ML22199A047
| ML22199A047 | |
| Person / Time | |
|---|---|
| Site: | La Crosse File:Dairyland Power Cooperative icon.png |
| Issue date: | 07/18/2022 |
| From: | Dairyland Power Cooperative |
| To: | Office of Nuclear Material Safety and Safeguards |
| References | |
| Download: ML22199A047 (27) | |
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Every decision at Dairyland Power Cooperative is made with a laser focus on our mission to power our communities and improve the quality of life for cooperative members. With an overarching goal of Sustainability, Dairyland's leadership and Board of Directors are focused on delivering safe, reliable and cost-competitive electricity as we transition to a low-carbon future.
SUSTAINABLE Dairyland's Sustainable Generation Plan provides a framework for reliability and energy diversification, considering the PLANNING economic impact on our members, technological feasibility, social implications and environmental responsibility.
As Dairyland transforms its energy resources ro reduce carbon intensity, the decision to acquire the RockGen Energy Center aligned with our strategic priorities. Following the closing of the coal-fired Genoa Station #3 in June 2021, the availability of this low-cost and reliable natural gas facility in Wisconsin was a good strategic fit for our power supply portfolio. RockGen supports the growth of wind and solar energy in the region and provides reliable electricity in all weather conditions.
Dairyland is exploring carbon-free power supply technologies, including NuScale's small modular reactor nuclear plants.
Nuclear is the only non-carbon emitting resource that can support the integration of renewable resources and ensure a 24/7 power supply.
The regulatory approval process continues for the Nemadji Trail Energy Center. Basin Electric Power Cooperative has joined Dairyland and Minnesota Power as a project co-owner for the proposed 525-625 MW natural gas generation faciliry (Superior, Wis.). Diverse power supply planning is essential for reliability and this facility will be a flexible and highly efficient power plant to provide power when the sun doesn't shine and the wind doesn't blow.
SAFE AND Our teams are dedicated to facility maintenance which strengthens power plant reliability. In 2021, the John P. Madgett RELIABLE Station (Alma, Wis.) and Elk Mound Generation Station (Elk Mound, Wis.) both set power production records, reliably OPERATIONS serving Dairyland's members during extreme temperatures.
PROVIDING MEMBERVALUE Dairyland is also strengthening our power delivery system and investing in regional transmission opportunities. By working with other utilities, regional transmission infrastructure will be strengthened to support growing renewable resources, while maintaining reliability and adding value for members.
Nothing is sustainable without a culture of safety. The cooperative navigated the challenges and complexities associated with the pandemic and protected mission critical operations. Whether working onsite, in the field or remotely-the Dairyland team is dedicated to safety, 24/7 reliability, resiliency and affordability.
Growth and innovation foster sustainable business and long-term competitive rates for members. Dairyland is implementing innovative technologies and systems to be more efficient, building infrastructure to grow electric vehicle use and supporting broadband accessibility in rural areas.
A new Business Development team is creating revenue opportunities and shared services. Dairyland has expanded economic development support for our members and is pursuing grant opportunities to support business and job growth, which will benefit the entire Dairyland system.
Financial and competitive strength are critical to sustainability, and we are pleased to share Dairyland had solid 2021 margins, along with strong credit ratings. Our average wholesale power rate for member cooperatives decreased for the 2022 rate year and our new rate design is providing additional flexibility for our members.
We remain LASER FOCUSED on competitive rates in 2022. We are closely monitoring inflationary pressures including supply chain, interest rates, fuel prices (i.e. natural gas) and energy market prices that could impact our wholesale power rate.
Our team has been stretched to think innovatively and resourcefully, and they are working diligently to rise to the challenge.
As our members' needs and the energy industry evolve, we must be innovative in our own transformation to a lower-carbon future. Through it all, we will be LASER FOCUSED on our cooperative mission to ensure we reliably deliver our members safe, sustainable and affordable power for generations to come.
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DAIRYLAND POWER COOPERATIVE
LASER FOCUSED I 2021 ANNUAL REPORT
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EVERYONE HOME SAFE, EVERYDAY THERE WHEN YOU NEED US Safety leads every aspect of uccess in business and operations. From continuing to navigate the COVID-19 pandemic to progressive improvement in safety practices, safety is the foundation on which Dairyland meets its obligations as a critical services provider.
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- submitted by Dairylanders and emailed weekJy to all employees help everyone work safely.
Safety and reliability go hand-in-hand. We rely on electricity to keep us safe, comfortable and functional at work, school and home. Through collaboration with other utilities in the Restoration of Power in an Emergency (ROPE) program, Dairyland crews work safely to restore power after severe weather events.
A derecho wind storm in December 2021 downed approximately 70 structures across Dairyland's service territory, resulting in thousands of widespread power outages. Crews put safety first every seep of the way to gee the lights and heat back on for cooperative members.
Routine maintenance of critical infrastructure is essential. Dairyland's power delivery professionals safely rebuild approximately 50 miles of 69 kV transmission line annually. In addition, Dairyland crews are leading fiber communications projects to help bring broadband internet service to rural areas.
LEADING A Dairyland's participation in regional transmission line projects serves the dual role of ensuring the SAFE PATH TO continued safe delivery of electricity while facilirating our region's transition cowards low-carbon energy LOW-CARBON resources. Dairyland is a 9 percent owner in the 345 kV Cardinal-Hickory Creek transmission line project, FUTURE which will extend from Dubuque, Iowa, co Middlecon, Wis. As traditional baseload generating plants are being retired throughout the Upper Midwest at an unprecedented pace and requests to interconnect new renewable generation sources are at an all-rime high, the Cardinal-Hickory Creek line will serve a critical role in meeting consumer energy needs.
Dairyland is also pare of Grid North Partners, which seeks to identify solutions to meet the future power delivery needs of nearly 3 million consumers served by the partner utilities.
LARGE PHOTO AT LEFT: Approximately 115 renewable generation projects totaling nearly I 7 gigawatts are dependent upon the construction of the Cardinal-Hickory Creek transmission line. These projects will generate enough electricity to power millions of homes with clean energy.
STRENGTHENING In collaboration with local, state and federal partners, Dairyland strives to secure economic RURAL opportw1ities to help member communities grow and prosper. In 2021, Dairyland expanded its COMMUNITIES economic development team to provide even greater support to its members and communities.
Competitive rates and low interest loans to support community businesses are just a few ways Dairyland supports economic development. These loans provide financing that has assisted new and existing businesses purchase buildings, machinery and equipment. By helping to create and retain jobs, these projects inlprove the quality oflife for consumer-members in the Dairyland system.
Dairyland has helped its 24 member cooperatives access 86 loans and grants totaling nearly
$27 million to assist them with economic development. Utilizing the USDA Rural Economic Development Loan and Grant program, Dairyland and its member cooperatives have provided zero percent interest rate financing for business and co.mmunity development projects throughout their service territories. These projects include business expansions, industrial park development, health care facilities, assisted living facilities, schools and fire stations.
WORKING WITH America's electric cooperatives were built by and belong to the diverse communities they serve.
