ML21131A085

Financial Statement and Auditors Report

ML21131A085
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	04/26/2021
From:	Ridge B Dairyland Power Cooperative
To:	Document Control Desk, Office of Nuclear Material Safety and Safeguards
References
LAC-14471
Download: ML21131A085 (33)

Text

BRENT J. RIDGE President and CEO DAIRYLAND POWER COOPERATIVE April 26, 2021 In reply, please refer to LAC-14471 DOCKET NO. 50-409 ATTN: Document Control Desk U.S. Nuclear Regulatory Commission Washington, DC 20555-0001

SUBJECT:

Dairyland Power Cooperative La Crosse Boiling Water Reactor (LACBWR)

Possession-Only License DPR-45 Financial Statement and Auditors' Report

REFERENCE:

1) 10 CFR 50.71(b)

In accordance with the requirements of Reference 1, we are forwarding three (3) copies of the Financial Statements and Independent Auditors' Reports for Dairyland Power Cooperative as of December 31, 2020 and 2019.

Sincerely, Brent J. Ridge President and CEO BJR:CLO:tco G:\\PIANTS\\ISFSI\\NRC\\NRC AUDITS - Financial Statement Letters\\lAC-14471 Enclosure(s) cc: John B. Geissner, NRC Regional Administrator Marlayna Vaaler, NRC, FSME Tim Lightfoot, DPC Cheryl Olson, DPC (LACBWR/ISFSI)

Mike Russell, DPC Nicole Metzler, DPC A Touchstone Energy°' Cooperative ~

3200 East Ave. S.

• PO Box 817

• La Crosse, WI 54602-0817

• 608-787-1449

• 608-787-1321 fax* www.dairynet.com Dairyland Power Cooperative is an equal opportunity provider and employer.

Document Control Desk LAC-14471 Page 2 April 26, 2021 STATE OF WISCONSIN)

COUNTY OF LA CROSSE

-,n*'-

A Personally came before me this_4::'C)_,_'--____ day of er=, \\

. 202~, the above named, Brent J. Ridge, to me known to be the person who executed the foregoing instrument and acknowledged the same.

~tcven NI. Schauer NotarY Public State of Wisconsin Notary Public, La Crosse County Wisconsin My commission expires A ~~

& 1 '2..0'Z..I

Document Control Desk LAC-14471 Page 3 April 26, 2021 cc (letter only)

Ken Robuck Group President Disposal and Decommissioning EnergySol utions 299 South Main Street, Suite 1700 Salt Lake City, UT 84111 John Sauger Executive VP and Chief Nuclear Officer Reactor D & D EnergySol utions 2701 Deborah Ave Zion, IL 60099 Gerard van Noordennen VP Regulatory Affairs EnergySolutions 121 W Trade Street, Suite 2700 Charlotte, NC 28202 Joseph Nowak General Manager La CrosseSo I utions S4601 State Highway 35 Genoa, WI 54632-846 Dan Shrum Senior VP Regulatory Affairs EnergySolutions 299 South Main Street, Suite 1700 Salt Lake City, UT 84111 Russ Workman General Counsel EnergySolutions 299 South Main Street, Suite 1700 Salt Lake City, UT 84111 Jerome Pedretti, Clerk Town of Genoa E860 Mundsack Road Genoa, WI 54632

Document Control Desk LAC-14471 Page 4 April 26, 2021 Jeffery Kitsembel Division of Energy Regulation Wisconsin Public Service Commission PO Box 7854 Madison, WI 53707-7854 Paul Schmidt, Manager Radiation Protection Section Bureau of Environmental & Occupational Health Division of Public Health Wisconsin Department of Health Services PO Box 2659 Madison, WI 53701-2659 Cheryl Olson, ISFSI Manager La Crosse Boiling Water Reactor Dairyland Power Cooperative S4601 State Highway 35 Genoa, WI 54632-8846 Lane Peters, Genoa Site Manager La Crosse Boiling Water Reactor Dairyland Power Cooperative S4601 State Highway 35 Genoa, WI 54632-8846 Andrew Parrish Wheeler, Van Sickle and Anderson, S.C.

44 East Mifflin Street, Suite 1000 Madison, WI 53703 John E. Matthews Morgan, Lewis and Bockius LLP 1111 Pennsylvania Avenue, NW Washington, DC 20004 G:\\PLANTS\\ISFSI\\NRC\\NRC AUDITS - Financial Statement Letters

Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of and for the Years Ended December 31, 2020 and 2019, and Independent Auditors' Report

__ j

Deloitteo INDEPENDENT AUDITORS' REPORT Board of Directors Dairyland Power Cooperative La Crosse, Wisconsin Deloitte & Touche LLP Suite 2800 50 Sou th Sixth Street Min11eapolis, MN 55402-1538 USA Tel: +l 612 397 4000 Fax: +1 612 397 4450 www.deloitte.com We have audited the accompanying consolidated financial statements of Dairyland Power Cooperative and its subsidiaries (the "Cooperative"), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of revenues, expenses and comprehensive income, member and patron equitles, and cash flows for the years then ended, and the related notes to the consolfdated financia[ statements.

Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financ.ial statements in accordance with accounting principles generally accepted in the United States of Amerfca; this indudes the design, implementation, and maintenance of internal control relevant to the preparatfon and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility Our responsibHity is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from materfal misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Cooperative's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Cooperative's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used ancl the reasonableness of sfgniflcant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all materiat respects, the financial position of Dairyland Power Cooperative and its subsidiary as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

March 26, 2021 DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOUDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2019 (In thousands)

ASSETS ELECTRIC PLANT:

Pfant and equipment-at original cost Less accumulated depreciation Net plant and equipment Construction work in progress Total electric plant OTHER ASSETS:

Nuclear decommissioning funds (Note 4) other property and fnvestrrents (Note 8)

Investments in capita[ term certificates of National Rural Utilities Cooperative Finance Corporation (Note 8)

Regulatory assets (Note 1)

Investment for defetied compensation Deferred charges (Note 1)

Total other assets CURRENT ASSETS:

Cash and cash equivalents Designated funds Accounts receivable:

Energy sales Other Inventories:

Fossil fuels Materials and supplies Prepaid expenses and other Total current assets TOTAL 2020

$1,864,390 (821,525) 1,042,865 68!812 1,111,677 1,988 13,550 9,176 16,139 1,530 18!165 60,548 19,535 8,000 35,541 1,311 41,327 20,908 10,736 137,358

