Q1. Which Rate Schedules Are Being Impacted with This New Rate Design?

November 1, 2014 New Rate Design Q & A PEMC Questions and Answers Concerning the New Rate Design Effective with November 2014 Bills, new LED Security Lighting and other Commonly Asked Questions

Q1. Which rate schedules are being impacted with this new rate design?

Service Availability Charge Rate Oct 2014 Nov 2014 Residential Service - RS $29.03 $35.00 Res. Ser. – RS-EE $29.03 $35.00 Res Ser Energy Star – RS-ES $29.03 $35.00 Small General Service - SGS $30.68 $37.00 General Service - GS $141.01 $150.00 Large Power – LP $290.34 $300.00 Res Ser TOD Energy Only $30.68 $35.00 R-TOD-E Small Gen. Ser. TOD – Energy $30.68 $37.00 SGS-TOD-E Res Ser TOD Demand/Energy $29.03 $35.00 R-TOD-D/E Small Gen. Ser. Time-of-day $30.68 $37.00 SGS-TOD-D/E Gen. Service T-O-D – GS-TOD $141.01 $150.00 Large Power T-O-D – LP-TOD $290.34 $300.00

1 November 1, 2014 New Rate Design Q & A

Q2. What is the monthly service availability (Facilities) charge? The “Facilities Charge” or new term “Service Availability Charge” is designed to recover Piedmont’s fixed costs which are costs Piedmont incurs regardless of an individual customer’s electric consumption. They are the costs of having a customer connected to the system even if the customer does not consume any electric power during the month. The fixed costs this charge is designed to recover are carrying costs (i.e. interest, property taxes, depreciation, maintenance, etc.) associated with the substations, transmission and distribution lines, transformers, service wires, meters, and other distribution plant that physically connects the customer to the electric distribution system, along with metering, billing, customer service and accounting costs. In the case of Piedmont, our last Cost- of-Service Study, which was performed by an outside rate consultant in 2013, showed that the cooperative could justify a Service Availability Charge of $64 per month for a typical residential customer, rather than the $29.03 that Piedmont was currently charging a typical residential customer. The remainder of the justified service availability charge will be recovered by an increase in the rate blocks of the first 800 kWhs. The difference in the justifiable amount and what Piedmont is charging is currently being recovered through the energy charge, which results in the higher energy use consumers subsidizing the low use consumers.

Q3.Why are the monthly service availability charges changing? The service availability charges are changing to more fairly recover the fixed costs of delivering electricity to members. This change will not completely recover these costs in the service availability charge but with fixed costs being included in the first 800 kWhs energy blocks it is a move toward a fairer recovering of fixed costs. Piedmont’s fixed 2 November 1, 2014 New Rate Design Q & A costs include equipment, such as poles, transformers, metering equipment, substation and other “hardware”. The fixed costs also include costs associated with accounting, customer service, linemen, taxes, equipment and right-of-way maintenance. These facility charge or service availability charge amounts are supported in the 2013 Cost of Service Study. The Cost of Service Study analyzes all costs incurred by the utility and identifies equitable ways to allocate the fixed and variable costs associated with delivering electricity to their customers.

Q4. The newsletter article indicated some members will see a decrease in their electric bills. Who are these members? Those members that will see decreases in their electric bills are those using an average of 1000 kWhs or more as shown in the tables below:

Residential Service Rate Annual Average Piedmont Increase / (Decrease) Current w/ kWh WPCA Proposed $ %

50 $34.76 $41.38 $6.61 19.02% 100 $40.50 $47.75 $7.25 17.91% 250 $57.70 $66.88 $9.18 15.91% 500 $86.36 $94.55 $8.19 9.48% 750 $115.03 $122.23 $7.20 6.26% 1,000 $141.23 $145.18 $3.94 2.79% 1,250 $166.82 $166.94 $0.12 0.07% 2,000 $243.59 $232.25 ($11.34) (4.65%) 2,500 $294.76 $275.79 ($18.98) (6.44%) 3,000 $345.94 $319.33 ($26.62) (7.69%) 4,000 $448.30 $406.40 ($41.90) (9.35%)

3 November 1, 2014 New Rate Design Q & A Residential Service – Energy Efficient Rate Annual Average Piedmont Increase / (Decrease) Current w/ kWh WPCA Proposed $ %