POLICYMAKERS Dairyland works with policymakers in both parties to find solutions to issues char could impact the cooperative membership.
CREATING COOPERATIVE CONNECTIONS Legislative and regulatory decisions regarding power delivery, the pace of energy diversification, infrastructure construction and the storage of nuclear fuel can significantly affect Dairyland's operations, reliability and the cost consumers will pay for electricity. Dairyland is a nonpartisan organization and regularly welcomes elected official of all parties to learn about energy issues and me work Dairyland does on behalf of its members.
As a founding regional member ofTouchstone Energy~ Cooperatives, a national network of cooperatives, Dairyland has been working togemer for decades to develop programs and tools to engage cooperative members and strengthen rural communities. Branding, market research, social media, educational programs and developing powerful engagement tools such as the Co-op Web Builder exemplify the strength of cooperatives collaborating to engage their members.
LARGE PHOTO AT RIGHT: President and CEO Brent Ridge leads discussion regarding energy issues at the "Lighting the Way for Rural Prosperity" conference in La Crosse.
TONIGH VOLUNT ARE FRi
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- EIS SAFE AND Teamwork and mutual respect are central to Dairyland's People 1st Culture. A sustainable workforce FLEXIBLE WORK prioritizes diversity, equity and inclusion (DEI) at every turn. Employee growth and education is a core ENVIRONMENT value at Dairyland. Learning opportunities include leadership workshops, safety, D EI compliance and more. People Powers Awards are one of many ways employees are recognized for excellence.
Dairyland offers a flexible workplace that includes telecommuting, flextime and compressed work weeks.
This enhances Dairyland's ability to maintain a progressive and productive work environment and encourage work/life balance. This flexibility has enhanced D airyland's ability to be responsive to members' needs while maintaining a safe work environment for all throughout the pandemic.
Dairyland's People 1st Culture highlights a focus on safety and wellness throughout the organization, with employees expected to have 200 percent accountability: 100 percent for themselves and 100 percent for their teammates.
VOLUNTEERISM Dairyland employees are focused on improving communities and the quality of life in D airyland's four-AND SUPPORT state region. Using their unique talents, employees volunteer and provide community support by coaching, serving on boards and helping their neighbors.
COMMITMENT TO EMPLOYEES AND COMMUNITY Employees raise funds during the annual United Way campaign, support families at a neighborhood school and deliver holiday gifts to nursing homes. Dairyland contributes to many community service organizations to improve the quality oflife: Salvation Army, YMCA, Rotary, Kiwanis, American Red Cross, Children's Museum, area fire departments and many others.
Providing for team members and creating new opportunities for family-supporting careers in the energy industry was a prioriry while planning for the retirement of Dairyland's 345 MW Genoa Station #3 (G-3) on June 1, 2021.
Plant decommissioning and demolition (D &D) is underway, with many donations made to schools and local organizations. In addition to the D&D activities, a Redevelopment & Reu e (R&R) Study Project is in progress at the Genoa Site. The project will identify optimal reuses of the G-3 power plant site, focused on the overall vitality of the Genoa area community while aligning with Dairyland's continued operational needs at the site. Completion of the R&R study will occur by year-end 2022.
ROCKGEN ENERGY CENTER SUPPORTS RENEWABLE ENERGY A YEAR TO BREAK RECORDS DIVERSITY STRENGTHENS RELIABILITY UP NEXT:
SOLAR&WIND Dairyland acquired the 503 MW RockGen Energy Center (Cambridge, Wis.) in December 2021 from Starwood Energy Group Global, LLC. RockGen's quick-start natural gas combustion turbines complement the ups and downs of intermittent solar and wind resources, while providing predictable and affordable energy.
The dual-fuel facility can also use fuel oil as a backup generating resource. This fuel Aexibility enhances reliability in the event that natural gas supply is limited.
2021 was Dairyland's Elk Mound (Wis.) Generating Station's 20th anniversary. le was also a record-breaking power production year for the natural gas facility. Li addition co its ability ro ramp up co full production in only 20 minutes, Elk Mound is a "black-start" facility, meaning it can start on its own power without support from the grid in the event of a major power system collapse.
Diverse power supply planning is essential for reliability. The North American Electric Reliability Corp. (NERC) released a December 2021 report warning of reliability risks when variable energy resources like wind and solar are not supported by Aexible resources.
Dairy land, Minnesota Power/ALLETE and Basin Electric Power Cooperative are joining together on the Nemadji Trail Energy Center, a combined-cycle natural gas facility proposed in Superior, Wis. Natural gas serves as a bridge resource, supporting renewable energy investments while new technologies mature.
The dangerous challenges co grid reliability during severe weather events further underscore the need for perform-on-demand facilities like Nemadji Trail, RockGen and Elk Mound.
Dai1yland's continuing investments in renewable resources support the path co a lower carbon future. Dairyland has a power purchase agreement (PPA) with Ranger Power for the entire 149 MW Badger Scace Solar facility in development in southern Wisconsin. Badger Scace will be in service in 2024, poweri ng at lease 25,000 homes. Recently, Dairyland began purchasing energy from the Tacanka Ridge Wind Farm in South Dakota (PPA with Tacanka Ridge Wind, LLC).
LARGE PHOTO AT RIGHT: W ind turbines at the Winnebago Wind Farm in T hompson, Iowa, are an important "crop" providing renewable energy to the region.
2017 2018 20.7% 22.4%
2019 2020 23.8% 25.0%
2021122.2%
COST MANAGEMENT RESULTS IN STRONG MARGINS Cost management actions and sound fiscal performance resulted in strong 2021 margins. As a result, Dairyland provided $4 million of rate credits to members in 2021, reduced future expenses and is investing in business development opportunities. In addition, Dairyland maintained its cash retirement of Capital Credits of2 percent totaling $4.7 million in 2021 and had four power cost adjustments (PCA) credits totaling $3.8 million.
A new wholesale power rate design was implemented in May 2021 to provide additional flexibility for Dairyland's member cooperatives. As part of this new structure, Dairyland also instituted the revenue volatility adjustment (RVA). All cold, the RVA returned an additional $9.2 million to the members in 2021.
COMPETITIVE The Board approved a budget supporting Dairyland's strategic business plan, which resulted in an estimated FOR MEMBERS 0.4% percent decrease in the average wholesale rate for Dairyland's member cooperatives for 2022.
Dairyland's rate year also moved to a calendar year beginning Jan. 1, 2022. This will improve efficiency of the annual budget process and add clarity for members.
Dairyland's Board and management work to balance building financial strength with competitive rates and sound operations. Dairyland has credit ratings ofA3" with a stable outlook from Moody's and an "A+"
with a stable outlook from Standard and Poor's. Management of costs and risks while modernizing processes to enhance efficiency will remain key areas of focus.
INVESTING IN Competitive rates are critical to the future economic well-being of the region. Enterprise risk management, THE FUTURE cost management and business development initiatives are in place to build financial strength and foster long-term competitive rates for members. Sustainability, safety and reliability are guardrails as Dairyland makes investments in modernizing systems, energy resources and infrastructure.
