Marketing to Co-ops

Steps for Success

Marketing to Cooperatives
WORKSHOP MODERATORS
Janine Weidow Manager, External Marketing NRECA
janine.weidow@nreca.coop

Steve Collier Vice President of Business Development Milsoft Utility Solutions

steve.collier@milsoft.com

Marketing to Cooperatives
AGENDA
8:00 am 8:30 10:00 12:00 1:00 pm 2:00 2:30 Welcome Remarks Introduction/Goals Workshop Session: Electric Co-op 101 The Cooperative Perspective Working Luncheon NRECA Resources Doing Business with/Selling to Co-ops Discussion/Closing Remarks Adjourn

Workshop Goal: Education

Workshop Goal = EDUCATION
Better understand cooperatives structure & operations. Hear cooperatives discuss how they do business with vendors. Learn about NRECA structure & operations.
And how NRECA works with its sister organizations. And NRECA resources for Associate Members

Hear successful vendors discuss doing business with co-ops. Get your questions answered.

Marketing to Co-ops

The Electric Cooperatives National Trade Association

Electric Utility Trade Associations

Cooperatives Municipals

Investor-Owned -

 National Rural Electric Cooperative Association www.nreca.coop Primary Focus: Rural Electric Cooperatives Distribution Cooperatives Generation & Transmission (G&T) Cooperatives Statewide / Regional Trade Associations Products & Services Co-ops Affiliate Members (vendors) >99% of electric cooperatives are Members.

 RE Magazine Advertising Editorial Content Conferences Flagship conference = TechAdvantage & Expo Cooperative Research Network Part of NRECA
All NRECA Members benefit

Touchstone Energy

 American Public Power Association www.appanet.org Primary Focus: Public Power Systems Divisions of local government: municipal, county, state
Include other utilities: water & wastewater, gas, telecomm

Joint action agencies (like co-op G&Ts) Statewide / regional trade associations Associate Members (vendors) Municipal leagues & related government organizations

Less than half of public power systems are members.

 Public Power magazine Advertising Editorial Content Conferences Flagship Conference = Annual National Conference.
Relatively small, limited exhibitor space & exposure.

DEED R&D network Voluntary, dues based.

A minority of APPA Members participate.

 Home Town Connections is a for-profit affiliate APPA owns 64%, public power systems the remainder. Selects an exclusive preferred vendor in each category. Public power systems and trade associations are indirect marketing & sales channels. Charges a marketing fee and receives commission on sales to any public power system. Vendor partners discount products / services to APPA Members.

 Edison Electric Institute www.eei.org Primary Focus: Shareholder-Owned Electric Utilities, aka Investor-Owned Utilities (IOUs). International Affiliates Associate Members (vendors) Edison Institute Institute for Energy Efficiency >95% of IOUs are Members

 Publications & Conferences are not central to

membership.
Scant advertising, exhibitor opportunities or exposure

Electric Power Research Institute Independent of EEI Voluntary, dues supported Also has co-op and public power members.

Marketing to Co-ops

More On NRECA

 Founded in 1942 Organized specifically to: Overcome World War II shortages of electric construction materials, Obtain insurance coverage for newly constructed rural electric cooperatives, and Mitigate wholesale power supply problems.

 Member-Elected Board of Directors 47 members One from each state with an electric cooperative Glenn English Chief Executive Officer Formerly U.S. Representative, Oklahoma Headquartered in Arlington, Virginia RS&I Division in Lincoln, Nebraska

THE NATIONAL ORGANIZATION DEDICATED TO REPRESENTING ELECTRIC COOPERATIVES AND THE CONSUMERS THEY SERVE
National leadership and member representation for legislative, regulatory, and public policy. Education and training programs Insurance, employee benefits and financial services Technical expertise, advice and R&D Electrification assistance in developing countries around the world National branding and services

Marketing to Co-ops

NRECA Members

DISTRIBUTION MEMBERS
Poles, wires and meters Electric distribution cooperatives and nonprofit associations, nonprofit corporations, public utility districts, and government corporations or authorities Located in a state, territory, possession or commonwealth of the U.S. Engaged in furnishing electricity at retail to consumers