50 $34.76 $41.38 $6.61 19.02% 100 $40.50 $47.75 $7.25 17.91% 250 $57.70 $66.88 $9.18 15.91% 500 $86.36 $94.55 $8.19 9.48% 750 $115.03 $122.23 $7.20 6.26% 1,000 $140.26 $144.25 $3.99 2.84% 1,250 $164.63 $164.85 $0.22 0.13% 2,000 $237.75 $226.67 ($11.08) (4.66%) 2,500 $286.49 $267.88 ($18.61) (6.50%) 3,000 $335.23 $309.10 ($26.14) (7.80%) 4,000 $432.72 $391.52 ($41.20) (9.52%)

Residential Service – Energy Star – Standard Rate Annual Average Piedmont Increase / (Decrease) Current w/ kWh WPCA Proposed $ %

50 $34.55 $41.11 $6.56 18.99% 100 $40.07 $47.22 $7.15 17.85% 250 $56.62 $65.55 $8.93 15.77% 500 $84.21 $92.08 $7.86 9.34% 750 $111.80 $118.60 $6.80 6.08% 1,000 $137.04 $140.60 $3.57 2.60% 1,250 $161.68 $161.47 ($0.21) (0.13%) 2,000 $235.62 $224.09 ($11.53) (4.89%) 2,500 $284.91 $265.83 ($19.08) (6.70%) 3,000 $334.20 $307.57 ($26.63) (7.97%) 4,000 $432.78 $391.05 ($41.72) (9.64%)

4 November 1, 2014 New Rate Design Q & A Residential Service – Energy Star – All Electric Annual Average Piedmont Increase / (Decrease) Current w/ kWh WPCA Proposed $ %

50 $34.55 $41.11 $6.56 18.99% 100 $40.07 $47.22 $7.15 17.85% 250 $56.62 $65.55 $8.93 15.77% 500 $84.21 $92.08 $7.86 9.34% 750 $111.80 $118.60 $6.80 6.08% 1,000 $136.13 $139.74 $3.60 2.64% 1,250 $159.65 $159.52 ($0.13) (0.08%) 2,000 $230.21 $218.89 ($11.32) (4.92%) 2,500 $277.24 $258.46 ($18.78) (6.77%) 3,000 $324.28 $298.04 ($26.24) (8.09%) 4,000 $418.35 $377.19 ($41.16) (9.84%)

Small General Service Single-Phase Piedmont Increase / (Decrease) Current w/ kWh WPCA Proposed $ %

50 $37.40 $44.57 $7.17 19.16% 100 $44.12 $52.13 $8.01 18.16% 250 $64.27 $74.83 $10.55 16.42% 500 $97.86 $108.13 $10.26 10.49% 750 $131.45 $141.43 $9.97 7.59% 1,000 $162.52 $166.71 $4.19 2.58% 1,250 $192.96 $189.99 ($2.97) (1.54%) 2,000 $284.29 $259.84 ($24.45) (8.60%) 2,500 $345.17 $306.40 ($38.77) (11.23%) 3,000 $406.05 $352.96 ($53.09) (13.07%) 4,000 $527.81 $446.09 ($81.73) (15.48%)

5 November 1, 2014 New Rate Design Q & A General Service 50 kW Piedmont Increase / (Decrease) Current w/ LF kWh WPCA Proposed $ %

10% 3,650 $719.04 $744.94 $25.90 3.60% 20% 7,300 $962.36 $969.05 $6.69 0.70% 30% 10,950 $1,205.68 $1,193.16 ($12.52) (1.04%) 40% 14,600 $1,449.00 $1,417.27 ($31.73) (2.19%) 50% 18,250 $1,692.32 $1,641.38 ($50.94) (3.01%) 60% 21,900 $1,935.64 $1,865.49 ($70.15) (3.62%) 70% 25,550 $2,178.96 $2,089.60 ($89.36) (4.10%) 80% 29,200 $2,422.28 $2,313.71 ($108.57) (4.48%) 90% 32,850 $2,665.60 $2,537.82 ($127.78) (4.79%)

Large Power Service 250 kW Piedmont Increase / (Decrease) Current w/ LF kWh WPCA Proposed $ %

