STORM HARDENING PROGRAM

Strengthening the Power Infrastructure
"Hardening" the power infrastructure means building a system that is more storm resistant in every way. This ongoing process encompasses a variety of programs, including the following: routine pole inspections and replacements, adoption of the Extreme Wind Standard, aggressive vegetation management, promotion of underground power, and comprehensive system maintenance and upgrades.

Pole inspections and replacements
FKEC has stepped up its pole inspection program and is systematically evaluating the condition of existing poles and is replacing those that have reached the end of their useful lives. In 2006, we replaced about 100 poles throughout our system, along with 5,500 feet of the service wire that attaches your meters to our poles. During these replacements, we also replaced the corresponding pole transformers.

Extreme Wind Standard
Also in 2006, FKEC's board of directors adopted the National Electric Safety Code extreme wind construction standard. This means that any new construction or any reconstruction of our existing system will be built to the NESC's standard. For example, the poles we replaced last year were replaced with "beefier" poles. Not necessarily taller, but stronger. Right now we are also finalizing a study that will tell us if we need to replace our current facilities in order to meet the NESC standard. We should have that study complete in the next couple of months.

In addition to just looking at our own system, we are also evaluating the telephone and cable company equipment that attaches to our poles. We are working with those companies to ensure that they maintain their equipment to the same standards. In 2006, we provided those companies with lists of items we thought they needed to correct and they have been responsive to our concerns.

Vegetation Management
FKEC has also been continually ramping up our efforts in vegetation management. Just like oil and water, power lines and trees do not mix well. So one way to avoid outages is to do a thorough job managing vegetation around our lines and poles.

Last year, we added manpower to our trimming efforts with two more contract tree crews. That brings our total to five contract tree crews in addition to the two or three internal crews we have on hand at all times.
Our crews and contract crews trimmed 225 miles of line in 2006. That is roughly one third of our system, which is consistent with our goal of trimming the entire system on a three-year cycle.

In addition to trimming trees we also implemented a new "Trade-a-Tree" program for trees that we just can't seem to keep out of the lines. With this new program, we have the option of working with the home or land owner to replace a tree we have to remove with a different tree Ð probably a native species Ð planted the proper distance away from the lines so it won't become a problem as it grows. There are also cases where the problem tree itself can be safely moved, but this is not always possible for large mature trees.

Underground Power
I touched on the subject of underground power last year and in 2006, FKEC's board of directors revised our underground power policy. In a nut shell, the board will now require more participation from FKEC in underground projects whether the project involves a single residence or a large construction project. This increased participation will be in the form of both dollars and manpower.

Comprehensive Maintenance
In addition to the above storm hardening programs we discussed last year, FKEC also performed its scheduled system maintenance in addition to other necessary upgrades.

Early in January 2006, our system experienced several power outages caused by failed lightning arresters in the Marathon Substation. As a result of those failures, we replaced a total of 15 of those same type of substation lightning arresters throughout the system to prevent future outages.

So far we have talked quite a bit about our programs for storm hardening and improving system reliability. Next, I would like to review our 2006 accomplishments in these areas.

RELIABILITY

99.98% Reliable in 2006
Last year, FKEC's average outage time was 1.8 hours per member. Our goal for the year was 1.22, so we have reset the same goal for 2007 and are currently on track to meet it this year.

Unusual Outages
In 2006, we experienced some unique outages that we hope never to see again. We already talked about the unexpected breaker and lightning arrester failures in January. Then in February, a large truck ran into a transmission pole which caused a transmission outage. Several months later, a contractor replanting trees in Key Largo accidentally pulled a tree into our lines, which relayed the power out again. Then, just a few days later, a propane gas tank began leaking in Key Largo. Officials requested that FKEC de-energize the lines to avoid igniting the propane. Finally, our most unique outage last year that we hope never happens again was when a skydiver landed on and broke one of our poles near the Marathon airport.

Without some of those unique outages we would have easily met our goal. But even at 1.8 hours of outage time, we still did well compared to our counterparts.

Better than Average
Although we did not meet our 2006 goal of 1.22 outage hours per member, our average of 1.8 hours is still better than average on a state and national level. The state's average for cooperatives was 4.48 hours and the national average was 2.74 hours. If you look at reliability as a percentage, an average of 1.8 hours a year means that our power was on 99.98% of the time. Statewide, that percentage was 99.95% and nation-wide the average was 99.97%.

System Upgrades & Expansion
FKEC is continually upgrading and expanding our system as demand increases and technology advances to provide new and better ways of delivering energy to our members.

In 2006, we completed a multi-year project to add a second power transformer to our substation in Tavernier. This large piece of equipment steps down the high voltage from the main transmission lines to the lower voltage used by our local distribution system.

Adding the second transformer and its related power equipment will provide greater capacity out of the Tavernier substation and will also provide the flexibility to switch loads between transformers to restore power more quickly during certain outage situations.

System Upgrades & Expansion
In addition to the expansion of the Tavernier Substation, FKEC is also making other smaller improvements. The first is replacing its current inline switches with gang operated switches. The function of switches is to turn power on and off in a local area or redirect it when necessary. An "inline" switch requires a lineman in a bucket to pull three separate switches to open each power phase. A "gang operated" switch allows all three to operate simultaneously, improving efficiency and reducing outage time. Another planned upgrade this year is to install under-frequency load shedding equipment designed to help keep the main transmission system operating in periods of instability.

Outage Management System
In 2006, we also began work on an advanced outage management system that will help pinpoint the location of an outage and provide an idea of the immediate cause. It will also allow our system operators to dispatch linemen more quickly and to identify potential problem areas.

– Adapted from the CEO's Report by Scott Newberry, April 21, 2007