Dairyland also invests in the sustainable closure of facilities. The decommissioning project contracted to EnergySolutions, a national radioactive waste services contractor for the La Crosse Boiling Water Reactor (LACBWR) is near completion. Its subsidiary, LaCrosseSolutions, LLC, temporarily holds the license and assumes responsibility for the decommissioning of the LACBWR site. The license is expected to return to Dairyland in 2022.
LARGE PHOTO AT LEFT: Dairyland's Transmission Construction team is rebuilding the Rochester-Wabaco 161 kV line in Minnesota as one of their first Business Development projects.
CHARGING Dairyland and its members were among 31 cooperatives to create CHARGE EV, LLC, to build FORWARD WITH interest in the growth of elecuic vehicles (EV). Since its launch in 2020, the cooperative-powered BENEFICIAL CHARGE' network is growing with affi]jates in six states. Additionally, Dairyland is working ELECTRIFICATION with local businesses to support adding EVs to their Aeets. In early 2022, Dairyland supported the installation of the first EV fast charger at a W isconsin Kwik Trip.
GROWING Growth supports sustainable business and long-term competitive rates for Dairyland's members.
BUSINESS AND Dairyland has established a Business Development team which is seeking new revenue ECONOMIC opportunities. In late 2021, a new business unit was formed around Dairyland's Transmission DEVELOPMENT Consuuction team which is rebuilding the Rochesrer-Wabaco 161 kV transmission ]jne. Growth will support long-term competitive rates for our members and help cultivate strong communities.
TECHNOLOGY MODERNIZATION FOR GROWTH, EFFICIENCY Business Development is LASER FOCUSED on growth in services that will benefit member cooperatives. Dairyland's Publication Services team has gained new customers for their efficient, high-quality graphic design, print and mail services. Shared services for members have also expanded in Human Resources and Information Technology.
Dairyland also expanded economic development support for its members. 1l1e team is worki ng with cooperatives to pursue opportunities for community growth through businesses and jobs which benefit the entire Dairyland system.
The Board supported accelerating the build-out plan for middJe-mile fiber optic communications on Dairyland's transmission infrastructure, prinlarily for communications. As the program progresses, fiber optic communication capacity could also support rural broadband service in the communities Dairyland's member cooperatives serve. H igh-quality broadband access fosters economic growth in rural communities.
Modernizing technology for Dairyland's successful load management program is underway. This program enhances overall system efficiency and offers opportunities for members to participate in varied rate programs by controlling electricity use during times of peak demand or shifting electricity use to off-peak hours. Load management benefits the entire system economically and can help relieve system imbalance during an outage.
LARGE PHOTO AT RIGHT: Dairyland's Power Delivery team installs fiber optic line on transmission structures as part of its initiative to strengthen the communications system in the service area.
As of December 31, 2021 & 2020 (All dollar amounts in thousands)
ASSETS Electric Plant:
n-2021 2020 Plant and equipment-at original cost.............................................
Less accumulated depreciation..................................................
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$2,055,575
$1,864,390 (867,431)
(821,525)
Net plant and equipment..................................................
1,188,144 1,042,865 Construction work in progress..................................................
87,032 68,812 Total electric plant........................................................
1,275,176 1,111,677 Other Assets:
Nuclear decommissioning funds.................................................
1,987 1,988 Intangible asset, net (Note 2)....................................................
30,566 Other investments (Note 8)....................................................
12,350 13,550 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation (NRUCFC) (Note 8).....................
9,176 9,176 Regulatory assets (Note 2).....................................................
25,614 16,139 Investment for deferred compensation............................................
1,776 1,530 Deferred charges (Note 2).....................................................
19,357 18,165 Total other assets.........................................................
100,826 60,548 Current Assets:
Cash and cash equivalents......................................................
46,244 19,535 Designated funds (Notes 2).....................................................
22,668 8,000 Accounts receivable:
Energy sales................................................................
37,111 35,541 Other.....................................................................
7,105 1,311 Inventories:
Fossil fuels.................................................................
24,234 41,327 Materials and supplies........................................................
17,936 20,908 Prepaid expenses and other.....................................................
12,675 10,736 Total current assets.......................................................
167,973 137,358 TOTAL.......................................................................
$ 1,543,975 I $ 1,309,583 I
(Continued)
See notes to consolidated financial statements.
I DAIRYLAND POWER COOPERATIVE
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As of December 31, 2021 & 2020 (All dollar amounts in thousands)
CAPITALIZATION & LIABILITIES Capitalization:
Member and patron equities:
Membership fees...........................................................
Patronage capital (Note 9)....................................................
Accumulated other comprehensive income......................................
Total member and patron equities.........................................
Long-term obligations (Note 6)..................................................
Total capitalization......................................................
Other Liabilities:
Other deferred credits (Note 2).................................................
Obligations under capital leases (Note 7)..........................................
Postretirement health insurance obligation (Note I I)................................
Decommissioning and asset retirement obligations (Note 14).........................
Other non-current liabilities....................................................
Total other liabilities....................................................
Commitments and Contingencies (Note I 0)
Current Liabilities:
Current maturities of long-term obligations and obligations under capital leases...........
Line of credit (Note 5).........................................................
Nuclear decommissioning obligations (Note 14)....................................
Advances from member cooperatives and other prepayments.........................
Deferred credits (Note 2)......................................................
Regulatory liabilities (Note 2)...................................................
Accounts payable.............................................................
Accrued expenses:
Payroll, vacation and benefits..................................................
Interest...................................................................
Property and other taxes....................................................
Other....................................................................
Total current liabilities...................................................
TOTAL.......................................................................
2021 341,427 1,753 343,181 820,090 1,163,271 9,418 7,934 5,164 2,231 4,577 29,324 45,654 209,707 56 20,584 22,668 33,985 5,669 6,841 3,642 2,574 351,380
$ 1,543,975 2020 I
326,600 1,376 327,977 835,120 1,163,097 2,519 6,623 5,523 4,957 3,627 23,249 44,167 56 13,704 20,945 8,000 26,255 5,897 3,201 1,012 123,237
$ 1,309,583 (Concluded)
See notes to consolidated financial statements.
LASER FOCUSED I 2021 ANNUAL REPORT
As of and for the years ended December 31, 2021 & 2020 (All dollar amounts in thousands)
I Nature of Business & Organization Business I Dairyland Power Cooperative and subsidiary ("Dairyland" or the "Cooperncive") is an electric generation and crnnsm ission cooperative organized under the laws of the states ofWisconsin and Minnesota. The Cooperntive, whose principal offices are located in Wisconsin, provides wholesale electric service ro Class A members engaged in the retail sale of electricity co member consumers located in W isconsin, Minnesota, Iowa and Illinois, and provides electric and other services co Class C, D and E members.
Principles of Consolidation I The consolidated financial scacements include the accounts of Dairyland and Dairyland's wholly owned subsidiary, Genoa FuelTech, L1c. All inrercompany balances and transactions have been eliminated in consolidation.