$1,309,583 2019

$1,810,057 (729,224) 1,080,833 85!461 1,166,294 1,984 11,927 9,176 8,288 1,873 1814_34 51,682 28,465 40,810 4,215 36,119 21,711 13,906 145,226

$1,363,202 (Continued)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2020 AND 2019 (In thousands) 2020 2019 CAPITALIZATION AND LIABILITIES CAPITALIZATION:

Member and patron equities:

Membership fees 1

1 Patronage capital (Note 9) 326;600 322,443 Accumufated other comprehensive income (Note 1) 1£376 11928 Total member and patron equities 327,977 324,372 Long-term obligations (Note 6) 835t120 8001519 Total capitalization 11163£097 1£1241891 OTHER LIABILITIES:

other deferred credits (Note 1) 2,519 53,649 Obligations under capital leases (Note 7) 6,623 5,058 Postretirement health insurance obligation (Note 11) 5,523 4,849 Decommissioning and asset retirement obligations (Note 13) 4,957 4,954 Other non-current Liabilities 3!627 2,269 Total other liabilities 231249 70,779 COMMITMENTS AND CONTINGENCIES (Note 10)

CURRENT LIABILITIES:

Current maturities of long-tern, obligations and obligations under capital leases 44,167 43,960 Line of credit (Note 5) 68,000 Nuclear decommissioning obligations (Note 13) 56 405 Advances from member cooperatives and other prepayments 13,704 13,826 Deferred credits (Note 1) 20,945 5,729 Other regulatory liabilities (Note 1) 81000 Accounts payable 26,255 23,031 Accrued expenses:

Payroll, vacation, and benefits 5,897 6,956 Interest 22 Property and other taxes 3,201 3,797 Other 1f012 1!806 Total current liabilities 123f237 1671532 TOTAL

$ 1,309,583

$ 1,363,202 See notes to consolidated financial statements.

(Concluded)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In thousands) 2020 2019 UTILITY OPERATIONS:

Operating revenues:

Sales of electrfc energy

$425,214

$444,760 Other 17,217 25,884 Total operating revenues 442,431 470,644 Operating expenses:

Fuel 96,273 106,389 Purchased and interchanged power 89,874 103,650 Other operating expenses 108,058 107,800 Depreciation and amortization 68,343 60,008 Maintenance 27,541 35,174 Property and other taxes 8,903 9,449 Total operating expenses 398,992 422,470 Operating margin before interest and other 43,439 48,174 Interest and other:

Interest expense 29,785 34,210 Allowance for funds used in construction-equity (1,008)

(936) other-net (60)

(143)

Total interest and other 28,717 33,131 OPERATING MARGIN 14,722 15,043 NONOPERATING MARGIN (Note 1) 984 3,286 NET MARGIN AND EARNINGS 15,706 18,329 OTHER COMPREHENSIVE LOSS-Postretirement health insurance obligation adjustments (552)

(559)

COMPREHENSIVE INCOME

$ 15,154

$ 17,770 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF MEMBER AND PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In thousands)

Accumulated Total Other Member Membership Patronage Comprehensive and Patron Fees Capital Income Equities BALANCE-December 31, 2018

$ 1

$ 308,540

$ 2,487

!;i 311,028 Net margin and earnings 18,329 18,329 Postretirement health insurance (SS9)

(559) obligation adjustments Retirement of capital credits (Note 9)

(4,426)

(4,426)

BALANCE-December 31, 2019 1

322,443 1,928 324,372 Net margin and earnings 15,706 15,706 Postretirement health insurance (552)

(552) obligation adjustments Retirement of capital credits (Note 9)

_jjj,549)

(11,549)

BALANCE-December 31, 2020 Ll

$ 326,600

$ 1,376 327,977 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In thousands) 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin and earnings

$ 15,706 18,329 Adjustments to reconcile net margin and earnings to net cash provided by operatlng activities:

(Gain) loss on disposal of assets (1,279) 2,836 Depreciation and amortization:

Charged to operating expenses 68,324 59,813 Charged through other operating elements such as fuel expense 3,353 3,336 Allowance for funds used fn construction-equity (1,008)

(936)

Unrealized loss (garn) on nuclear decommissioning trust investments 6

(15)

Changes fn operating elements:

Accounts receivable 8,173 (3,861)

Inventories (5,068) 7,919 Prepaid expenses and other assets 3,170 4,593 Accounts payable 3,721 4,423 Accrued expenses and other liabilities 11,480 (9,203)

Deferred charges and other (17,337)

_---1.,462 Total adjustments 73,545 70,367 Net cash provided by operating activities 89,251 88,696 CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions (54,021)

(50,434)

Purchase of investments (6,2.47)

(10,928)

Proceeds from sale of investments and economrc development loans 51071 10ll39 Net cash used in investing activities (55,197)

(511223)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under line of credit 44,000 72,000 Repayments under line of credit (112,000)

(83,000)

Borrowings under long-term obligations 79,958 Repayments of long-term obligations (43,086)

(21,336)

Retirement of capital credits (11,549)

(4,426)

Borrowings of advances from member cooperatives 378,670 390,776 Repayments of advances from member cooperatives (3781977)

(3881621)

Net cash used in financing activities (42,984)

(34,607)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,930) 2,866 CASH AND CASH EQUIVALENTS-Beginning of year 281465 25,599 CASH AND CASH EQUIVALENTS-End of year

$ 19,535

$ 28,465 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (All dollar amounts in thousands)

1.

NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperative and subsidiary ("Dairyland" or the "Cooperative")

is an electric generation and transmission cooperatlve organized under the laws of the states of Wisconsin and Minnesota. The Cooperative, whose principal offices are located fn Wisconsin, provides wholesale electric service to class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa and Illinols, and provides electric and other services to class C, D and E members.

Principles of Consolidation-The consolidated financial statements include the accounts of Dairyland and Dairyland's wholly owned subsidiary, Genoa FuelTech, Inc. All intercompany balances and transactions have been eliminated In consolidation.

Accounting System and Reporting-The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Utilities Service (RUS), the Cooperative's principal regulatory agency.