GENERATION & TRANSMISSION MEMBERS

Generate and resell wholesale power to their member utilities Cooperatives, nonprofit associations, nonprofit corporations and public utility districts Located in a state, territory, possession or commonwealth of the United States Engaged in the marketing, generation and/or transmission of wholesale bulk electricity for sale to others for the purpose of resale

TRADE & SERVICE ASSOCIATION MEMBERS

Related organizations that are not actually engaged in the marketing, generation, transmission or distribution of electricity
members are generation & transmission or distribution cooperative, associations, nonprofit corporations, public utility districts

Located in a state, territory, possession or commonwealth of the United States Engaged in support of electric co-ops marketing, generation, transmission or distribution of electricity

TRADE & SERVICE ASSOCIATION MEMBERS (cont)

Unified advocacy to the general public, regulatory bodies and state legislatures on behalf of their members Voluntarily membership Governed by member-elected representatives Offer desired services
Education & training Publish newspapers or magazines for members Group purchasing Other

PRODUCT & SERVICE COOPERATIVE MEMBERS

Cooperatively-owned organizations Members generally include NRECA members Objectives are aligned with the objectives of NRECA. Provide products and services at better price, quality, terms, service than would be available elsewhere
Insurance - Federated Banking - NRUCFC Data Processing NISC, SEDC Telecommunications NRTC Transformers & Equipment - UUS

ASSOCIATE MEMBERS
Companies doing business with NRECA members Includes:
Utility equipment manufacturers, distributors, wholesalers Consulting / professional services IT & software products and services Telecomm products and services Financial products and services Consumer products and services

Many participate in TechAdvantage & Expo and advertise in Rural Electric Magazine.

Marketing to Co-ops

Other NRECA Organizations

November 1962 - NRECA and the newly-established U.S. Agency for International Development (USAID) signed an inaugural cooperative agreement in the White House Oval Office in a ceremony witnessed by President John F. Kennedy. NRECA International, Ltd. was incorporated as a wholly owned subsidiary of NRECA in June 1972.

HELPING DEVELOPING COUNTRIES ELECTRIFYY

Original purpose: Share lessons learned from US rural electrification with developing countries around the world. Assisted development and deployment of rural electrification programs in over 40 countries. Support from USAID, U.S. Department of Agriculture, the World Bank, the UK Department for International Development (DFID), Asian Development Bank (ADB), and host country government agencies.

THE NATIONAL BRAND OF ELECTRIC COOPERATIVES

Voluntary membership for NRECA members More than 660 Touchstone Energy cooperatives in 46 states are delivering electric power and energy to more than 30 million consumers. www.touchstoneenergy.com

THE POWER OF HUMAN CONNECTIONS

National promotion & advertising
Television ads on various channels including:

Print ads in major national publications including: Advertising brand and collateral for member co-ops to use.

NATIONWIDE SERVICES FOR MEMBERS CUSTOMERS

Bill Consolidation and Energy Management Program Touchstone Energy Home Energy Saver Program Co-op Connections Sites Across America.com Energy education programs
Kids "Super Energy Saver" Program Discovery School Program - Get Charged!

NRECA

Monitor, evaluate & apply technologies that help electric cooperative utilities control costs, increase productivity, and enhance service to their consumermembers.
Results are available to all NRECA voting members.
Online and printed studies, reports, newsletters Web conferences Seminars and presentations at conferences

Partners with US DOE, EPRI and other R&D organizations. Six Member Advisory Boards & an Industry Advisory Group

NRECA

Principal areas of investigation include: Clean coal and environmental-management technologies Renewable and alternative energy End-use solutions that help the customer make better use of electricity Distribution system operations best practices Broadband communications and information technology Transmission capacity and security

Marketing to Co-ops

National Cooperative Business Network Organizations

INSURANCE EXCHANGE FOR ELECTRIC COOPERATIVES

Founded in 1959 Property & casualty insurance for rural electric co-ops in 40 states. Includes coverage for water, sewer, propane and natural gas, surge suppression, security systems and other cooperative business ventures. Phil Irwin, President www.federatedrural.com

SERVICE | INTEGRITY | EXCELLENCE

Founded by NRECA, incorporated in 1969 Original purpose was to develop independent financing to supplement / replace REA Provides banking services to more than 1,050 electric cooperative owners serving 32 million ultimate users. Also provides banking services to rural telephone utilities. Sheldon Petersen, Governor & CEO www.nrucfc.org

