COOPERATIVE $ 38,578 JANETTE FARIS ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 78,696 401(K) EMPLOYER CONTRIBUTION 3,296 TOTAL COLUMN C $ 81,992 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (78,696) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 33,513 EXPENSE TO COOPERATIVE $ 36,809 GREG FAITH ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 31,089 401(K) EMPLOYER CONTRIBUTION 3,066 TOTAL COLUMN C $ 34,155 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (31,089) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 31,768 EXPENSE TO COOPERATIVE $ 34,834 DOUG GRUENEWALD ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN $ 40,352 401(K) EMPLOYER CONTRIBUTION 2,715 TOTAL COLUMN C $ 43,067 LESS: ACTUARIAL INCREASE IN DEFINED BENEFIT PLAN (40,352) ADD: CASH CONTRIBUTION TO DEFINED BENEFIT PLAN 28,027 EXPENSE TO COOPERATIVE $ 30,742 Form 990, Part VI, Section A, line 2 A BUSINESS RELATIONSHIP EXISTS BETWEEN GARY HURSE, GENERAL MANAGER, AND JOHN INGLE, BOARD PRESIDENT. BOTH INDIVIDUALS SERVE ON THE BOARDS OF OTHER COMPANIES AT THE REQUEST AND BENEFIT OF THE COOPERATIVE. Form 990, Part VI, Section A, line 6 THE COOPERATIVE WAS FORMED BY THE MEMBERS TO PROVIDE ELECTRIC SERVICE AT COST ON A COOPERATIVE BASIS. Form 990, Part VI, Section A, line 7a THE MEMBERS OF THE COOPERATIVE VOTE ON THE BOARD OF DIRECTORS. ELECTIONS ARE DONE ON A ONE MEMBER ONE VOTE BASIS. Form 990, Part VI, Section A, line 7b THE FOLLOWING ACTS REQUIRE APPROVAL OF THE MEMBERS OF THE COOPERATIVE: 1. DISPOSAL OF A SUBSTANTIAL PORTION OF THE COOPERATIVE'S ASSETS; 2. DISSOLUTION/LIQUIDATION OF THE COOPERATIVE; 3. MERGER OR CONSOLIDATION WITH ANOTHER COOPERATIVE ORGANIZATION; AND 4. AMENDMENTS TO THE ARTICLES OF INCORPORATION AND BY-LAWS. Form 990, Part VI, Section B, line 11 MANAGEMENT PRESENTED A COPY OF THE FORM 990 TO THE BOARD FOR DISCUSSION, REVIEW AND APPROVAL PRIOR TO FILING. Form 990, Part VI, Section B, line 15a THE BOARD OF DIRECTORS USE A COMPENSATION SURVEY WHEN DETERMINING THE COMPENSATION OF THE GENERAL MANAGER. THE SURVEY SHOWS COMPARATIVE SALARIES FOR GENERAL MANAGERS FROM SIMILARLY SITUATED COOPERATIVES LOCATED IN NEW MEXICO AND THE NATION. Form 990, Part VI, Section C, line 19 THE COOPERATIVE PROVIDES A COMPLETE COPY OF ITS GOVERNING DOCUMENTS AND AUDITED FINANCIAL STATEMENTS TO ANY MEMBER WHO REQUESTS A COPY OF ANY SUCH DOCUMENT. ANNUALLY THE COOPERATIVE MAILS A COPY OF THE AUDITED BALANCE SHEET AND INCOME STATEMENT TO THE MEMBERS OF THE COOPERATIVE WITH THE ANNUAL REPORT. FORM 990, PART VII, COLUMN F IN ORDER TO PROVIDE RETIREMENT BENEFITS TO ITS EMPLOYEES, THE COOPERATIVE HAS ESTABLISHED A DEFINED CONTRIBUTION PLAN UNDER SECTION 401(K) OF THE INTERNAL REVENUE CODE. THE COOPERATIVE CONTRIBUTES BASED ON A PERCENTAGE OF THE PARTICIPATING EMPLOYEE'S COMPENSATION AS DETERMINED UNDER THE PLAN DOCUMENT. ADDITIONALLY, THE COOPERATIVE PARTICIPATES IN A MULTI-EMPLOYER DEFINED BENEFIT PLAN. CONTRIBUTIONS TO THIS PLAN ARE BASED ON THE FULL