CoServ Board Director Elections

MINUTES OF ANNUAL MEETING
OF THE MEMBERS OF
DENTON COUNTY ELECTRIC COOPERATIVE, INC.,
D/B/A COSERV ELECTRIC

June 6, 2023

The Annual Meeting of the members (the “Members”) of Denton County Electric Cooperative, Inc., d/b/a CoServ Electric (the “Company”), was held on June 6, 2023, at 7701 South Stemmons Freeway, Corinth, Texas. There were 10,774 Members present at the meeting as represented by mail and electronic ballots received. The following directors of the Company were present:

Bill Ragsdale, Chairman
Chris McCraw, Vice Chairman
Trisha Sheffield, Secretary/Treasurer
Leon Pelzel
Richard Muir
Mark Rutledge
Chance Adair

Mr. Ragsdale announced that a quorum was present and then called the meeting to order at 2:00 p.m., CT.

Mr. McCraw gave the invocation.

A video was then played of Sherry Floyd, a Company employee, singing the national anthem.

Mrs. Sheffield, as Secretary of the Company, certified that official notice of the meeting was timely given in accordance with the Company’s bylaws.

Mr. Ragsdale introduced the Company’s directors to the Members. Mr. Ragsdale then introduced Mr. Kevin W. Haney, the Company’s general counsel with the law firm of McGinnis Lochridge LLP.

Quorum; Voting Results – Mr. Haney informed the Members that he would be announcing the voting results for the approval of the 2022 Annual Meeting minutes and election of directors for Districts 3, 4 and 6. Mr. Haney informed the Members that the law firm of Richards, Elder & Gibson, PLLC served again this year as the independent third-party “election official,” with assistance from the election firm Survey & Ballot Systems, to administer the director nomination and election process and to receive, validate and count the mail and electronic ballots and certify the vote count.

Mr. Haney stated that the Company’s bylaws require that at least one percent of the Members as of the meeting record date be present at the meeting as determined by valid mail and electronic ballots received to constitute a quorum, and that any proposed action be decided by a majority vote of the number of Members present at the Meeting. Mr. Haney reported that 2,606 Members are required for a quorum at this year’s meeting and that 10,774 Members are present at the meeting as represented by valid mail and electronic ballots received. Therefore, a quorum exists and the Company can transact business.

Mr. Haney announced that 10,087 Members voted to approve the 2022 Annual Meeting minutes, which is a majority, so the 2022 Annual Meeting minutes are approved.

Mr. Haney informed the Members that Chris McCraw, the incumbent director for District 3, ran against Harlan Jefferson, William Kollar ran unopposed for election as the District 4 director, and Bill Ragsdale, the incumbent director for District 6, also ran unopposed. Mr. Haney announced that

(i) 5,725 Members, which is a majority, voted to elect Mr. McCraw as the District 3 director, (ii) 9,665 members, which is a majority, voted to elect Mr. Kollar as the District 4 director, and (iii) 9,788 Members, which is a majority, voted to elect Mr. Ragsdale as the District 6 director. Based on the director election voting results, Mr. Haney announced that Mr. McCraw is elected as the District 3 director, Mr. Kollar is elected as the District 4 director, and Mr. Ragsdale is elected as the District 6 director.

Mr. Haney thanked the Members for participating in the voting process. Mr. Ragsdale congratulated the three directors on their election.

Keynote Video – A video was then played that discussed the Company’s dedication to meeting the challenges of today while investing in tomorrow by (A) investing in its employees by (i) providing job training, (ii) fostering a safe work environment through the “I Do It For Them” program, and

(iii) maintaining a strong company culture that provides employee engagement opportunities; (B) committing to provide the best service possible by (i) assuming 100% control of its power purchases,

(ii) utilizing its Energy Resources team to develop a strategy to purchase power in advance when rates are typically lower, (iii) offering Members a variety of rate plans, (iv) empowering Members to take control of their electric usage through SmartHub, the CoServ mobile app and monthly emails to Members, and (v) providing Member appreciation events; (C) planning for growth by (i) upgrading and adding capacity to its electric distribution facilities, and (ii) opening a new Krum Service Center to position its crews and equipment closer to its Members in the western half of the Company’s service territory; (D) investing in technology by (i) using drones to inspect poles and wires, and (ii) using tablets to locate the source of outages; and (E) investing in the communities it serves by (i) awarding grants through CoServ Charitable Foundation, which is supported by the Members who participate in Operation Roundup^® and monies received from the Company’s employees through payroll deduction and fundraisers, (ii) providing scholarships for high school seniors, (iii) visiting local schools so that the Energy Education team can teach children about the science and safety of electricity and natural gas, and (iv) hosting training seminars for local first responders so they will know how to respond to electric or natural gas emergencies.

President and Chief Executive Officer’s Remarks – Mr. Clary informed the Members that, effective March 1, 2023, the Company was released from its power purchase agreement with Brazos Electric Power Cooperative, Inc. (“Brazos”) and assumed complete control of its power purchases.

Mr. Clary discussed with the Members the history of the Company’s relationship with Brazos and the circumstances that led to the Company being obligated to purchase all of its power from Brazos. Mr. Clary informed the Members that the Company has for many years considered terminating its power supply contract with Brazos but determined that terminating the agreement would have been a lengthy, complicated and expensive process. Mr. Clary explained to the Members that, although the Company had determined it did not make economic sense to terminate its power purchase agreement with Brazos, the Company had, over the course of several years and much negotiation, gained the ability to make power purchasing decisions on over 40% of the Company’s power supply needs, but the Company was still subject to Brazos’ policies and restrictions. As Winter Storm Uri approached in February 2021, the Company used its ability to hedge potential exposure to increased electricity demand and higher prices, which reduced the Company’s Winter Storm Uri-related charges by approximately $150 million.

Mr. Clary informed the Members that the Company worked diligently throughout the Brazos bankruptcy to make sure the impact on the Members was mitigated, and was actively engaged in the court proceedings, often taking positions contrary to Brazos’ positions. Mr. Clary explained that, as the Brazos bankruptcy progressed, the judge asked the parties to enter into mediation, which the Company was active in, and which led to an approved reorganization plan in November 2022, that required Brazos to sell all generation assets and cancel its power supply contracts with the Company and the other Brazos members. Mr. Clary informed the Members that the reorganization plan required Brazos’ members to pay final negotiated bankruptcy claims totaling $2.1 billion, the Company’s share of which was $451 million, and allowed Brazos and its members to retain ownership of all transmission and substation assets.

Mr. Clary explained that, by exercising its right to hedge power in the days before Winter Storm Uri and working through the Brazos bankruptcy, the Company’s Winter Storm Uri-related charges were reduced from an initial estimate of $725 million to $451 million, and that upon payment of the $451 million, the Company was released from its power supply contract with Brazos. Mr. Clary informed the Members that the Company elected to finance the $451 million through a securitization financing transaction and that a securitization surcharge is included on each Member’s monthly billing statement. Mr. Clary informed the Members that, even with this surcharge, the Company’s rates remain competitive.

Mr. Clary announced that the Company’s board of directors recently approved the retirement of a record $16 million in capital credits, which will begin showing up as credits on Members’ August billing statements.

Prize Drawings – Mr. Ragsdale informed the Members that the Members who voted in this year’s elections by mail or electronic ballot were entered into a drawing for fifty $100.00 bill credits, and the names of the winners will be displayed immediately following the adjournment of the meeting.

Mr. Ragsdale thanked those who viewed the meeting, live and recorded.

There being no further business to consider, Mr. Ragsdale adjourned the meeting at 2:24 p.m., CT.