Electric Plant-The cost of renewals and betterments of units of property (as distinguished from minor items of property) includes contract work, direct labor and materiafs, alfocable overhead, and allowance for funds used durfng construction, and is charged to electric plant accounts. Included in accumulated depreciation are nonlegal or noncontractual costs of removal components. As a result, the cost of units of property retrred, sold or otherwise dfsposed of, plus removal costs, less salvage, ls charged to accumulated depreciation and no profit or loss is recognized tn connection with ordinary retirements of property units. A provision for these nonlegal or noncontractual costs of removal components is recognized based on depreciation rates determined by a third-party depreciation study completed in November 2016 and approved by RUS in 2017 for rates effective in 2017. The Cooperative is unable to obtain the information to separate the cumulative removal costs as of December 31, 2020 and 2019. Maintenance and repair costs and replacement and renewal of minor items of property are charged to operations.

Depreciation-Depreciation, which is based on the straight-line method at rates that are designed to amortize the original cost of properties over their estimated useful lives, includes a provision for the cost of removing and decommissioning the properties. The provision for depreciation averaged 3.8% and 3.5% of depreciable piant balances for 2020 and 2019, respectively.

Allowance for Funds Used! During Construction-Allowance for funds used during construction (AFUDC) represents the cost of external and internal funds used for construction purposes, and is capitalized as a component of electric plant by applying a rate (5.872% in 2020 and 5.321 % in 2019) to certain construction work in progress. The amount of such allowance was $2,785 ln 2020 and $2,524 in 2019. The borrowed funds component of AFUDC for 2020 and 2019, was $1,777 and $1,587, respectively (representing 3.747% and 3.345% in 2020 and 2019, respectively). The equity component of AFUDC for 2020 and 2019 was $1,008 and $936, respectively, (representing 2.125%

and 1.976% in 2020 and 2019, respectively). The borrowed funds components were included as a reduction of interest expense in the consolidated statements of revenues, expenses and comprehensive income.

Designated Funds - In January 2021, the Board of Directors approved the creatlon of a regulatory liability revenue deferral plan in the amount of $8,000 pertalning to favorabte results from market credits through transactions with the Mid-Continent Independent System Operator (MISO) in 2020 and cost savings realized with the decision to retire the Genoa #3 station. The Cooperative deferred $8,000 of 2020 revenue and plans to recognize this amount in 2021. The deferral plan was approved by RUS in February of 2021.

Regulatory Assets-The Cooperative's accounting pollcies and the consolidated finandal statements conform to accounting principles generally accepted In the United States of America applicable to electr[c cooperatives.

The noncurrent portion of regulatory assets as of December 31, 2020 and 2019, include the fol lowing:

Alma 4&5 unrecovered plant balances Genoa #3 unrecovered plant balances Total regulatory assets 2020 16,139

$16,139 2019

$ 8,288

$ 8,288 Alma 4 & 5 unrecovered plant balances-During 2014, the Cooperative established a regulatory asset related to unrecovered plant balances upon dosure of the Alma 4&5 generating stations. This is befng amortfzed through rates over 10 years beginning in 2015. In 2020, the Board of Directors approved early defeasement of this regulatory asset and the remaining amount was amortized into expense.

Genoa #3 unrecovered plant balances-During 2020, the Cooperative estabHshed a regulatory asset related to the unrecovered plant bafances upon closure of the Genoa #3 generating station expected in 2021. A second regulatory asset was also established in 2020 in the amount of $10,000 and relates to the retirements and retention programs associated with the Genoa Station #3 closure. In 2020, Dairyland began accelerating depreciation of plant assets related to Genoa #3 which was recorded against the regulatory asset. Accelerated depreciatfon will continue to occur until the book value is zero at the closure date. The revenue recognition related to the GRE Prepayment (Note 1) was also accelerated to coincide with the expected plant dosesure date. This accelerated revenue recognition was recorded as an offset to the Genoa #3 regulatory asset.

The expected fo[lowing year's portion of these regulatory assets is included in prepayments and 0th.er assets at December 31, 2020 and 2019, respectively.

Deferred Charges-Deferred charges represent future revenue to the Cooperative associated with costs that will be recovered from customers through the rate-making process. As of December 31, 2020 and 2019, the Cooperative's deferred charges are being reflected fn rates charged to customers, except the deferred nuclear litigation as liloted below. rf all or a separable portion of the Cooperative's operations become no longer subject to the provisions of regulatory accounting,, a write-off of deferred charges would be required, unless some form of transition recovery (refund) continues through rates established and collected for the Cooperative's remaining regulated operations. In addition, the Cooperative would be required to determine any impairment to the carrying costs of deregulated plant and inventory assets.

The noncurrent portion of deferred charges as of December 31, 2020 and 2019, include the following:

Pension prepayment Deferred nuclear litigation Other Total deferred charges 2020

$ 2,690 6,271 9,204 i181i6S 2019

$ 5,380 3,958 9,096 i18i434 Pension prepayment-The voluntary prepayment to the Cooperatfve's multiemployer defined-benefit pension plan to reduce future funding amounts is being amortized to benefits expense over 10 years beginning in 2013 as prescribed by RUS.

Deferred nuclear litigation-Litigation expenses from the third nuclear contract damages claim against the United States government are being deferred pending the outcome of that litigation. See further discussion in Note 14.

Other-Costs relating to the Nemadji Trail Energy Center natural gas project are being accumulated in deferred charges. These charges will be amortized when the plant is in service (currently estimated for 2025).

Cash and Cash Equivalents-Cash equivalents include all highly liquid investments with origina[ maturities of three months or less. Cash equivalents consist primarily of commercial paper, stated at cost, which approximates market.

Fossil Fuels and Materials and Supplies-Coal inventories, a.swell as materials and supplies inventories, are stated at the lower of average cost or net realizable value.

Deferred Credits-Deferred credits represent both future revenue to the Cooperative assoc;iated \\*Vith customer prepayments and noncurrent obligations and reserves refated to operations. As of December 31, 2020, the Cooperative's deferred credits are being considered when determining rates charged to customers.

The noncurrent portion of deferred credits as of December 31, 2020 and 2019, include the following:

Unearned revenue-contract prepayment Other Total deferred credits 2020 2019 2,519

$ 2,519

$ 53,649

Unearned Revenue-Contract Prepayment-During 2015, the Cooperative and Great River Energy (GRE) reached settlement terms amending a power agreement which shared costs and benefits of the Cooperative owned! 345-megawatt coal-fired generating unit located in Genoa, Wisconsin ("Genoa Station #3"). The settlement terms allowed GRE to end its purchase of power and energy under the agreement as of June 1, 2015, upon prepayment by GRE of $83,543 for certain obligations under the agreement. GRE is no longer entitled to any output from the unit. GRE will remain responsible for its share of eventual decommissioning costs and of any liability for disposal of coal combustion byproducts. The transaction received required approval from RUS during 2015.