Accounting System and Reporting I The accounting records of the Cooperative are maintained in accordance wid1 the uniform system of accounts prescribed by the Federal Energy Regulatory Comm ission as adopted by d1e Rural Utilities Service (RUS), the Cooperative's principal regulatory agency.
2 I Significant Accounting Policies Electric Plant I The cosr of renewals and bercerments of units of property (as distinguished from minor items of property) includes contract work, direct labor and materials, allocable overhead, and allowance for funds used during construction, and is charged to electric plane accounts. lncluded in accumulared depreciation are nonlegal or noncontracrual costs of removal components. As a result, the cost of units of property retired, sold or od1erwise disposed of, plus removal costs, less salvage, is charged to accwn ulaced depreciation and no profit or loss is recognized in connection wid1 ordinary retirements of property uni rs. A provision for these nonlegal or noncontraccual costs of removal components is recognized based on depreciation races determined by a d1 ird-party depreciation study completed in November 20 16 and approved by RUS in 20 17 for races effective in 20 17 through 2021. The Cooperative is Lmable co obtain the information to separate the cumulative removal costs as of December 31, 2021 and 2020. Maintenance and repair costs and replacement and renewal of minor items of property are cl1arged to operations.
Significant components of electric plane were as follows as of December 31:
Depreciable Lives 2021 Production................................. 11-60 years..... $ 1,208,130 Transmission................................ 23-50 years.....
642.029 Distribution.................................. 38 years.......
General plant................................ 5--47 years......
Other....................................... 32 years.......
101,890 101,764 1,762 2020
$1,036,631 627,011 97,455 101,531 1,762 Construction work In process.................................. __
8_7~,0_3_2 ___ 68~,8_1_2
$2,142.607
$ 1,933,202 Less accumulated depreciation................................. -~(86_7~*"'-3~1>~~<8_2_1~,5_25- )
Electric plant
_.$_1_,2_75_._l 7_6_$._I_, _I l_l._6_77_
Depreciation I Depreciation, whicl1 is based on the straight-line method at races d1ar are designed to amortize the original cost of properties over d1eir estimated useful lives, includes a provision for d1e cost of removing and decommissioning the properties. The provision for depreciation averaged 2.5% and 3.8% of depreciable plane balances for 202 1 and 2020, respectively.
DAIRYLAND POWER COOPERATIVE Allowance for Funds Used During Construction I Allowance for funds used during construction (AFVD ) represents the cost of external and internal funds used for construction purposes, and is capitalized as a component of electric plane by applying a rate (4.7 19% in 2021 and 5.872% in 2020) to certain construction work in progress. The amount of such allowance was $2,549 in 202 1 and $2,785 in 2020. The borrowed funds component of AFUD for 2021 and 2020, was $ 1,586 and $1,777, respectively (representing 2.929%
and 3.747% in 2021 and 2020, respectively). The equity component of AFUDC for 202 1 and 2020 was $963 and $1,008, respectively, (representing 1.790% and 2. 125% in 2021 and 2020, respectively). The borrowed funds components were included as a reduction of interest expense in the consoUdared statements of revenues, expenses and comprehensive income.
Designated Funds I Designated funds represent the amounts collected from customers through rares and deferred for furure use.
Asset Acquisitions I In December 2021, the Cooperative completed their purcl1ase of d1e assets of RockGen Energy Center in the amount of $210,079. RockGen Energy Center, located in Can1bridge, Wl, is a 503 megawatt (MW) sim ple-cycle, dual fuel power generating facility d1ac rLUlS primarily on namral gas. The facility will help the Cooperative meet its Members' power needs as the Cooperative transitions to more renewable resources. Due to the timing of the acquisition, the Cooperative elected co secure short-term financi ng for RockGen Energy Center.
The purcl1ase price was allocated based on the estimated fair values of the assets acquired and liabilities asswned at the dace of the acquisition and includes the following:
Purchase Price Allocation Assets acquired:
Property, plant and equipment............................................ $ 175,000 Intangible asset........................................................
30,221 Accounts receivable....................................................
9,314 Inventories............................................................
2,359 Other current assets................................................... --'~*000 Total assets acquired.................................................. $ 217,894 Liabilities assumed:
Accounts payable.......................................................
5,478 Deferred revenue...................................................... __
2.~3_3_7_
Total liabilities assumed............................................... ___ 7_,8_1_5_
Total purchase price...................................................... $ 210,079 Plant assets related to this acquisition will be depreciated over a period of20 years beginning in December 2021.
Intangible Asset I In December 202 1, the ooperative recorded an intangible asset as part of their purchase of the RockGen Energy Center in d1e a.mount of$30,2 I l. 'TI1e intangible asset consists of d1e assignable capacity and energy sales contracts that were defined in d1e asser purchase agreement and will be an1ortized over d1e remaining life of the contracts as energy is sold.
Regulatory Asset I *n,e Cooperative's accounting policies and the consolidated financial statements conform to accounting principles generally accepted in the United Scares of America applicable co electric cooperatives.
The noncurrent portion of regulatory assets as of December 31, 2021 and 2020, include the following:
2021 2020 Genoa #3 unrecovered plant balances............................ $ 25,614
$ 16,139
Genoa #3 Un recovered Plant Balances I During 2020, the Cooperative esrablished a regulatory asser relared to the unrecovered plant balances upon closure of the Genoa #3 generating station that occurred in 2021. Additional costs associated with the closure of
$ 17,822 were recorded in the current year. Amounts will be amortized in rares through 2029.
The current portion of the Genoa #3 regularory asser as of December 3 1, 2021 and 2020, is
$5,621 and $3, 144, respectively. These amow1ts are recorded in prepayments and od1er assets.
Deferred Charges I D eferred marges represent future revenue to d1e Cooperative associated with costs thar will be recovered &om customers d1rough d1e rare-making process.
As of December 3 1, 202 1 and 2020, d1e Cooperatives deferred cl1arges are being reflected in rates m arged to customers, except the deferred nuclear litigation as noted below. lf all or a separable portion of the Cooperative's operations become no longer subject to d1e provisions of regulatory accow1ting, a write-off of deferred charges would be required, unless some form of transition recovery (refi.111d) continues through rates established and collected for the Cooperative's remaining regulated operations. ln addition, the Cooperative wottld be required to determine any impairment to the carrying costs of deregulated plant and inventory assets.
The noncurrent portion of deferred cl1arges as of December 3 1, 202 1 and 2020, include d1e following:
2021 2020 Pension prepayment.......................................... $
2,690 Deferred nuclear litigation.....................................
8,858 6,271 Nemadji Trail Energy Center...................................
9,986 8,671 513 533 19,357
$ 18,165 Total deferred charges........................................ _$ __...., ________ ___
Pension Prepayment I The volWltary prepayment to d1e Cooperative's multiemployer defined-benefi t pension plan to reduce funcre fi.mding amoWlts is being amortized to benefits expense over 10 yea.rs beginning in 201 3 as prescribed by RUS. ln 202 1, the Board of Directors approved early defeasement of this deferred liability.
Deferred Nuclear Litigation I Litigation expenses from the third nuclear contract damages claim against the Un ired Scares government are being deferred pending the ourcome of thar lirigation. See further discussion in Nore 14.