FUNDING LIMITATION OF SUCH PLAN. EMPLOYER CONTRIBUTIONS FOR BOTH PLANS ARE AVAILABLE TO PARTICIPATING EMPLOYEES MEETING THE ELIGIBILITY REQUIREMENTS OF SUCH PLANS, INCLUDING OFFICERS, KEY EMPLOYEES AND HIGHLY COMPENSATED EMPLOYEES. THE COOPERATIVE ALSO PROVIDES HEALTH, DENTAL, VISION AND LIFE INSURANCE TO ALL ELIGIBLE EMPLOYEES THROUGH A QUALIFIED PLAN. THE AMOUNTS REPORTED ON PART VII, COLUMN (F) FOR OFFICERS, KEY EMPLOYEES AND HIGHLY COMPENSATED EMPLOYEES ARE COMPRISED OF THE ACTUARIAL INCREASE IN THE DEFINED BENEFIT PLAN, THE EMPLOYER CONTRIBUTIONS TO THE 401(K) PENSION PLAN AND THE INSURANCE PAID ON THEIR BEHALF. IN ADDITION TO THE ABOVE PENSION PLANS, THE COOPERATIVE ALSO PROVIDES POST-RETIREMENT HEALTH INSURANCE BENEFITS THROUGH A FUNDED WELFARE BENEFIT PLAN. THE VALUE OF THESE BENEFITS HAS NOT BEEN ESTIMATED. FORM 990, PART VII, SECTION A THE BOARD OF DIRECTORS CONSIDERS THE GENERAL MANAGER TO BE BOTH THE TOP MANAGEMENT OFFICIAL AND THE TOP FINANCIAL OFFICIAL. THEREFORE, ONLY THE GENERAL MANAGER IS LISTED AS AN EMPLOYEE OFFICER. FORM 990, PART VIII, LINE 2 PATRONAGE DIVIDENDS RESULT FROM THE PURCHASE OF WHOLESALE POWER FROM A GENERATION & TRANSMISSION COOPERATIVE. PATRONAGE DIVIDENDS ALSO 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 SERVICE PROVIDED BY THE COOPERATIVE TO ITS MEMBERS. FORM 990, PART VIII, LINE 2 THE COOPERATIVE AND WESTERN FARMERS ELECTRIC COOPERATIVE (WFEC), A RURAL ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, HAVE ENTERED INTO A WHOLESALE POWER CONTRACT WHERE WFEC WILL PROVIDE THE COOPERATIVE WITH ELECTRIC POWER. AS PART OF THE AGREEMENT THE COOPERATIVE MUST CONTRIBUTE EQUITY TO WFEC IN A MANNER AND AMOUNT SUCH THAT, AS OF JUNE 1, 2026, THE COOPERATIVE HAS CONTRIBUTED EQUITY TO WFEC COMPARABLE TO THE AMOUNT OF EQUITY CONTRIBUTED TO WFEC BY PRIOR EXISTING MEMBERS. THE PURPOSE OF THE CONTRIBUTION IS TO OBTAIN A POWER SUPPLY IN ORDER TO MEET THE TERMS OF THE WHOLESALE PURCHASE CONTRACT. PURUSANT TO APPROVAL BY THE NEW MEXICO PUBLIC REGULATION COMMISSION, THE EQUITY CONTRIBUTION IS RECOVERED MONTHLY FROM THE MEMBERS THROUGH THE SALE OF ELECTRICITY. FORM 990, PART IX THE ACCOUNTING RECORDS OF THE COOPERATIVE ARE MAINTAINED IN ACCORDANCE WITH THE RUS UNIFORM SYSTEM OF ACCOUNTS AS PRESCRIBED FOR ELECTRIC BORROWERS OF THE RURAL UTILITIES SERVICE (RUS). THE UNIFORM SYSTEM OF ACCOUNTS DOES NOT RECORD EXPENSES IN THE GENERAL EXPENSE CATEGORIES PROVIDED ON PART IX LINES 1 - 23. THE COOPERATIVE SEPARATELY STATES 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 UNIFORM SYSTEM OF ACCOUNTS. FORM 990, PART IX, LINES 5-7 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 $ 3,967,198 LESS DIRECTORS FEES REPORTED ON 1099-MISC (121,236) LESS EMPLOYEE OFFICER BENEFITS INCLUDED IN LINE 5 (150,431) PLUS SALARIES AND WAGES ALLOCATED TO NONOPERATING MARGINS 1,238 PLUS SALARIES AND WAGES CAPITALIZED DIRECTLY TO PLANT 511,300 PLUS SALARIES AND WAGES CAPITALIZED/EXPENSED INDIRECTLY THROUGH CLEARING & OTHER ACCOUNTS 