The prepayment was setup to be recognized into operating revenues on a straight-line basis through 2029, the approximate tirrie frame over which the prepayment amounts would have been billed. The amounts recognized as revenue under the straight-line basis were $5,729 during both 2020 and 2019.

Revenue recognition related to the GRE prepayment was accelerated in 2020 to coincide with the expected closing of the Genoa Station #3 facility (expected June 1, 2021), The accelerated revenue recognition was recorded as an offset to the regulatory asset established for the Genoa Station #3 facility. The amount of the accelerated revenue recognition for 2020 was $30,612. The remaining GRE prepayment balance of $20,945 was classified within current deferred credits as of December 31, 2020 due to the expected closure in 2021.

Sales of Electric Energy-Revenues from sales of electric energy are recognized when energy is delivered. The class A wholesale rates approved by the Board of Directors have a power cost adjustment that allows for increases or decreases in class A member power billings based upon actual power costs compared to plan. For 2020 and 2019, the power cost adjustment to the class A members resulted in credits to sales billed of $2,770 and

$239, respectively. These amounts are recorded fn sales of electric energy in operating revenues on the consolidated statements of revenues, expenses and comprehensive income.

Other Operating Revenue-Other operating revenue primarily includes revenue received from transmission service and is recorded as services are provided.

Accounting for Energy Contracts-Contracts that did not meet the accounting definition of a derivative are accounted for as executory contracts. The Cooperative's energy contracts that qualify as derivatives continue to be accounted for at fair value, unless those contracts meet the requ.irements of and have been designated as "normal purchase normal sale." The Cooperat!ve does not have any energ,y contracts that are required! to be accounted for at fair value as of December 31, 2020 and 2019.

Nonoperating Margin-The nonoperating margin for the years ended December 31, 2020 and 2019, includes the following:

2020 2019 Investment income

$ 603

$2,722 Investment income on nuclear deconmissioning funds:

Net earnings 9

112 Realized gains 77 Realized losses and !asses due to OTTI (33)

Provision-recorded as estimated decommissioning liabHities (9)

(156)

Other 381 564 Nonoperating margin

$~ 984

$3,286 Use of Estimates-The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts or revenue and expenses during the reporting period. Significant estimates in the consolidated financial statements relate to postretlrement benefit obligations, asset retirement obHgation liabllltles, fixed-asset depreciable lives, and litigation and contingencies. Actual results could differ from those estimates.

Accumulated Other Comprehensive Income-Accumulated other comprehensive income is comprised solely of a postretirement health insurance obligation. See additional information in Note 11. The components for the years ended December 31, 2020 and 2019, are as follows:

2020 2019 Balance-beginning of year

$1,928

$2.487 Recognition in expense:

Amortization of prior service cost 91 65 Amortization of unrecognized actuarial gain (109)

(154)

Actuarial assumption changes (534)

(470)

Net other comprehensive loss (552)

(559)

Balance-end of year

~1,376 il,928 Concentration O*f Risk-Approximately 42% of the labor force for the Cooperative is under a collective bargaining agreement that expires on January 31, 2023.

Subsequent Events-The Cooperative considered events for the recognition or disclosure in the consolidated financial statements that occurred subsequent to December 31, 2020, through March 26, 2021, the date the consolidated financial statements were available to be issued.

2.

ACCOUNTING STANDARDS Recently Adopted:

The Cooperative adopted ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework - Changes to the Disclosure Requirements for Fair Vaiue Measurement on January 1, 2020. The ASU modified fair value disclosure requirements including new disclosure requirements for Level 3 unobservable inputs and eliminated the requirement to disclose certain information relating to transfers betvveen levels. The Cooperative determined that the adoption of ASU 2018-13 did not have a materlal impact on its disclosures.

The Cooperative adopted FASB ASU No. 2018-14, Compensation-Retirement 13eneflts-Defined Benefit Plans-General (Subtopic 715-20) on January 1, 2020. The ASU amends existing guidance to add, remove and clarify disclosure requirments related to defined benefit pension and other postretirement plans. Adoption of the ASU had no material impact on the consolidated financial statements.

Not Yet Effective:

In February 2016, the FASB issued new accounting guidance for leases. The new guidance increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements in the financial statements. In January 2018, the FASB issued additional accounting guidance on leases, amending the guidance issued in 2016, to simplify the transition to the new guidance for land easements. The new guidance will be effective for the Cooperative in 2022. Early adoption of the accounting guidance is permitted and must be applied using one of the two prescribed methods. Management is currently evaluating the impact of adoption of this new guidance on the consolidated financial statements and disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The new standard requires entities that are customers fn cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internala use software guidance. ASU 2018-15 is effective for the Cooperative in 2021 and early adoption is permitted. The amendments allow either a retrospective or prospective approach to all implementation costs incurred after adoption. The Cooperative is evaluating the expected impact of this standard on its consoltdated financial statements.

3.

INCOME TAXES The Internal Revenue Service has determined that Dairyland is exempt from federal income taxes under Section 501(c)(12) of the Internal Revenue Code. Accordingly, the Cooperative's utility operations are generally exempt from federal and state Income taxes and no provision for such taxes is recorded in the consolidated financial statements.

4.

AVAILABLE-FOR-SALE INVESTMENTS Investments in the nuclear decommissioning trust (NDT) are classified as available-for-sale, recorded at fatr value, and recorded within Prepaid expenses and other and Nuclear decommissioning funds as of December 31, 2020 and 2019. Investment balances as of December 31, 2020 and 2019, include the following:

Cash and cash equivalents U.S. government securities Corporate bonds 2020 Fair Value NOT

$ 2,045 2019 Fair Value NOT

$ 2,017 183 189 Information regarding the sale of available~for~sale marketable securities, induded in the nucfear decommissioning trusts, for the years ended December 31, 2020 and 2019, is as follows:

Proceeds from sale of securities Realized gains (tosses) 2020 787 8

2019

$ 9,791 44 For the purposes of determining realized gains and losses, the cost of securities sold is based upon specific identification.

Secur[ties in the portfolio are reviewed to determine whether they have been other-than-temporarily impaired. The Cooperative recorded no impairment write-downs of its investments in 2020 and 2019.