Nemadji Trail Energy Center I Costs relating to the Nemadji Trail Energy Center narural gas project are being accwnulared in deferred m arges. These charges will be amortized when the planr is in service (currendy estimared for 2027).
Cash and Cash Equivalents I Cash equivalents include all highly liquid investments with original maturities of three months or less. Cash equivalents consist primarily of commercial paper, stated at cost, which approximates marker.
Fossil Fuels and Materials and Supplies I Coal inventories, as well as materials and supplies inventories, are stated at d1e lower of average cost or net realizable value.
Regulatory Liabilities I As of December 3 1, 202 1 and 2020, d1e Cooperative had various revenue deferrals reflected as regulatory liabilities. The revenue deferrals pertained to favorable reswts from marker credits d1rough transactions with the Mid-Continent independent System Operator (MlSO) in addition to favorable results due to market conditions. 1l1e smnmary of regttlatory liabilities as of December 3 1, 202 1 and 2020, is as follows:
2021 2020 Planned 2023 J.P. Madgett outage costs........................... $ 13,000 Business growth and development...............................
7,400 6,000 Planned 2022 J.P. Madgett outage costs............................
1,900 Electric vehicle charging stations.................................
368 1,000 Rate relief...................................................
1,000
$ 22,668 8,000 Planned 2023 J.P. Madgett Outage Costs I In January 2022, the Board of Directors approved the creation of a regulatory liabiliry revenue deferral plan in the amoWlr of $13,000.
1l1e Cooperative deferred $13,000 of2021 revenue and plans to recognize d1is amoWlt in 2023. 1l1e deferral plan was approved by RUS in February of 2022.
Business Growth and Development/Electric Vehicle Charging I 1n December 202 1, the Board of Directors approved the carryforward of the 2020 revenue deferral plan in the amount of $6,000. The Board of Directors also approved an additional regttlatory liability revenue deferral in 2021 in rhe amoWlt of $ 1,400 for business growth and development.
This amended deferral plan was approved by RUS in January 2022. ln addition, the Board of Directors approved the carryforward of another 2020 Revenue deferral plan in the amount of
$368 in January 2022. The an1ended deferral plan was approved by RUS in February 2022.
The Cooperative plans to recognize th.is amount in 2022.
Planned 2022 J.P. Madgett Outage Costs I ln November 2021, d1e Board of Direcrors approved the creation of a regularory liability revenue deferral plan in the am oWlr of $1,900.
1l1e Cooperative deferred $1,900 of202 1 revenue and plans ro recognize this amown in 2022. The deferral plan was approved by RUS in February of 2022.
Deferred Credits I Deferred credits represem borl1 future revenue ro d1e Cooperative associated wid1 cusromer prepayments and noncurrenc obligations and reserves related ro operations. As of D ecember 3 1, 202 1, the Cooperatives deferred credirs are being considered when determining rares charged ro cusromers.
Deferred credirs as of December 31, 202 1 and 2020 were comprised of d1e following:
2021 Customer energy prepayments.................................
$ 7,924 Elk Mound startup revenue deferral..............................
1,432 2020
$ 2,519 Other...................................................... -----'-62"-----
Total deferred credits.......................................... ~ $_ 9_.4_18 ___ $_ 2_,5_1_9 The current deferred credits balance of $20,945 as of December 3 1, 2020, related to the remaining balance of the G rear River Energy prepayment associated with the Genoa #3 generation sration and was recognized in 202 1 with the closure of the G3 plant.
Sales of Electric Energy I Revenues from sales of electric energy are recognized when energy is delivered. The Class A wholesale races approved by the Board of Direcrors have a power cost adjuscrnem that allows for increases or decreases in Class A member power billings based upon actual power costs compared ro plan. For 202 1 and 2020, the power cosc adjustment ro the Class A members resttlted in credits ro sales billed of$3,834 and $2,770, respectively. These a.in oWlts are recorded in sales of electric energy in operating revenues on d1e consolidated statements of revenues, expenses and compreilensive income.
Other Operating Revenue I O ther operating revenue primarily includes revenue received from tra.ilSmission service and is recorded as services are provided.
Accounting for Energy Contracts I The Cooperative does nor have any energy contracts that are required ro be accounted for ac fair value as of December 3 1, 2021 and 2020.
Use of Estimates-111e preparatio n of consolidated financial scacements in conform ity with accounting principles generally accepted in the United Srares of America requires management ro make estimates and assumptions that affect the reported amounts of assets and liabilities, and d1e disclosure of contingent assets and liabilities at d1e date ~f the consolidated fina.i1cial statements, and d1e reported am ounts of revenue and expenses during the reporting period. Significant estimates in the consolidated financial statements relate to postretiremenr benefit obligations, asset reti rement obligation liabilities, fixed-asset depreciable lives, and litigation and contingencies. Actual resw ts could differ from those estimates.
Concentration of Risk I Approximately 37.5% of the labor force for the Cooperative is under a collective bargaining agreement that expires on January 3 1, 2023.
Subsequent Events I TI1e Cooperative considered events for the recognition or disclosure in the consolidated financial statements that occurred subsequent to December 3 1, 2021, through March 28, 2022, the date the consolidated financial statements were available to be issued.
3 Accounting Standards Adopted I The Cooperative adopted ASU 2018-15, lntangi,bles-Goodwill and Other-Internal-Use Software: Customer's Accounting/or Implementation Costs Incurred in a Clnnd Computing Arrangement that is a Service Contract in the current year. The new standard requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by d1e entity in software licensing arrangements under the internal-use software guidance. The adoption of ASU 20 18-15 did not have a material impact on the Cooperative's financial scacements and related disclosures.
The Cooperative adopted FASB ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20) on January I, 2020.
The ASU amends existing guidance to add, ren10ve and clarify disclosure requirements 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 I ln Februasy 2016, the FASB issued new accounting guidance for leases. The new guidance increases cransparency and comparability am ong organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about lea.sing arrangements in d1e financial statements. In Januasy 2018, d1e FASB issued additional accounting guidance on leases, an1ending the guidance issued in 2016, to simplify the transition to the new guidance for land easements. The Cooperative adopted the new lease guidance on Januasy l, 2022 using the modified retrospective approach. 11-ie adoption of the new lease guidance did not have a material impact on d1e Cooperative's financial statements.
4 I Income Taxes The Internal Revenue Service has determined that Dairyland is exempt fi-om federal income taxes under Section 50 I (c)( I 2) of d1e Internal Revenue Code. Accordingly, the Cooperative's utility operations are generally exempt from federal and stare income taxes and no provision for sucl1 taxes is recorded in the consolidated financial scacements.
5 Lines of Credit To provide interim financing capabilities, d1e Cooperative has arranged committed lines of cred.ir wid1 CoBank. TI1e original line was executed on November 30, 201 5, and amended on November 20, 20 I 9, with availability aggregating approximately $350,000. "This fucLlity has a five-year term and provides funds bod1 for short-term working capital requirements and for capital projects until permanent financing can be obtained. Some capital projects will last longer than one year, bur the intent is co pay down the line of credit as permanent funding is received.