1,477,982 TOTAL WAGES ACCRUED AND/OR PAID $ 5,686,051 FORM 990, PART IX, LINE 24 ADMINISTRATIVE AND GENERAL EXPENSE IS COMPRISED OF THE FOLLOWING: OFFICE AND SUPPLIES $ 232,081 OUTSIDE SERVICES EMPLOYED 198,546 INJURY & DAMAGES 12,330 REGULATORY COMISSION EXPENSE 289,740 TRUSTEE EXPENSES 17,378 DUES ASSOCIATED ORGANIZATION 137,333 ADVERTISING - CONSERVATION AND SAFETY 221,830 MISCELLANEOUS & GENERAL 380,120 ANNUAL MEETING EXPENSE 95,019 CAPITAL CREDIT EXPENSE 23,622 MAINTENANCE GENERAL PLANT 228,546 TOTAL ADMINISTRATIVE AND GENERAL EXPENSE PER 990 $1,836,545 FORM 990, PART IX, LINE 24E OTHER EXPENSES ARE COMPRISED OF THE FOLLOWING: COST OF REMOVAL, NET OF EARNINGS $ 363,061 CUSTOMER ACCOUNTS 338,544 TRANSMISSION EXPENSE 294,903 TAXES - PROPERTY & OTHER 52,925 SALES EXPENSE 34,581 TOTAL OTHER EXPENSES PER FORM 990 LINE 24E $ 1,084,014 FORM 990, PART IX, LINE 4 THE FORM 990 INSTRUCTIONS SPECIFICALLY STATE THAT THE AMOUNT OF PATRONAGE DIVIDENDS PAID TO THE MEMBERS (HEREINAFTER REFERRED TO AS PATRONS) SHOULD BE REPORTED ON PART IX, LINE 4 AS "BENEFITS PAID TO MEMBERS". THE PHRASE "PATRONAGE DIVIDENDS PAID" REFERS TO THE PROCESS, SUBSEQUENT TO YEAR-END, BY WHICH THE COOPERATIVE ALLOCATES PATRONAGE CAPITAL TO AND, THEREFORE, OPERATES AT COST WITH ITS PATRONS. THE COOPERATIVE'S TAX EXEMPT PURPOSE IS TO PROVIDE ELECTRICITY TO ITS PATRONS AND TO DO SO ON A COOPERATIVE BASIS. TAX LAW DEFINES "OPERATING ON A COOPERATIVE BASIS" AS SUBORDINATION OF CAPITAL, DEMOCRATIC CONTROL, AND OPERATION AT COST. THE COOPERATIVE OPERATES AT COST THROUGH THE ALLOCATION OF TRUE PATRONAGE DIVIDENDS (ALSO REFERRED TO AS ALLOCATIONS OF PATRONAGE CAPITAL) TO ITS PATRONS. PATRONAGE DIVIDENDS ARE CONSIDERED PAID IF THE ALLOCATION IS MADE (1) PURSUANT TO A PRE-EXISTING OBLIGATION, (2) FROM THE MARGINS PRODUCED FROM THE TRANSACTIONS DONE WITH OR FOR PATRONS, AND (3) IN A FAIR AND EQUITABLE MANNER ON THE BASIS OF PATRONAGE (I.E. PURCHASES). ADDITIONALLY, THE ALLOCATION OF PATRONAGE DIVIDENDS SHOULD BE MADE WITHIN A REASONABLE TIME PERIOD AFTER THE CLOSE OF THE COOPERATIVE'S YEAR-END OF DECEMBER 31. EACH ONE OF THESE REQUIREMENTS FOR A TRUE PATRONAGE DIVIDEND IS PROVIDED FOR IN THE NON-PROFIT OPERATION ARTICLE OF THE COOPERATIVE'S BYLAWS AND IS SUMMARIZED AS FOLLOWS: (A) IN ORDER TO INDUCE PATRONAGE AND TO ASSURE THAT THE COOPERATIVE WILL OPERATE ON A NONPROFIT BASIS, THE COOPERATIVE IS OBLIGATED TO ACCOUNT ON A PATRONAGE BASIS TO ALL ITS PATRONS FOR ALL AMOUNTS RECEIVED AND RECEIVABLE FROM THE FURNISHING OF ELECTRIC POWER AND ENERGY IN EXCESS OF OPERATING COSTS AND EXPENSES PROPERLY CHARGEABLE AGAINST SUCH SERVICES (I.E. MARGINS FROM THE PROVISION OF ELECTRIC POWER AND ENERGY). (B) THE MARGINS FROM THE PROVISION OF ELECTRIC POWER AND ENERGY ARE RECEIVED WITH THE UNDERSTANDING THAT THEY ARE FURNISHED BY THE PATRONS AS CAPITAL. (C) THE COOPERATIVE IS OBLIGATED TO PAY BY CREDITS TO A CAPITAL ACCOUNT FOR EACH PATRON FOR ALL SUCH MARGINS. AND (D) ALL SUCH AMOUNTS CREDITED TO THE CAPITAL