Investment income included in nonoperating margin on the consolf dated statements of revenues, expenses and comprehensive income is net of investment fees of approximately

$3 and $12 for the years ended December 31, 2020 and 2019, respectively.

S.

LINES OF CREDIT To provide interim financing capabilities, the Cooperative has arranged committed lines of credit with availability aggregating approximately $350,000. The Cooperative has a syndicated credit facility with CoBank originally executed on November 30, 2015, and amended on November 20, 2019. This amended faciffty has a five-year term and provides funds both for short-term working capital requirements and for capital projects untfl permanent financing can be obtained. Some capital projects will last longer than one year, but the intent is to pay down the line of credit as permanent funding is received.

Compensating balance requirements and fees relating to the lines of credit were not significant in 2020 and 2019. Information regarding line of credit balances and activity for the years ended December 31, 2020 and 2019, is as follows:

Interest rate at year-end Total borrowings outstanding at yearwend Average borrowings outstanding during year 2020 2019 1.16 °/o 2.80 0/i,

$ 68,000

$ 22,400 9 58,900 The Cooperative also allows member cooperatives to prepay their power biUs and pays interest on these prepayments based on current short-term borrowing rates. Advances from member cooperatives tota!ed $13,704 and $13,820 at December 31, 2020 and 2019, respectively. Interest expense on member cooperative advances was $191 and $301 for the years ended December 31, 2020 and 2019, respectively. These amounts have been included in interest expense on the consolidated statements of revenues, expenses, and comprehensive income.

6.

LONG-TERM OBLIGATIONS Long-term obligations as of December 31, 2020 and 2019, consist of the following:

2020 2019 Federal Financing Bank obligations-1.24%-4.49%

$582,110

$527,723 Federal Financing Bank obligations-4,50%-5.52%

209,964 220,672 Total Federal Financing Bank 792,074 748,395 RUS obtigations-4.125% and grant funds 3,055 3,532 CoBank notes-2.9%, 4.3%

7,232 12,283 Private bonds placement obligations-3.42%

74,167 77,500 Long-term debt 876,528 841,710 Less current maturities (41,408)

(41,191)

Total long-term obligations

$835,120

l!BD0,519 Quarterly principal and interest payments on the long-term obligations to the Federal Financing Bank (FFB) extend through 2053. Long-term obligations to FFB are net of deposits in the RUS debt prepayment program of $0 and $809 as of December 31, 2020 and 2019, respectively. These deposits earn 5% interest and are used solely to pay principal and interest payments.

Long-term obligations to the RUS are payable in equal monthly principal and interest installments through 2024. Payments on the CoBank 2.6% and 4.3% notes are due quarterly and semi-annual through 2023. The private bond placement is an amortizing 30-year term loan at an interest rate of 3.42%. Quarterly principal and interest payments on this obligation extend through 2043.

The Cooperative executed, filed and recorded an indenture of mortgage, security agreement and financing statement, dated as of September 13, 2011 and as supplemented (the "Indenture), between the Cooperative, as granter and U.S. Bank National Association, as trustee. The perfected lien of the Indenture on substantially all of the Cooperative's assets secured equally and ratably all of the Cooperatlve's longwterm debt with the exception of unsecured notes to CoBank (balances of $7,232 and $8,742 at December 31, 2020 and 2019, respectively). The Cooperative is required to maintain and has maintained certain financial ratios related to earnings In accordance with the covenants of its loan agreements as of December 31, 2020.

Scheduled maturities of the Cooperative's long-term obligations as of December 31, 2020, were as follows:

Years Ending December 31 2021 2022 2023 2024 2025 Thereafter Total $ 41A08 42,628 41,997 42,309 43,015 665,171

$876,528

7.

LEASES Operating Leases-The Cooperative has entered into lease agreements under which it is the lessee on operating leases for various fleet vehicles and six rail cars. These transactions are covered in the master lease agreement and have lease terms ranging from four to 15 years. At the end of the leases, the Cooperative can either purchase the equipment at fair market value, continue to lease the assets, or return the equipment to the lessor. Rent expense was $653 and $785 in 2020 and 2019, respectively. ihe schedule of future minimum lease payments as of December 31, 2020, ls as follows:

Years Ending December31 2021 2022 2023 2024 Total

$ 677 491 369 52

$1,589 Capital Leases-The Cooperative has entered fnto several capital lease agreements for large vehicles and heavy equipment. The transactions are covered in the master lease agreement with lease terms not exceeding seven years. At the end of the lease, the Cooperative can purchase the equipment for a bargain purchase prfce. The original cost of the assets under capital leases as of December 31, 2020 is $19,120. The assets are amortfzed over the lesser of their related lease terms or their estimated productive lives.

The schedule of future minfmum lease payments as of December 31, 2020r Is as follows:

Years Endin.g December 31 2021

$ 3,038 2022 2,273 2023 1,600 2024 1,103 2025 1,038 Thereafter 1,064 Total minimum lease payments 10,116 Amounts representing interest (734)

Present value of minimum lease payments 9,382 Current maturities (2,759)

Long-term capital lease obligations

~ 6,623

8.

FINANCIAL INSTRUMENTS The fair value of the Cooperative's financial instruments other than marketable securities and short-term borrowings, based on the rates for similar securities and present value models using current rates available as of December 31, 2020 and 2019, is estimated to be as follows:

2020 2019 Recorded Fair Recorded Fair Value Value Value Value Assets:

other property and investments $ 13,550 13,550

$ 11,927 11,927 Investments in capital term certificates of NRUCFC 9,176 9,176 9,176 9,176 Liabilities-long-term obligations 876,528 1,053,339 841,710 946,153 Assets and Liabilities Measured at Fair Value-Accounting principles generally accepted in the United States of America establish a framework for measuring fair value by creating a hierarchy for observable independent market inputs and unobservable market assumptions and provides for required disclosures about fair value measurements.

Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that could be realized in a current market exchange.

A description of the inputs used in the valuation of assets and liabilities are as follows:

Level 1 inputs utilize observable market data in active markets for identicaf assets or liabflities. Level 2 inputs consist of observable market data, other than that included In Level 1, that are either directly or indirectly observable. Level 3 inputs consist of unobservable market data, which are typically based on an entity's own assumptions of what a market participant would use in pricing an asset or liabifity as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest-level Input that is significant to the fair value measurement in its entirety. The Cooperative's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or lia bHity.