10% 18,250 $3,549.58 $3,603.82 $54.23 1.53% 20% 36,500 $4,525.29 $4,437.84 ($87.44) (1.93%) 30% 54,750 $5,500.99 $5,271.87 ($229.12) (4.17%) 40% 73,000 $6,476.69 $6,105.89 ($370.80) (5.73%) 50% 91,250 $7,452.39 $6,939.92 ($512.48) (6.88%) 60% 109,500 $8,428.09 $7,773.94 ($654.15) (7.76%) 70% 127,750 $9,403.80 $8,607.97 ($795.83) (8.46%) 80% 146,000 $10,379.50 $9,441.99 ($937.51) (9.03%) 90% 164,250 $11,355.20 $10,276.02 ($1,079.18) (9.50%)

6 November 1, 2014 New Rate Design Q & A Q5. Why would Piedmont EMC have this new rate design in November before the holidays? There is never a good time for rate changes. Piedmont EMC has held off this rate restructure as long as possible. The last rate adjustment occurred in January 2011 when Piedmont EMC took the first step to decoupling our rates. The following May 2011, 2012, 2013 rate revisions adjusted the Renewable Energy and Energy Efficiency Riders (Part of NC Senate Bill 3). The July 2014 rate change was made to remove the gross receipts tax to comply with N.C. law. With the WPCA credit due to the $2 million demand savings attributed to our successful Load Management Programs this was a good time to make the new rate design change since WPCA credit will help offset or completely offset impacts to those being impacted by this new rate design. Refer to chart above for impacts associated with level of kWhs used.

Q6. I have heard the term “decoupling rates”? Is this what Piedmont is moving towards? Decoupling rates is a utility rate term that describes an actual cost of service recovery rate method. The benefits of “decoupling rates” includes a fairer representation of the actual cost of service, reducing the revenue fluctuations due to seasonal weather changes, more accurate reflection of cost savings from energy efficiency programs and helps promote energy efficiency programs by eliminating the conflict of selling more kWhs to cover fixed operating costs. This new rate design is an industry trend that utilities are moving towards including Piedmont EMC.

Q7. Explain what makes up the cost of electricity? The costs associated with electricity costs include Fixed and Variable costs: Fixed Costs: Distribution System, Buildings (this includes capital costs associated with our loans for poles, equipment, substations, transformers, etc., depreciation of assets, maintenance (Right-of-Way), taxes. (Note: 70% of the cooperatives investments are mortgaged resulting in monthly payments) Administration Costs (preparing bills, dispatching linemen, setting up new services) Margins (financial obligation to our members and lenders to remain a financially healthy business that can ensure loans are paid) Capital Credits (margins/profits that returned to members after all expenses have been paid) Variable Costs: Wholesale power cost purchased from Duke Energy

Q8. How has this new rate design impacted the WPCA (Wholesale Power Cost Adjustment) Rider charge? The WPCA Rider is evaluated monthly. Due to our members participation in our Load Control Program we received a $2million demand charge credit from Duke Energy. The WPCA is forecasted to be a credit during the remainder of 2014 and for a few months in 2015 due to the $2million refund in demand charges Piedmont EMC received from Duke Energy.

Q9. What is the WPCA Rider? The WPCA is the Wholesale Power Cost Adjustment Rider that is used to adjust for the monthly variations of actual cost of power compared to the power cost recovered in the rates. When rates are developed, part of the kWh rate is designed to recover the cost of wholesale power supply. If the actual cost of wholesale power is different from the cost of power in the rate design, a credit or charge is assessed to compensate for that difference. The wholesale power cost is evaluated and applied monthly to the members’ bills. The actual monthly cost of wholesale power changes each month because of load factor variations. Also, the cost of power will change if our power suppliers’ rates change. Load factor changes can cause the monthly cost of power to vary dramatically. For this reason, the WPCA calculation averages power cost over a forecasted year to smooth out these dramatic variations. The base cost of power in Piedmont retail rates starting November 1st is $0.07372 per kWh.

Q10. How long will the WPCA remain at this credit level? Forecasts indicate that we could see the WPCA at this credit level for the remainder of 2014 and for the first couple of months in 2015. Forecasts that we have received from our wholesale power providers indicate that wholesale power costs will be rising in the future years.

Q11. Are there maximum or minimum charges for the WPCA? No, there are no maximum or minimum WPCA charges. The wholesale power cost is evaluated monthly and can change based on the cost of electric generation during the year; however, we are forecasting that the WPCA will remain lower during 2015 as compared to the first ten months of 2014.