The ooperative, under d1e syndicated line of credit wid1 Cobank, has d1e availability co issue letter of credit for its account. On December 15, 2021, the Cooperative issued a letter of credit in the amount of$700 under the revolver, maturing December 31, 2022.
In December 2021, the Cooperative arranged a second line of credit for $215,000. The purpose of these funds was co finance the purchase of d1e RockGen plant. The term of the line is 12 months, however, it is anticipated that the line will be converted co permanent financing mid-2022.
Compensating balance requirements and fees relating to the lines of credit were not significant in 2021 and 2020. Information regarding line of credit balances and activity for the years ended December 31, 2021 and 2020, is as follows:
2021 2020 Interest rate at year-end......................................
I. I I%
1.1 6%
Line l-$350M..............................................
Line 2-$215M..............................................
$ 209,707 Total borrowings outstanding at year-end.........................
$ 209,707 Average borrowings outstanding during year......................
17,476
$ 22,400 The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current shorc-cern1 bortowing rates. Advances fi-om member cooperatives totaled $20,584 and $13,704 at December 31, 2021 and 2020, respectively.
Interest expense on member cooperative advances was $125 and $ 191 for the years ended December 31, 2021 and 2020, respectively. TI1ese ain ow1ts have been included in interest expense on the consolidated statements of revenues, expenses, and comprel,ensive income.
6 Long-Term Obligations Long-term obligations as ofDecen1ber 31, 2021 and 2020, consist of the following:
2021 2020 Federal Rnancing Bank obligations-- 1.24% to 4.49%.................... $ 584,270
$ 582, 110 Federal Rnancing Bank obligations--4.50% to 5.20%....................
201,942 209,964 Total Federal Rnancing Bank...................................
786,212 7'12,074 RUS obligations--4.125% and grant funds.............................
2,557 3,055 CoBank notes--29% and 4.3%......................................
3,362 7,232 Private bonds placement obligations--3.42%..........................
70,833 74,167 Long-term debt..............................................
862.964 876,528 Less current maturities........*.............*......................
(42,874)
(41,408)
Total long-term obligations.......................................... $ 820.090
$ 835,120 Quarterly principal and interest payments on the long-term obligations ro the Federal Financing Ba.ilk (FFB) extend through 2053.
Long-term obligations to d1e RUS are payable in equal monthJy principal and interest installm ents through 2024. Payments on the CoBank 2.9% and 4.3% notes are due quarterly and semi-annually, respectively, through 2023. The private bond placement is an ainorcizing 30-year term loan at an interest rate of3.42%. Q uarterly principal ai1d interest payments on mis obligation extend thtough 2043.
TI1e Cooperative executed, filed M d recorded ai1 indenture of mortgage, security agreement and finai1cing statement, dated as of September I 3, 2011, and as supplemented (die "Indenture"), between the Cooperative, as grancor and U.S. Bai1k National Association, as uuscee. The perfected lien of d1e Indenture on substantially all of d1e Cooperative's assets secured equally ai1d ratably all of d1e Cooperative's long-term debt with d1e exception of unsecured notes to CoBailk (balai1ces of $3,362 and $7,232 at December 31, 2021 and 2020, respectively). TI1e Cooperative is required to maintain, ai1d has maintained, certain financial ratios related to earnings in accordance wid1 d1e covenants of its loan agreements as of December 3 1, 202 1.
Scl1eduled marnrities of the Cooperative's long-term obligations as of December 3 l, 2021, were as follows:
Years Ending December 31 2022.................................. *........................... $
42,87-4 2023..............................................................
42,049 2024..............................................................
52,474 2025.......................................................... *...
43,620 2026..............................................................
-45,069 Thereafter........,.....,........................................... -~636~,8~7~8_
Total.............................................................. $ 862,964
7 I Leases O perating Leases I "The Cooperative has entered into lease agreements under which it is die lessee on operating leases for various Aeec vehicles and six rail cars. These cransaccions are covered in the master lease agreement and have lease terms ranging from four co l 5 years. At the end of the leases, the Cooperative can either purchase the equipment at fair market value, continue co lease the assets, or return the equipment co the lessor. Rent expense was $598 and
$653 in 2021 and 2020, respectively. The scliedule offurure minimum lease payments as of December 31, 2021, is as follows:
Years Ending December 31 2022.............................................................. $
430 2023..............................................................
382 2024..............................................................
60 2025..............................................................
11 Total.............................................................. _.$ ___
88""3'--
Capital Leases I The Cooperative has entered into several capital lease agreements for large vehicles and heavy equipment. The cransactions are covered in die master lease agreement with lease terms nor exoeeding seven years. At the end of the lease, the Cooperative can purd1ase the equipment for a bargain purchase price. The original cost of the assets under capital leases as of December 31, 2021, is $19,297. The assets are amortized over the lesser of their related lease terms or dieir estimated productive lives.
The schedtJe offutw*e minimuni lease payments as of December 31, 2021, is as follows:
Years Ending December 31 2022.............................................................. $
3.130 2023..............................................................
2.388 2024.............................................................
1.890 2025..............................................................
1,818 2026..............................................................
1,323 Thereafter.......................................................... __
...:9c.:.7.:.6_
Total minimum lease payments.... *............................... *..
11.525 Amounts representing interest............................................ __
.>,e(8:..:.l.:...l)'-
Present value of minimum lease payments..............................
10.714 Current maturities...................................................... __ (=2~.7-"-8""0)._
Long-term capital lease obligations......................................... _$.__7..,, 9.a.34.a....
8 Financial Instrument s The Fair value of die Cooperative's financial instruments ocher d1an marketable securities and short-term borrowings, based on the rates for similar securities and present value models using current rates available as of December 3 1, 2021 and 2020, is estimated to be as follows:
Assets:
Other investments.........................
Investments in capital term certificates of NRUCFC..................
Liabilities-Jong-term debt....................
2021 Recorded Value
$ 12,350 9,176 862,964 Fair Value 12.350 9,176 979.972 2020 Recorded Value
$ 13.550 9,176 976,528 Fair Value 13.550 9,176 1.053.339 Assets and Liabilities Measured at Fair Value I Accounting principles generally accepted in die 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 lair 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 chat cowd be realized in a current market exchange.
I 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 identical assets or liabilities.
Level 2 inputs consist of observable market data, ocher than chat included in Level 1, that are either directly or indirectly observable. Level 3 inputs consist of unobservable market data, whicli are typically based on an entity's own assumptions of what a market participant wowd use in pricing an asset or liability as there is little, if any, related market activity. 1n instances where die determination of die fair value measurement is based on inputs from different levels of the Fair value hierardiy, the level in the Fair value hierarchy within which the entire Fair value measurement fulls is based on the lowest-level input chat is significant to die lair value measurement in its entirety. The Cooperative's assessment of the significance of a particular input co die Fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The following table summarizes cl1e Cooperative's assets and liabilities measured at fai r value on a recurring basis as of December 31, 2021 and 2020, aggregated by the level in die fai r value hierardiy within whidi cl1ose measurements full:
Fair Value Measurements Using Od,w -
2021 FairValue (level I)
(level 2)
(level 3)
Assets--lnvestmems:
Nuclear decommissioning funds.........*..