The foHowing table summarizes the Cooperative's assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019, aggregated by the level in the fair value hierarchy witt1in which those measurements fall:

2020 Assets-investments:

Designated funds Nuclear decommissioning funds other property and investments Investments in capital term certificates of National Rural Ulllitles Finance Corporation Investment for deferred com pensatfon 2019 Assets-investments:

Nucrear decommissioning funds Other property and investments Investments in capital term certificates of National Rural Utilities Finance Corporation Investment for deferred compensation Fair Value

$ 8,000 2,045 13,550 9,176 1,668

$34,439 Fair Value

$ 2,389 11,927 9,176 2,048

~25,540 Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Identical Assets Obsen,able and Liabilities (Level 1)

$ 8,000 2,045 4,035

$14,080 Inputs (Level 2) 1,419 1,668 Significant Unobservable Inputs (Level 3) 8,096 9,176

$17,272 Fair Value Measurements Usln9 Quoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and Uabilities Inputs Inputs (Level 1)

(Level2)

(Level3)

$2,389 1,070 10,857 9,176 2,048

$3,459

$2,048

$20,033

In 2020, there were $353 of transfers from level 3 to. 2 and $1,585 of transfers from level 3 to 1 after reassessment by management of market activity and the availability of observable market data. There were no transfers between levels 1, 2, and 3 in 2019.

The changes in Level 3 recurring fair value measurements using significant unobservable inputs for the years ended December 31, 2020 and 2019, are as follows:

2020 2019 Other property and investments:

Balance-beginning of year

$ 10,857

$ 10,188 New Investment and loans made 25 550 Loan repayments received and current maturities (949)

(25)

Patronage capital allocations 101 159 Refunds of deposits (15)

Transfers from Level 3 to Level 1 (1,585)

Transfers from Level 3 to Level 2 (353)

Balance-end of year 8,096 1_ 10,857 The valuation of these assets involved management's judgment after consideration of market factors and the absence of market transparency, market liquidity ~nd observable inputs.

9.

RETIREMENT OF CAPITAL CREDITS The Cooperative's Board of Directors has adopted a policy of retiring capital credits allocated to members on a first-in, first-out basis. As part of an equity development strategy adopted in 2003, patronage capital retired will be limited to no greater than 2% of the total assigned patronage capital balance as of December 31 of the prior year. This policy is subject to annual review and approval by the Board of Directors and the RUS, and no cash retirements are to be made which would impair the financial condition of the Cooperative or violate any terms of its agreements. Since 2003, the amount of nonoperating margins assigned to members each year is at the discretion of the Board of Directors. Any unassigned nonoperating margins will become unallocated reserves and part of permanent equity. Patronage capital amounts for the years ended December 31, 2020 and 2019, are as follows:

Assigned Unassigned Total Balance-December 31, 2018

$221,293

$87,247

$308,540 Retirement of capital credits (4,426)

(4,426)

Current year margins 14,107 4,222 18,329 Balance-December 31, 2019 230,974 91,469 322,443 Retrrement of capital credits (11,549)

(11,549)

Current year margins 13,713 1,992 15,706 Balance-December 31, 2020 ji233,138

e93,461 i326,600 During 2020, as a result of the COVID-19 pandemic, the Board of Directors approved capital credit retirements at 5% of net patronage capital. This one time increase was to provide relief to the Class A member cooperatives and enable them to provide relief to their end-use members. The Board determined that the one time increase would neither impair the financial condition of Dairyland nor violate the terms of the indenture of mortgage or any outstanding loan agreements that Dairyland is party to.

10. COMMITMENTS AND CONTINGENCIES The Cooperative is a party to a number of generation, transmission and distribution agreements, under which costs and/or revenues are recognized currently based upon the Cooperative's lnterpretatfons of the provisions of the related agreements. Differences between the estimates used In the consolidated financlal statements and the final settlements are recorded in the year of settlement.

The Cooperative has entered into various coal purchase contracts with one-to four-year terms. The estimated commitments under these contracts as of December 31, 2020, Is as follows:

Years Ending December31 2021 2022 2023 2024 Total

$ 49;418 32,053 26,268

. 1§,080

$123,819 The Cooperative has been named as a defendant in various lawsuits and clatms arising in the normal course of business. Although the outcome of these matters cr;1nnot be determined at the present time, management and legar counsel believe these actions can be successfully defended or resolved without a material effect on the consolidated financial position, results of operations or cash flows of the Cooperative.

11. EMPLOYEE BENEFITS Multiemployer Defined-Benefit Pension Plan-Pension benefits for substantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRECA) Retirement Security Plan ("RS Plan"). This is a defined benefit pension plan qualified under Section 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. Pension benefits are funded in accordance with the provisions of the RS Plan and are based on salaries, as defined, of each participant. The Emptoyee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendment Act of 1980, imposes certain liabilitfes on employers who are contributors to multfemployer plans in the event of a plan termination or an employer's withdrawal. These plans have not been terminated, nor has the Cooperative undertaken any plans to withdraw from participation. Since the RS Plan is a multiemployer plan for accounting purposes, air plan assets are availabte to pay benefits of any plani participant. Separate asset accounts are not maintained for particfpating employers. Thfs means that assets contributed by one employer may be used to provrde benefits to employees of other participating employers.

The Cooperative may be contingently liable for its share of the RS Plans' unfunded vested liabilities.

The Cooperative's contributions to the RS Plan in 2020 and 2019 represented less than 5%

of the total contributions made to the plan by all participating employers. In 2013, the Cooperative made a voluntary prepayment of $26,899 to this plan to reduce future contribution amounts. Expense for the RS Plan was $12,724 in 2020 and $12,277 in 2019.

The 2020 expense includes contributions to the plan of $10,034 and $2,690 of prepayment amortization. The 2019 expense includes contributions to the plan of $9,587 and $2,690 of prepayment amortization.

In the RS Plan, a "zone status" determination is not required, and therefore not determined, under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by indfviduc1I employer. In total, the RS Plan was over 80% funded on both January 1, 2020 and 2019, based on the PPA funding target and PPA actuarial value of assets on those dates.

Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience.