NATIONAL INFORMATION SOLUTIONS COOPERATIVE

Merger of CADP & NCDC in 2000 500+ electric & telco members in 47 states Accounting & business services, customer information & billing services, e-commerce solutions, E&O solutions. Also provides CIS services to national retailers in cooperation with Touchstone Energy. Vern Dosch, CEO www.nisc.coop

SOUTHEASTERN DATA COOPERATIVE

200+ electric members in 33 states Accounting & business services, customer information & billing services, e-commerce solutions, E&O solutions. Ron Camp, CEO www.sedc.coop

UNITED UTILITY SUPPLY

230 electric co-op members in 17 states Manufactures and sells distribution transformers Distributes electrical distribution supplies & equipment Ron Sheets, President www.uus.org

YOUR TELECOMMUNICATIONS COOPERATIVE

Founded 1986 by NRECA, NRUCFC and NTCA To provide telecommunications for internal use and for resale by rural electric and telephone utilities. Bob Phillips, CEO Original business was satellite television for members and affiliates eventually serving >2 million retail subscribers Also offers IPTV, satellite broadband, AMR, SCADA, voice & data dispatch radio, MVNO mobile phone. www.nrtc.org

Marketing to Co-ops

What Is a Cooperative?

COOPERATIVELY-OWNED BUSINESSES
A business incorporated under local state law. 1752, Benjamin Franklin forms Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, still in operation today 1844, the Rochdale Equitable Pioneers Society opened a cooperative store on Toad Lane in Rochdale, England. Cooperatives are deemed to be not-for-profit and therefore usually tax-exempt.

THE COOPERATIVE PRINCIPLES

Voluntary & Open Membership Democratic Member Control Member Economic Participation Autonomy & Independence Education, Training & Information Cooperation Among Cooperatives Concern for Community

 Cooperatives usually form to provide products or

services with greater economy, efficiency, quality or values than would otherwise be available.
Often to achieve economies of scale or leverage of scope.

There are three kinds of cooperatives:

Consumer-owned Producer-owned Employee-owned

Electric cooperatives are consumer-owned

COOPERATIVES IN THE US
Over 120 million people are members of 48,000 cooperatives. Nearly 10,000 U.S. credit unions have 84 million members and assets in excess of $600 billion. Well known national cooperatives include:
USAA (customer-owned) ACE Hardware (employee-owned) Ocean Spray, Land O Lakes (producer-owned)

Marketing to Co-ops

More About Electric Cooperatives

A Brief History of Electric Cooperatives

FDR learned in 1930 that 80% of the US was electrified, but only 10% of rural America had electric service.
FDR formed Rural Electrification Agency in 1934.
Congress formed Rural Electrification Administration under USDA in 1935. Offered loan guarantees / low interest loans to qualified borrowers (not just cooperatives). Provided financial and engineering standards. USDA reorganized in 1994 and replace the REA with the Rural Utilities Service (RUS).

A Brief History of Electric Cooperatives

RURAL ELECTRIC COOPERATIVES
Most IOUs were not interested in the risks and low rate of return for extending rural electric service. Consumers banded together to form cooperative (consumerowned) corporations to qualify for REA loans and loan guarantees. Within ten years of the REA being formed, 90% of rural Americans had electric service.

Electric Co-op Facts

864 distribution cooperatives and 66+ generation and

transmission cooperatives serve:

Over 40 million people across 47 states
15.5 million+ residences 1.8 million commercial accounts 138,792 industrial (less than 1% of the total)+ industrial accounts

17.5 million meters 2,500 of 3,141 counties in the U.S.