Q12. How does this new rate design affect those installing renewable generation or purchasing high energy efficient equipment? This new rate design helps our members who are considering purchasing energy efficient equipment and renewable generation see the true cost savings of their purchase.

Q13. I am on the PrePay program. What changes will I see with this new rate design? The monthly service availability charge is pro-rated on a daily basis for PrePay accounts. This will not change. The daily amount will increase but should be mostly offset due to the Wholesale Power Cost Adjustment (WPCA) being a credit or close to $.000000 for several months in 2015.

Q14. Isn’t Piedmont EMC already collecting for wholesale power cost in the energy portion of the rate schedule? Yes, Piedmont EMC recovers a large portion of the cost of wholesale power in the energy portion of the rates; however, in the first 800 energy blocks of the rates it also recovers a portion of our fixed costs. This new rate design in the monthly service availability charge and the first 800 kWhs moves us toward our fixed costs in our newly designed rate schedules. There are also fluctuations in the wholesale power bills that we receive due to demand charges, energy charges, load factor shapes and other contract variables.

Q15. What are the benefits of an LED security light as compared to the Mercury Vapor security or High Pressure Sodium security light? The LED light is a white light alternative to the mercury vapor light that is being phased out due to federal regulations. Many members do not like the High Pressure Sodium lights due to the yellow hue that the lamp emits. The LED lights have a much better light distribution pattern that supplies even coverage at greatly reduced energy consumption. Piedmont EMC has added two new LED lights for outdoor security that are very popular with members who have installed them.

Q16. What are the charges for replacing my existing security light with the new LED security light? If your existing security light is functioning properly this will be a one-time special trip charge of $36 and a monthly fixed charge of $10.15 for the 55 watt LED as compared to the $10.65 MV 175 watt monthly charge and the $10.15 HPS 100 watt monthly charge. If your light fails, there will be no charge to replace the light with the LED at the time of repair.

Q17. Why is Piedmont EMC more expensive than Duke Energy? Your electric cooperative provides electric service to areas that the investor-owned utilities would not serve because of the low population. Today the population has grown out into some of our assigned area but we still only have 8 services per mile of line as compared to the larger investor-owned utility companies that average between 30 – 40 services per mile of line. Those utility companies that can serve more customers per mile of line can spread their cost over more customers reducing the per customer cost. This much lower density of Piedmont’s rural service area is the number one reason why our rates are higher than larger, higher density, investor-owned electric utilities.

9 November 1, 2014 New Rate Design Q & A Q18. The monthly facilities charge or service availability charge is too high? The fixed costs that you pay for other services are (on-line search conducted 10-7-2014):

Time Warner Digital Cable TV + Phone: $129.99 per month (requires 12 mo. contract) AT&T TV + Internet + Phone: $89/month (requires 12 month contract) AT&T Single Wireless Line-Unlimited Text & Talk: $65/month CenturyLink TV + Internet + Phone: $186.68/month (requires 24 mo. contract) Verizon Single Wireless Line-Unlimited Text + Talk: $60/mo. (requires 24 mo. contract) Sprint Single Wireless Line-Unlimited Text & Talk & Data: $60/mo. (w/ 24 mo. contract)

Q19. What is Piedmont doing to hold down costs? The most significant effort we have made is in controlling Piedmont’s wholesale power costs. Over the last ten years Piedmont has negotiated contacts with Duke Energy that progressively have reduced the price Piedmont EMC pays for wholesale power. Our most recent cost saving accomplishments has been attributed to our load management programs (Load Control, Time-of-Day rate schedules and Beat the Peak). As the result of our 2013 load management programs we were able to reduce our peak demand component of our wholesale power costs by $2 million. As a result, you will see a credit over several months to the Wholesale Power Cost Adjustment line item on your bill. As the economy has slowed Piedmont is constantly evaluating staffing levels. Positions that are vacated are not automatically filled. We instead look for ways to do more with less and improve our process efficiency. Cost-saving initiatives are an on-going priority at your cooperative. We are using volt/VAR applications at substations that fine-tune our voltage at peak times. By using a system of regulators and capacitors, we are able to reduce our demand by about 1% per volt dropped saving our members close to $200,000 during 2014. Other initiatives include our finding ways that our advanced meters can help reduce our wholesale power costs by verifying if load control switches are not functioning properly and these advanced meters also provide our members with daily energy information so they are “empowered” with the information they need to manage and control their electric bills. Eliminating labor costs associated with reading meters. Other cost saving initiatives include improving the energy efficiency of our headquarters (upgrades to our lighting system from T12s to T8s and installation of occupancy sensors), transitioning our small utility fleet to Ford Escape Hybrids, created energy efficient landscaping (including north wind break planting) at the Roxboro office, shared labor resources with other Cooperatives for accounting, communications and human resource tasks.