Postretirement Health Insurance Obligation-Certain employees of the Cooperative retfrlng at or after age 55 are eligible to participate in a postretlrement health care plan through age 65. Eligible dependents of the retired Cooperative employees are also eligible to participate in this plan through age 65. Retirees pay 100% of the prem[um amount for this coverage. The premium is based upon the combined medical claims experiences of all active employees and retirees. If premiums were determined based upon the medical claims experience of retirees only, the resulting premium for retirees would be higher. The differ_ence between the premium paid by retirees and the potential actual premium amount is the basis for the postretirement benefit obligation. The Cooperative uses a December 31 measurement date for its plan. The postretirement health care plan is unfunded.

The accumulated postretirement benefit obligation (APBO) and the amounts recognized in the consolidated financial statements as of and for the years ended December 31, 2020 and 2019, are as follows:

Amount recognized in the consolidated balance sheets:

Total accrued qualified and nonqualified benefit obligation Less current portion included In accrued expenses-other Long-term portion Change in benefit obligation:

APBO-beginnlng of year Service cost Interest cost Actuarial loss Benefits paid APBO-end of year Funded status of plan-December 31 Accrued postretirement health insurance obligations recorded at year-end Change in plan assets:

Employer contribution Benefits paid Change in accumulated other comprehensive income:

Net income at prior measurement date Actuarial assumption changes Recognition in expense:

Amortization of prior service cost Amortization of unrecognized actuarial gain Accumulated other comprehensive income Components of net periodic postretirement benefit cost:

Service cost-benefits attrfbuted to service durin.g the year Interest cost on accrued postretirement health insurance obligation Amortization of prior service cost Amortization of unrecognized actuarial gain Net periodic postretirernent benefit expense 2020 2019

$ 5,825

$ 5,166 (302)

(317)

$ 5,523

$ 4,849

$ 5;166

$ 4,597 297 260 145 176 534 470 (317)

(337) f 5,825 i 5,166

$(5,825)

$(5,166)

$ 5,825

$ 5,166

$ (317)

$ (337) 317 337

$ 1,928

$ 2,487 (534)

(470) 91 65 (109)

(154)

$ 1,376

$ 1,928 297 260 145 176 91 65 (109)

(154) i 424 347 Employer cash contributions expected to be made to the plan during the fiscal year ending December 31, 2021, is $302. The amount of accumulated otlher comprehensive income expected to be recognized during the fiscal year ending December 31, 2021, is an actuarial gain of $58 and amortization of prior service cost of $0. All prior service costs have been fully amortized.

For measurement purposes, a 2.07% and 2.90% discount rate was assumed for 2020 and 2019, respectively, to determine net periodic benefit cost. The 2020 and 2019 annual health care cost increase assumed is 6.50% and 6.60%, respectively, decreasing gradually to 4.50% for 2030 and thereafter.

Estimated future benefit payments from the plan as of December 31, 2020, are as follows:

Years Ending December 31 2021 2022 2023 2024 202S 2026-2030 302 281 289 2,i 311 1,813 Defined-Contribution Plan-Dairyland has a qualified tax-deferred savings plan for eligible employees. Eligfble participants hfred prior to January 1, 2020 may make pretax contributions, as defined, with the Cooperative matching up to 2.5% of the participants' annual compensation. Eligible participants hired after December 31, 2019 may make pretax contributions, as defined, with the Cooperative matching up to 13% of the participants' annual compensation. Contributions to this plan by the Cooperative were

$1,325 and $1,298 for 2020 and 2019, respectively.

Other Plans-The Cooperative offers key employees deferred compensation plans available through NRECA. The plans permit qualifying employees to defer a portion of their salary until future years. The accumulated deferred compensation balance is not available to employees until termination, retirement or death.

All amounts of compensation deferred under the plans and all income att,ibutable to those amounts (until pald or made available to the employee or other beneficiary) are solely the property and rights of the Cooperative (not restricted to the payment of benefits under the plan)~ subject only to the claim of genera! creditors. Participants' rights under the plans are equal to those of general cred[tors of the Cooperative fn an amount equal to the fair market value of the deferred account for each participant. The related assets and liabilities, totaling $1,668 and $2,048 as of December 31, 2020 and 2019, respectively, are reported at contract value, which approximates fair value.

The c;:ooperative also provides employees with medical insurance coverage, vision and dental insurance coverage, short-term and long-term disability, and life insurance, which are funded by employer and employee contributions. The Cooperative's costs related to tl1ese benefits were $10,562 and $10,277 for 2020 and 2019, respectively. The liability for these plans of $5 and $41 as of December 31, 2020 and 2019, respectively, are recorded in accrued expenses on the consolidated balance sheets.

12. RELATED-PARTY TRANSACTIONS The Cooperative provides electric and other services to its class A members. The Cooperative received revenue of $384,984 and $401,877 in 2020 and 2019, respectively, for these services. The Cooperative has accounts receivable from its class A members of

$32,311 and $37,362 as of December 31, 2020 and 2019, respectively.

The Cooperative has advances from class A members of $13,704 and $13,820 as of December 31, 2020 and 2019, respectively, related to the prepayment program. Class A members have the option of paying their electric bill in advance, and in turn, the Cooperative pays the members' interest income. The Cooperative's interest expense related to the prepayment program was $191 and $301 for the years ended December 31, 2020 and 2019, respectively.

13. ASSET RETIREMENT Q,BLIGATIONS An asset retirement obligation (ARO) is the result of legal or contractual obligations associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. The Cooperative determines these obligatrons based on an estimated asset retirement cost adjusted for inflation and projected to the estimated settlement dates and discounted using a credit-adjusted risk-free interest rate. Upon Initial recognition of a liability for ARO, the Cooperative capitalizes the asset retirement cost by increasing the carrying amount of the related long-lived asset by the same amount as the liability. The Cooperative allocates that asset retirement cost to expense using the straight-line method over the remaining useful life of the related long-lived asset. The accretion of the obligation is recognized over time up to the settlement date. Any future change in estimate will be recognized as an increase or a decrease in the carrying amount of the liability for an ARO and the related asset retirement cost capitalized as part of the carrying amount of the related long-lived asset.

The Cooperative determined that it has AROs related to future removal and disposal of asbestos at its power plants. There are no assets legally restricted for purpose of settling the ARO related to future removal and disposal of asbestos.