Electric Co-op Facts

Assets worth $100 billion Own and maintain 2.5 million line miles
42% of the nations electric distribution lines covering of the nation's landmass

Deliver 10% of total kilowatt hrs sold in the U.S. each year generate nearly 5% of total electricity produced in the U.S. each year Spend nearly $9 billion annually on products and services needed to operate their systems Employ nearly 67,000 people

Electric Co-op Facts

Rural Electric Cooperatives
Only 16 of 47 states with electric regulatory authorities regulate some aspects of electric co-ops' operations Rates are reviewed and approved by local Board of Directors Rate Objectives of Utility: covering costs/expenses

Electric Co-op Facts

DISTRIBUTION COOPERATIVES RESELL POWER
Purchase wholesale power
A handful of distribution cooperatives generate some power

G&Ts provide about 40% of power purchased by distribution cooperatives

Full and partial requirements contracts

Distribution cooperatives obtain the remainder of their wholesale power from a variety of other sources

Electric Co-op Facts

SOME ELECTRIC COOPERATIVES ALSO OFFER
Community development & revitalization projects
Improvement of rural water and sewer systems

Assist in delivery of health care and education Internet service provider (ISP) Propane Natural gas Premises security monitoring & control HVAC equipment & service

Electric Co-op Facts

COOPERATIVE COMPARISONS
Pedernales (TX) is largest with 230,000 meters. Alaska Village serves the largest land area of any electric utility in the world with only 7,400 meters. Gila River Community Utility Authority is the smallest with 26 meters.
I-N-N (AK) is the next smallest with 296 meters.

Average size = 19,000 meters Median size = 12,500 meters Rio Grande (TX) is the sparsest with <2 meters / line mile (national average = 7 meters / line mile)

Marketing to Co-ops

Comparing Electric Co-ops to Other Electric Utilities

Division of Activities Americas Electric Utilities

Utility Comparison
Electric Utility Comparisons

Number of Utilities

Size (median)

Residential Residential Residential Customers, Revenues, kWh sales, % of total % of total % of total

Investor Owned Publicly Owned Cooperatives*

220 400,000 2,000 2,000 930 12,500

73% 15% 12%

76% 14% 10%

74% 16% 10%

*864 Distribution, 66 Generation & Transmission Cooperatives Source: Department of Energy Year of Data: 2006

Cooperatives Compared With Other Electric Utilities:

Co-op sales grew twice as fast as the total electric industry average in 2000. Customers Per Mile of Line Cooperatives Investor-Owned Municipals 6.6 34 44 Revenues Per Mile of Line $8,500 $59,000 $72,000

Who Sells Americas Electricity?

Total U.S. Electric Utility Comparison by Sector

Co-op Retail Sales

Co-op Power Generation

Co-op Fuels Used in Power Generation

Marketing to Co-ops

Understanding Electric Cooperatives

Understanding Electric Co-ops

ELECTRIC CO-OP CHARACTERISTICS
They are customer-owned, not-for-profit, principle-based. Their primary focus is cost, not profit. They are extremely sensitive to individual customers. Staff roles are broader & duties overlap. Their have distinctive practices & vocabulary.

Understanding Electric Co-ops

ELECTRIC CO-OP CHARACTERISTICS
Business is very relationship based, more personal, less formal. Cooperatives nationwide are a tight knit community. Individual cooperatives are locally controlled, operate like a family, are very independent. Co-ops prefer that you already work well with other co-ops.

Understanding Electric Co-ops

ELECTRIC CO-OP CHARACTERISTICS (cont.)
Most electric cooperatives share many characteristics But, no two electric cooperatives are just alike. What most impacts a co-ops view of planning & operations?
Size Growth Load factor Wholesale power cost C&I customers Community demographics Leadership

Marketing to Co-ops

The Cooperative Perspective Panel Discussion

The Cooperative Perspective

Panel Discussion
Moderator: Panelists: Steve Collier, Milsoft Final list to come ASAP

The Cooperative Perspective

Purchasing Technology Operations

How Co-ops Buy Products & Services

Cooperatives vs. Municipals

RUS procurement rules (CFR 1726) Government procurement rules RUS borrowers must purchase from approved materials list

How Co-ops Buy Products & Services

Common purchasing practices
5 vendors or less (few suppliers) 3 bids orally requested 90% of purchasing activities are manual transactions Public bid opening not required unless a large power plant Supply chain management decisions by committee, OR Purchasing responsibilities are split among several functions

So find the center of influence for your product or service

How Co-ops Buy Products & Services

Advantages for the supplier:

Co-ops are easy to work with less bureaucratic Co-ops are dependable and pay on time Co-ops are usually willing to pay for JIT deliveries and other value added services Co-ops are known to be honest and loyal

The Co-op Supply Chain

Engineering planning Purchase need Warehouse Review Suppliers contacted Quotes received Supplier selected Order typed & transmitted

Price & Delivery

Order shipped or backorder released

Warehouse receives

Receiving copy is sent to purchasing &/or A/P

Invoice received

Supplier Paid

How Co-ops Buy Products & Services

What Co-ops Buy

Line transformers (20%) Conductor (18%) Poles, towers, etc (13%) Station equipment (11%)
The big 4 account for @ 2/3 of the spend!