10 November 1, 2014 New Rate Design Q & A Q20. The cost of electricity is too high and is no longer a good value? Electricity is one of the few things that we use first and pay for later. We can’t see electricity; therefore it can be difficult to understand its value.

Take a look at what you can do for just a few pennies with the help of electricity: ●Use a 75 watt lamp for 14 hours for about 13 cents. Replace that 75 watt lamp with a CFL equivalent 18 watt for 14 hours for 3 cents. ●Refrigerate food for a day with an Energy Star rated 22 cu. Ft. side by side refrigerator for about 23 cents. ●Wash a load of clothes with an Energy Star rated washing machine for about 4 cents per load using cold water and about 57 cents per load using hot water for the wash and warm water for the rinse cycle. ●Wash a load of dishes in a dishwasher for about 16 cents.

*(Refrigerator, 22CF, New) 54 kWh/month | 730 hours/month | 1 kWh = 0.1275 **(Dishwasher Air Dry) 8 kWh/month | 16 hours/month | 1 kWh = 0.1275

To estimate your own appliance and home electronic energy use, click here.

Electricity really is a bargain. What else can you buy that costs pennies and does so much work? You definitely couldn’t do this amount of work or hire someone else to do it for the same value.

The amount of power that a household/business consumes depends on how many appliances/equipment there are and the amount of time they are in use. Some appliances or machines take a lot of energy to operate, so it will result in more use of power.

We pay for electricity in kilowatt-hours (kWhs). One kilowatt-hour is the equivalent of using 1,000 watts for one hour or using a 100-watt light bulb for 10 hours. When these kilowatt hours add up, electric bills get higher.

Q21. What is the reason for the changes in the monthly cost of the outdoor lights? Piedmont EMC had an outside consultant perform a Cost-of-Service Study in early 2014 to determine if each of the Cooperative’s rate classes were earning a similar rate of return. While the results Study indicated that the Cooperative’s overall revenue, including the Wholesale Power Cost Adjustment (WPCA) revenue, were adequate, the Study recommended increases to some of the rate classes and decrease to others. For the Cooperative’s lighting rate classes a revenue increase of approximately 0.8% was recommended over and above what the Cooperative collected through the fixed monthly rate, plus the WPCA. The actual percent change varied by type of light, two of which are shown in the example below.

175W MV Light 100W HPS Light

Pre-November 1 rate: $10.16 $ 9.68 WPCA Charge $ 0.62 $ 0.35

Total Monthly Charge $10.78 $10.03

Post-November 1 rate: $10.65 $10.15

Percent Change: (1.21%) 1.15%

Piedmont EMC predicts the forecast for the WPCA factor to be a credit for several months, which will actually lower the Post-November monthly charges shown above.

Q22. What programs are available to help me lower my electric bill? Piedmont EMC has the following programs on going for 2014:  Free Residential Energy Audits  Free Residential HVAC Audits  Infrared Camera Energy Audits  Water Heater and Air Conditioner Load Control  Time of Day Rates  Energy Efficient Rates  Energy Star Home Rates  LED Lights Rebate Program  Water Heater Efficiency Kits Program  Energy Efficiency Heat Pump Rebates  Energy Efficiency & Renewable Low Interest Loan Program  Energy Star Program for New Homes Rebates (Planned Spring 2011)

12 November 1, 2014 New Rate Design Q & A  Converting Mercury Vapor Lights to High-Pressure Sodium Lights or LED Lights  Solar Water Heater Rebate Program  TogetherWeSave.com Program  Smart Hub Usage Monitoring  PrePay Program  Analyze My Bill Tool Calculator  Home Energy Calculator  Lighting Calculator  Space Heater Calculator  Questline Resource Library and Tools (Commercial Accounts Only)  Co-op Connections® Card Program which saves you money when shopping locally and on-line