The Cooperative has established a decommissioning trust to accumulate the estimated amounts necessary to decommission a nuclear power plant that the Cooperative formerly operated and the related Independent Spent Fuel Storage Installation {ISFSI). The assets of this trust in the amount of $2,045 and $2,389 as of December 31, 2020 and 2019, respectively, are outside the Cooperative's admrnistrative control and are available solely to satisfy the future costs of decommissioning. As the expected completion Is planned for 2021, the balance of the trust as of December 31, 2020 of $56 is recorded as current in the consolidated balance sheet. The remaining $1,988 is related to the annual ISFSI costs that will remafn after completion of the decommissioning.

Nuclear decommissioning and other asset retirement obligations as of December 31, 2020 and 2019, are as follows:

Nuclear Balance-December 31, 2018

$ 6,260 Increase in estimated obligation 156 Incurred costs on projects (4,0_27)

Balance-December 31, 2019

$ 2,389 Increase in estimated obligation 9

Incurred costs on projects (354)

Balance-December 31, 2020

~ 4_,_044 Other

$ 2,970

$ 2,970 1

Total 9,230 156 (4,027) 5,359 9

(354) 5 014

~

The Cooperative did not record a conditional ARO related to the dismantlement of the dam and drafnage reservoir for the hydro generation plant at Flambeau, the restoration of land to preexisting condition at Genoa Station #3 site related to the land rights permit, and the removal of transmission lines in various corrfdors, because the Cooperative does not have sufficient information to estimate the fair value of the ARO.

14. NUCLEAR REACTOR License-The La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily removed from service by the Cooperative effective April 30, 1987. The intent was to terminate operation of the reactor, and a possession-only license was obtained from the Nuclear Regulatory Commission (NRC) in August 1987. LACBWR will remain in safe storage status (SAFSTOR) until the final stage of decommissioning of LACBWR, involving dismantlement and decontamination, can be completed. In May 2016, the NRC approved transfer of the Hcense to La CrosseSolutions LLC (Solutions), a subsidiary of EnergySolutions LLC.

Solutions will temporarily hold the license and assumes responsibility for the decommissioning of the site. The license will revert back to the Cooperative following completion of decommissioning activities. While Solutions undertakes decommissioning, the Cooperative retains a license for its continued ownership of the spent fuel.

Nuclear Waste Policy Act of 1982 {NWPA)-Under the NWPA, the United States government is respons!.b,le for the storage a,nd disposal of spent nuclear fuel removed from nuctear reactors. By statute and under contract, the United States government was to have begun accepting spent fuel in January 1998,, bUit has not yet licensed and established a repository.

The Cooperative filed an initial breach of contract damages claim against the United States government in the United States Court of Federal Claims to recover its costs generally incurred a:fte:r 1998 through 2006 related to spent fuel remaining at LACBWR. In January 2013, the Cooperative received a damages award payment of $37,659 from the government for this claim.

The Cooperative filed a second contract damages claim in December 2012 to recover its costs generally incurred from 2007 through 2012. The Cooperative and the government agreed to settle the second claim In October 2016. Settlement proceeds of $73,500 were received from the government in November 2016, and at the direction of the Board of Directors, were recorded as a regulatory liability due to Class A members. The nuclear related regulatory asset of $16,700 and deferred charges for nuclear related titigation and plant costs of $9,164 were recovered from the regulatory liability as these amounts had not been collected in rates previously. The remaining net amount of $47,636 was refunded to Class A members in February 2017.

In late 2018, the Cooperative filed a third contract damages claim to recover its costs generally incurred from 2013 through 2018. The claim is proceeding through the legal process.

Subsequent damages claims will be filed to recover the continuing costs arising from the presence of the spent fuel.

ISFSI-The Cooperative completed the temporary dry storage facility project located on the LACBWR site and completed the move of the LACBWR spent nuclear fuel to this ISFSI facility in September 2012. The spent nuclear fuel will remain at the ISFSI until it is able to be transferred to the government. Annual ISFSI costs are recorded on an as incurred basis and rncorporated into the annual budget and rate making process.

Decommissioning-The Solutions decommissioning plan anticipates completion of decommissioning LACBWR, not including the ISFSI, in 2021. The estimated costs of decommissioning the nuclear generating facility are based on the Solutions cost study and decommissioning plan filed with the NRC as part of the license transfer. Costs Incurred for decommissioning projects are charged against the decommissioning liabiHty, As costs are incurred, Solutions submits requests for withdrawals to the Cooperative for release of funds from the nuclear decommissioning trust.

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION The statement of cash flows includes the following supplemental information as of December 31, 2020 and 2019:

2020 2019 Cash paid for interest 32,096 s

35,360 Electric plant additions funded through accounts payable and accrued expenses 2,888 2,509 Electric plant addftions under capital leases 4,758 2,654 Non-cash payment of long-term debt i_

809

§i 163!428

16. REVENUE FROM CONTRACTS WITH CUSTOMERS Sales of electric energy consists of sales to members pursuant to long-term wholesale electric contracts. Dairyland recognizes revenue based on the amount of energy deHvered to each customer at agreed upon rates. The measurement of energy sales to customers ls generally based on meter data, whfch is collected through the last day of the month. At the end of each month, amounts of energy delivered to customers rs recognized.

We are an active participant in the MISO Energy Markets, where we bid our generation Into the Day Ahead and Real Time markets and procure electricity for our wholesale customers and sell energy at prices determined by the MISO Energy Markets. Purchase and sale transactions are recorded using settlement information provrded by MISO. Purchase transactions are accounted for on a net hourly posftion. Net purchases in a single hour are recorded as purchased and interchanged power. Sales of excess energy transacted through MISO are recorded on a gross basis in other sales. For sales to the MISO Energy Markets, we have no performance obligation until the energy is sold.

The Cooperatrve's members consist of Class A, C, D, and E members. Class A members purchase wholesale electric service and rates are set annually with approval by the Board of Directors. contract term is determined by the Wholesale Power Contract that Is In effect until December 31, 2060. The contract automatically extends an addltfonal 2. years ln each odd-numbered year beginning January 1, 2021 unless either the Cooperative or member give notice no later than the preceding September 1 of its election not to extend further.

Class C member revenue represents contractual sales to GRE, being recognized through 2029. Class D member revenues are based on various contracts with wholesare munieipal members. Class E member revenues primarily reflect sales to MISO.

The foHowing table disaggregates revenue by major source for the years ended December 31, 2020 and 2019:

Class A Class C Class D Class E, including MISO Other sales Total 2020

$384,984 5,729 10,151 24,350 17,217

$442,431 2019

$401,877 8,261 12,653 21,969 25,884

$470,644