How Co-ops Buy Products & Services

The Suppliers role

Long standing relationships mutual trust Products priced on a case-by-case basis Stocking/Consignment/JIT programs Little long-term planning

Areas of Potential Improvement

Some co-ops manage their supply chain, some dont Growing focus on supply chain cost performance and

measurement
Group buying, standardization, etc. can reduce costs Almost of all co-ops are unwilling to join with other co-ops in the purchase or storage of materials Normally utilize short-term forecasting 3 bids and a cloud of dust preferred method Inventory turnover varies based on vendor alliances vs. self

management

Decision Influences
Having other co-ops as customers Understanding what a co-op is and how co-ops operate Successful track record Appearances at NRECA conferences/shows Customer Support/Tech Support

Panel recommendations:
Show success with other co-ops (if not a co-op, then

a similar sized electric utility)

Understand what a co-op IS and what a co-op is

ABOUT
Demonstrate a willingness to work with the co-op,

even if theyre not huge

Create a relationship Customer Service

How do co-ops find information?

Shows/Conferences (mostly NRECA) Trade Magazines (RE, T&D,) Web sites GOSSIP
Talking with counterparts at other co-op shows, meetings, schools

Staying Informed
Reading publications such as: Rural Electric Magazine Transmission & Distribution Electrical World Utility Automation Energy IT PC Magazine Networking with other cooperatives. Keeping informed on technology projects ongoing at

cooperatives.

Staying Informed
Attending trade shows
Distributech NRECA TechAdvantage Conference & Expo IEEE Rural Electric Power Conference IEEE Transmission & Distribution Other specialty conferences and shows (GITA Autovation, CS Week)

Leveraging NRECA Resources

Publications Conferences/Trade Shows Associate Membership

Rural Electric Magazine

Mission is to help readers become more informed

participants in the electric utility industry and in the business life of their co-ops and local communities. With nearly 26,000 subscribers, RE Magazine has the widest circulation among employees of electric co-ops of any utility industry magazine. Two-thirds of those readers make or affect purchasing decisions.

NRECA Publications

Two major publications inform and educate members, decision makers and the interested public: 1. Rural Electric Magazine, published monthly 2. Electric Co-op TODAY, a weekly newspaper

Rural Electric Magazine

Help readers become more informed about new

technologies, products and services through monthly technical articles and special issues and sections.
Technical Articles

Co-op Tech Solutions Utility Marketplace

Rural Electric Magazine

Special Issues/Sections

TechAdvantage and Expo Preview (usually February) Connections Supplement (April and October) Buyers Guide (May) Directory of Electric Co-ops (July) Advertisers Study (September)

Rural Electric Magazine

Associate Members can help by supplying RE

with examples how they work with co-ops to improve their utility operations and enhance customer service.
Check for upcoming topics in the printed media kit

or at the RE Magazine Web site: www.remagazine.coop

Contact us three months ahead of the issue

date.

Rural Electric Magazine: NRECA Contacts

Co-op Tech and Utility Marketplace: Bill Koch, (206) 772-0283,

specrep@earthlink.net
Solutions: John Lowrey, (217) 529-5561, lowrey@aiec.org CONNECTIONS: Nancy McMahen, (800) 230-2601,

nancy.mcmahen@nreca.coop
Editor: Perry Stambaugh, (703) 907-5712, perry.stambaugh@nreca.coop Advertising: Danielle Burton, (301) 829-6333, dburton@remagazine.org

Contact us anytime to discuss how your product or service helps electric co-ops do a better job for their consumers