2,043
$ 2.043 Other investments................*......
12,350 4.235 1.364 6.751 Investments in capital term certificates of NRUCFC 9,176 9,176 Investment for deferred compensation......
1.941 1.941
$ 25.5 10
$ 6,278
$ 3.305
$ 15,927 Fair Value Measurements Usl~
Oct- -
2020 FairValue (level I)
(level 2)
(level 3)
Assets-investments:
Designated funds.........................
8,000 8,000 Nuclear decommissioning funds............
2.045 2.045 Other investments.......................
13.550 4,035 1,419 S.096 Investments in capital term certifocates of NRUCFC.................
9.176 9,176 Investment for deferred compensation......
1,668 1,668
$ 34,439
$ 14,080
$ 3,087
$ 17.272 The changes in Level 3 recurring Fair value measurements using significant unobservable inputs for die years ended December 31, 2021 and 2020, are as follows:
2021 2020 Other property and investments:
Balance-beginning of year....................................
8.096
$ 10.857 New investment and loans made...............................
25 Loan repayments received and current mawrities.................
(409)
(949)
Patronage capital allocations............................. *.....
55 IOI Patronage capital retirements..................................
(991)
Transfers from Level 3 to Level I...............................
(1.585)
Transfers from Level 3 to Level 2...............................
(353)
Balance--end of year............................................................. ____ -=---
6,751 8.096 The valuation of these assets involved management's judgment afier consideration of market lactors and the absence of market mmsparency, market liquidity and observable inputs.
9 I Retirement of Capital Credits The Cooperative's Board of Directors has adopted a policy of retiring capital credics 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 rota! assigned patronage capital balance as of December 3 1 of the prior year. This policy is subject to annual review and approval by the Board of Directors and the RUS, and no cash retiremencs are to be made whid1 would impair the financial condition of the Cooperative or violate any terms of ics agreemencs. Since 2003, the am owlt of nonoperating margins assigned to members each year is at the discrecion of the Board of Directors. Any LU1assigned nonoperating margins will become unallocated reserves and part of permanent equity. Patronage capital amowics for the years ended December 31, 2021 and 2020, are as follows:
Assigned Unassigned Balance-December 31, 2019.....................
$ 230,974
$ 91,-469 Retirement of capital credits......,.............
( 11,549) 1,992 Current year margins.......................... ___
13~*~7_13~--~---
Balance-December 31, 2020.....................
Retirement of capital credits....................
233,138 (4,663) 93,-461 Total
$ 322,443 (1 1,549) 15,706 326,600 (4,663) 2.841 19,490 Current year margins.......................... ___
16~*~64_9 _ __ ~----~~-
$ 96,302
$ 34 1,427 Balance-December 31, 2021..................... __
$_2_4_S_, 1_2_4 _____.___ __________ __
During 2020, as a resLJt of the COVID-19 pandemic, the Board of Directors approved capital credit retiremencs at 5% of nee 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 of Directors 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 oucsranding loan agreemencs that Dairyland is parry to.
I O I Commitments & Contingencies The Cooperative is a party to a nwnber of generation, transmission and discribution agreemencs, under which coses and/or revenues are recognized currently based upon the Cooperative's interpretations of the provisions of the related agreemencs. Differences between the estimates used in the consolidated financial statemencs and the final setdemencs are recorded in the year of settlement.
The Cooperative has entered into various coal purchase con traces with one-to four-year terms.
The estimated commitrnencs w,der these contraccs as of December 31, 2021, is as follows:
Years Ending December 31 2022............................................................... $ 41,271 2023..................,............................................
36,041 2024...............................................................
20,727 202S............................................................... -~2,~24_2_
Total................................................................ $ I 00,281 The Cooperative has been named as a defendant in various lawsuics and daims arising in die normal course of business. Although the outcome of these matters cannot be determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved wid1ouc a material elf= on the consolidated financial position, resulcs of operations or cash Aows of the Cooperative.
11 Employee Benefits Multiemployer Defined-Benefit Pension Plan I Pension benefics for substantially all employees are provided through participation in the National Rural Electric ooperative Association (NRECA) Retirement Security Plan ("RS Plan"). This is a defined benefit pension plan qualified under Section 40 I and rax-exempt under Section 50 I (a) of die Internal Revenue Code. Pension benefics are funded in accordance wicli the provisions of die RS Plan and are based on salaries, as defined, of each participant.
The Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendment Act of 1980, imposes certain liabilities on employers who are contributors to multiemployer 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 ro withdraw &om participation. Since die RS Plan is a multiemployer plan for accounti ng purposes, all plan assecs are available to pay benefics of any plan participant.
eparate asset accouncs are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefics to employees of other participating employers. The Cooperative may be contingently liable for ics share of che RS Plan's unli.mded vested liabilities.
The Cooperatives contributions to the RS Plan in 2021 and 2020 represented less than 5% of the total contributions made to the plan by all participating employers. In 201 3, the Cooperative made a voluntary prepayment of $26,899 to this plan to reduce future contriburion amounts. The remaining prepayment was fully amortized in 202 1.
Expense for the RS Plan was $ 15, 16 1 in 202 1 and $ 12,724 in 2020. The 202 1 expense includes contributions to die plan of $9,78 I and $5,380 of prepayment amortization.
The 2020 expense includes contributions to the plan of$ I 0,034 and $2,690 of prepayment amortization.
ln die RS Plan, a "wne status" determination is not required, and therefore not determined, under the Pension Protection Act (PPA) of 2006. In addition, the accw,rnlated benefit obligacions and plan assecs are not determined or allocated separately by individual eniployer.
1n total, die RS Plan was over 80% funded on bod, January I, 2021 and 2020, based on the PPA funding target and PPA actuarial value of assecs on those dates.
Because die provisions of the PPA do not apply to cl1e RS Plan, funding improvenient plans and surcharges are not applicable. Future contribution requiremencs are determined each year as part of the actuarial valuation of the plan and may change as a restJt of plan experience.
Postretirement Health Insurance Obligation I Certain employees of the Cooperative retiring at or a&er age 55 are eligible to participate in a postretiremem heal ch care plan through age 65. Eligible dependencs of the retired Cooperative employees are also eligible to participate in chis plan through age 65. Retirees pay I 00% of the premium amount for this coverage. The premium is based upon the combined medical claims experiences of all active employees and retirees. If premiwns were derennined based upon die medical daims experience of retirees orJy, the resulting premiwn for retirees would be higher. The difference between die premiwn paid by retirees and d1e potential acrual premiwn amount is the basis for die posrretirement benefit obligation. The Cooperative uses a December 3 1 measurement date for its plan. The postretirement health care plan is Wlfunded.