ACCOUNT OF ANY PATRONS SHALL HAVE THE SAME STATUS AS THOUGH THEY HAD BEEN PAID TO THE PATRON IN CASH IN PURSUANCE OF A LEGAL OBLIGATION TO DO SO AND THE PATRON HAD THEN FURNISHED TO THE COOPERATIVE CORRESPONDING AMOUNTS OF CAPITAL. THE AMOUNT REPORTED ON PART IX, LINE 4 REPRESENTS THE AMOUNT OF PATRONAGE CAPITAL THAT IS EITHER ALLOCATED OR TO BE ALLOCATED TO THE PATRONS RESULTING FROM THEIR PURCHASE OF ELECTRICITY FROM THE COOPERATIVE FOR THE 2014 CALENDAR YEAR. AS NOTED ABOVE, SUCH AMOUNTS ARE ALLOCATED SUBSEQUENT TO YEAR-END IN A FAIR AND EQUITABLE MANNER ON THE BASIS OF PATRONAGE (I.E. PURCHASES). THE AMOUNTS ALLOCATED ARE REPRESENTATIVE OF THE MARGINS FROM THE PROVISION OF ELECTRIC POWER AND ENERGY TO THE PATRONS AND ARE DONE PURSUANT TO THE OBLIGATION THAT EXISTED IN THE BYLAWS PRIOR TO THE COOPERATIVE PROVIDING ELECTRICITY TO ITS PATRONS. THEREFORE, THESE AMOUNTS MEET THE DEFINITION OF THE TERM "PATRONAGE DIVIDENDS PAID". PLEASE NOTE, HOWEVER, THAT BECAUSE PATRONAGE DIVIDENDS IS THE PROCESS BY WHICH THE COOPERATIVE OPERATES AT COST WITH ITS PATRONS AND THEREBY A KEY COMPONENT TO ACCOMPLISHING ITS EXEMPT PURPOSE, THE COOPERATIVE HAS REPORTED THE AMOUNT OF ITS 2014 MARGIN THAT HAS BEEN OR IS TO BE ALLOCATED TO THE PATRONS SUBSEQUENT TO YEAR-END. SUCH AMOUNTS ARE AN EXPENSE FOR FORM 990 REPORTING AND IS NOT AN EXPENSE FOR FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. AS A RESULT, THE DIFFERENCE BETWEEN THE COOPERATIVE'S GAAP BASIS FINANCIAL STATEMENTS AND THE REVENUE LESS EXPENSES REPORTED ON PART I, LINE 19 IS THE AMOUNT OF PATRONAGE DIVIDENDS REPORTED AS BENEFITS PAID TO MEMBERS. FORM 990, PART X, LINES 19 AND 25 THE COOPERATIVE HAS DETERMINED THAT UNCLAIMED PROPERTY AS HELD AND DETERMINED UNDER STATE LAW, SHOULD BE INCLUDED ON PART X, LINE 25 AS "OTHER LIABILITIES" FOR 2014. TO INCREASE CONSISTENCY, THE ACCRUED LONG-TERM LIABILITIES FROM THE PRIOR YEAR HAVE BEEN RECLASSIFIED FROM LINE 19 TO LINE 25. Form 990, Part XI, line 9: NET CHANGE IN MEMBERSHIPS 657. OTHER COMPREHENSIVE INCOME PROVISION FOR PENSIONS AND BENEIFTS -130,500. PATRONAGE CAPITAL ASSIGNABLE 8,162,504. PATRONAGE CAPITAL RETIRED -3,011,296. FORM 990, PART XII, LINE 2C THE BOARD AS A WHOLE IS RESPONSIBLE FOR OVERSEEING THE AUDIT AND SOLICITING THE CPA WHO WILL PERFORM THE AUDIT. PROCEDURAL CHANGES DID NOT OCCUR DURING THE YEAR. LCEC GENERATION LLC PO BOX 1447 LOVINGTON TX 882601447 ELECTRICITY GENERATION NM 4909861 0 LEA COUNTY ELECTRIC COOPERATIVE INC LEA COUNTY ELECTRIC EDUCATION FOUNDATION PO BOX 1447 LOVINGTON NM 88260 850351147 TO PROVIDE COLLEGE SCHOLARSHIPS TO MEMBERS OF THE COOPERATIVE. NM 501(C)(3) PF LEA COUNTY ELECTRIC COOPERTIVE INC 1 ENERGY RESEARCH AND DEVELOPMENT INC PO BOX 1447 LOVINGTON NM 88260 850228936 REAL ESTATE NM LEA COUNTY ELECTRIC COOPERTIVE INC C 29082 1.00000 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 LEA COUNTY ELECTRIC EDUCATION FOUNDATION O N/A - LESS THAN $50,000 ENERGY RESEARCH & DEVELOPMENT INC B N/A - LESS THAN $50,000