[HollyMutual-Announce] Whitehall Well Special Assessment

[Holly Mutual Water Company]

All:

Last summer the Whitehall Well pit was flooded because of a failed PVC pipe. The pit's sump pump was overwhelmed by the deluge and could not keep up. In the past we had an automatic fault reporting system connected to Colorado Water Well (CWW), but this was more focused on detecting power/overload faults and ultimately was disconnected because it proved useless. However even if it had remained connected and worked, it would not have saved us. Because we had no above-ground means to cut off the power to the pit equipment, CWW had to wait a day to get Xcel to shut off power, before the pit could be safely pumped out and re-entered.

This flood destroyed all of the mechanical and electrical equipment in the Whitehall well pit, which will have to be replaced to bring the well back online. The well itself was not affected. The board has been working with CWW to assess the best path forward. Their recommendation was to install as much of the electrical equipment as possible above ground, to minimize any damage caused by a future re-occurrence, and to allow them to cut off the pit power without Xcel's help. They also provided a preliminary repair estimate for budgetary purposes of $60,000 last year. That was well within the Holly Mutual Water Company's (HMWC) contingency reserve, and the board asked CWW to provide an formal proposal for the repairs, with the expectation that this work would be completed in time for our annual system activation on April 16th.

In February, CWW submitted their formal proposal of $107,000, which is slightly more than HMWC's liquid assets. The board has investigated the available options, and came to a unanimous decision to make an immediate special assessment of $1,000 for each shareholder. Our expectation is that this, along with our existing contingency reserve, will be sufficient to (1) fund the Whitehall repairs, (2) maintain sufficient capital to continue running HMWC, and (3) begin the re-establishment of our contingency reserve.

I am sorry to deliver this news. We have requested CWW to replace all PVC piping, which was responsible for the break, with copper piping, and the board is considering increasing our current insurance to cover equipment damages. We will also investigate whether an automatic fault detection system is now practical. Nevertheless I am grateful to this board and all of its previous members, for their efforts to keep HMWC running smoothly and to control our budget in the face of rising supplier costs. Twenty years ago HMWC was charging each shareholder about $2,000 per year. Ten years ago we were charging $1,600 per year, and recently before this special assessment, we've been been charging around $1,200 per year. There is no way we can maintain this trend, but we will keep working to make our water as affordable and reliable as possible.

Thanks,
Mark Derbyshire

President, Holly Mutual Board of Directors