NRECA Conferences and Expos

Overview of NRECAs Conferences and Expos

Overview of Conferences
Month Jan. Feb. Conference CEO Conference Touchstone Energy New & Emerging Technologies Conf. TechAdvantage Conference & Expo (Engineering & Operations; Supply Management, Information Technology) NRECA Annual Meeting Directors' Conference Legal Seminar & Workplace Law Human Resource Management & Benefit Update Conferences Legislative Conference Legal Seminar & Workplace Law Connect Conference Tax, Accounting and Finance Conference Cooperative Supervisors Institute Executive and Administrative Assistants Conference G+T Legal Seminar Expo Platinum YES Sponsorship YES YES YES YES YES YES YES Attend YES YES

March April May

June July Aug Oct Nov Dec

YES

YES YES YES YES

YES YES YES YES

Identifying Conference Topics and Speakers

Electric Cooperative Business Network

Access e-communities of electric cooperative employees to identify key issues, objectives, and potential speakers for conferences
NRECA input Year-round input welcome, especially on hot topics

and new technologies

Call for Presentations-6-9 months before each

conference

Participants Have Told Us:

They like to hear co-op success stories They like to hear directly from the co-ops

Case studies
They do NOT prefer to hear sales talks They want practical information to take home. This is the

way they can sell ideas to management.

BOTTOM LINE: The more success stories you have with co-ops, the higher your chances are to get the word out about your products.

Associate Membership

Marketing Opportunities
Sponsorships Program Advertising Golf Tournament Exhibits Presentation Opportunities Networking

Associate Member Benefits

Increased exposure to electric utility decision-

makers
Access to electric utility industry information Valuable networking opportunities Potential for sales, partnering and other business

alliances

Types of Memberships
NRECA offers you a choice of three associate

membership levels designed to fit the needs of your company and your business:
Silver Associate Member Gold Associate Member Platinum Associate Member

Exposure Benefits for Associate Members

Subscription to Rural Electric Magazine Annual Subscription to Electric Co-op Today Designation in the Annual Network Services/Associate Membership Directory Designation in our Annual Buyer's Guide Access to NRECA Conferences and Seminars Associate Member Logo for Print Advertising Certificate of Associate Membership Link to NRECA's Home Page I&FS Benefits Access to NRECA member database

Listing In NRECAs Buyers Guide 2010 Network Services/Associate Membership Directory Rural Electric Magazine Utility Marketplace section CONNECTIONS: RE Magazine Supplement Listing in NRECAs Membership Directory Published in July issue of RE Magazine

Exposure Benefits for Gold and Platinum Associate Members

All Silver Associate Member benefits, plus:
Discounts on Space at TechAdvantage Expo: VIP Suite at TechAdvantage Expo Discounts on Full-Page, Four-Color Ads in RE Magazine One complimentary registration to the CEO Leadership Conference One complimentary registration to the Marketing to Co-ops Workshop

Exposure Benefits for Platinum Associate Members

All Silver Associate Member Benefits, plus:
Complimentary Space and Discounts on Space at TechAdvantage Expo VIP Suite at TechAdvantage Expo One Free Full-Page, Four-Color Ad in RE Magazine One Free -Page, Black & White Ad in RE Magazine Platinum Associate Membership Plaque $12,000 Annual Dues

Leveraging NRECA Resources

Questions?

Marketing to Co-ops

Doing Business With Cooperatives Panel Discussion

Vendor Panel
Members of panel have spent years working

with co-ops Are Platinum Associate Members and Affiliate Members of NRECA All have extensive knowledge of co-op business practices, sales cycles and business needs

Final Points: Selling to Co-ops

Assist - dont pester Understand position and perspective Do homework for the co-op Be available - not underfoot Price to co-op pocketbook Produce what you promise Provide Excellent Customer Service

Appendix: Resource Information

2007/2008 NRECA Annual Report About NRECA Brochure Associate Member Brochure and web site on nreca.coop Touchstone Energy web site on www.touchstoneenergy.com 2010 TechAdvantage Exhibitor Prospectus 2009 Connect Exhibitor Prospectus 2009 New and Emerging Technologies Exhibitor Prospectus (for

information only)
CONNECTIONS Supplement Information Rural Electric Magazine Media Kit

Final Points - Selling To Co-ops

Final Questions?