The accumulated postretirement benefit obligation (APBO) and the amouncs recognized in the consolidated financial statements as of and for die years ended December 31, 202 1 and 2020, are as follows:
2021 2020 Amount recognized in the consolidated balance sheets:
Total accrued qualified and nonqualifoed benefn: obligation............. $ S,S60 S.82S Less current portion included in accrued expenses-other............
!396)
!302)
Long-term portion............................................ $ S,164
$ S.S23 Cha11ge in benefit obligation:
APB~beginning of year..................................... $ S,82S
$ S,166 Service cost...............................................
354 297 Interest cost..............................................
117 145 Actuarial loss.............................................
(434)
S34 Benefits paid............,..................................
!302)
!31?.}
AP80-end of year......................................... $ S,S60 I S,82S Funded status of plan--Oecember 3 I ********* * **** * *** * ** * * * **** $ (5,560)
$ (S.82S)
Accrued postretirement health insurance obligations recorded at year-end..................................,.... ------------------=--
$ S,S60
$ S.82S Change in plan assets:
Employer contribution....................................... $
(302)
(317)
Benefits paid......................,........................ ___ 3_0_2 ____ 3_1_7
i I
I Change in accumulated other comprehensive income:
Net income at prior measurement date......................... $ 1,376 1,928 Actuarial assumption changes..................................
434 (534)
Recognition in expense:
Amortization of prior service cost............................
91 Amortization of unrecognized actuarial gain....................
!5n (109)
Accumulated other comprehensive income........................ $ 1.753 1,376 Components of net periodic postretirement benefit cost:
Service cost-benefits attributed to service during the year........... $
354 297 Interest cost on accrued postretirement health insurance obligation.....
117 145 Amortization of prior service cost..............................
91 Amortization of unrecognized actuarial gain......................
!5n (109)
Net periodic postretirement benefit expense...................... $
414 424 Employer cash contributions expected to be made to the plan d uring the fiscal year ending December 3 1, 2022, is $396. The amount of accumulated other comprehensive income expected to be recogni:zed during the fiscal year ending D ecember 31, 2022, is an actuarial gain of$80 and amortization of prior service cost of$0. All prior service coses have been fuJly an1orti:zed.
For measurement purposes, a 2.55% and 2.07% discount rate was asswned for 202 1 and 2020, respectively, to determine net periodic benefit cost. The 202 l and 2020 annual heal di ca.re cost increase asswned is 6.50% and 6.50%, respectively, decreasing gradua.Jly to 4.46%
for 204 1 and thereafter.
Estimated future benefit paymenes from me plan as of December 3 1, 2021, are as follows:
Years Ending December 31 2022..............................................................
396 2023..............................................................
386 2024..............................................................
2025........................... ****** * * * * ** --* * ** ** * * * *** ** *** **--
2026..............................................................
2027-2031.........................................................
330 339 402 1,519 Defined-Contribution Plan J Dairyland has a qualified tax-deferred savings plan for eligible employees. Eligible participanrs hired prior to January I, 2020 may make pretax contributions, as defined, wid1 me Cooperative matching up to 2.5% of me participanes' an nual compensation. Eligible participan es hired afrer December 31, 2019, may make pretax contributions, as defined, wid1 me ooperative marching up to 13% of d1e parricipanes' annual compensation. Contributions to diis plan by the Cooperative were $1,409 and $ 1,325 for 2021 and 2020, respectively.
Other Plans J The Cooperative offers key employees deferred compensation plans available dirough NRECA. The plans permit qualifying employees to defer a portion of meir salary w1til future years. The accumulated deferred compensacion balance is not available to employees until termination, retirement or deam.
All ainowies of compensation deferred under me plai1s ai1d all income attributable to diose amounes (until paid or made available to d1e employee or odier beneficiary) are solely die property and rights of the Cooperative (not restricted to d1e payment of benefies under the plan), subject only to d1e dain1 of general creditors. Participanes' righ es under me plans are equal to mose of general credirors of me Cooperative in an amount equal to me fur market value of me deferred account for each participant. The related assees and liabilicies, totaling
$1,942 and $ 1,668 as of December 3 1, 202 1 ai1d 2020, respectively, are reported ar com racc value, which approximates fair value.
The Cooperative also provides employees with medical insurance coverage, vision and dental insurance coverage, short-term and long-term disability, and life insurIDce, which are funded by employer IDd employee contributions. The Cooperative's coses related to mese benefi es were $9,867 a.J1d $ 10,562 for 202 1 ai1d 2020, respectively. The liability for these pla.J1S of$59 and $5 as of December 3 1, 202 1 ai1d 2020, respectively, are recorded in accrued expenses on me consolidated bala.J1ce sheees.
12 I Related-PartyTransactions The Cooperative provides electric and omer services to ies Class A members. The Cooperative received revenue of$376,523 and $384,984 in 202 1 and 2020, respectively, for mese services. The Cooperative has accoun es receivable from ies Class A members of $30,829 and
$32,311 as of December 31, 2021 and 2020, respectively.
The Cooperative has advances fro m C lass A members of$20,584 and $ 13,704 as of December 3 1, 2021 and 2020, respectively, related to me prepayment program.
Class A members have the option of paying their electric bill in advance, and in turn, the Cooperative pays die members interest income. The Cooperative's interest expense related to the prepayment program was $ 125 and $ 191 for me years ended December 3 1, 202 1 and 2020, respectively.
13 Asset Retirement Obligations An asset retirement obligation (ARO) is me result oflegal or contractual obligations associated wim me retirement of a ta.J1gible long-lived asset chat results from me acquisition, construction, or development a.J1dlor me normal operation of a long-lived asset. The Cooperative determines mese obligations based on ai1 estimated asset retirement cost adjusted for inflation ai1d projected to d1e estim ated setdement dates a.J1d discounted using a credir-adjusced risk free interest rate. Upon initial recognition of a liabUity for ARO, me Cooperative capitali:zes me asset retirement cost by increasing me carrying amount of the related long lived asset by die same amount as the liabUity. The Cooperative a.Jlocates d1at asset retirement cost to expense using d1e straight-line memod over the remaining usefuJ life of me related long-lived asset. ll1e accretion of the obligation is recogni:zed over time up to me setdement date.
Any future diai1ge in estimate will be recogni:zed as an increase or a decrease in the carrying amount of me liability for aJ1 ARO ai1d d1e related asset retirement cost capitalized as part of the carrying am ount of me related long-lived asset.
The Cooperative determined mat it has AROs related to future removal a.J1d disposal of asbestos at its power plai1tS. lliere are no assees lega.Jly restricted for purpose of seeding d1e ARO related to fi.1ture removal and disposal of asbestos.
ll1e ooperacive has established a decommissioning crust to accumulate me estimated ai11ounes necessary to decommission a nuclear power plant chat die Cooperative formerly operated and die related lndependent Spent Fuel Storage lnstaUacion (ISFSl). ll1e assees of mis crust in d1e amount of $2,043 a.J1d $2,045 as of December 3 1, 2021 and 2020, respectively, arc oueside me Cooperative's administrative control ai1d are available solely to satisfy me future coses of decommissioning. As die expected completion is planned fo r 2022, me balance of the crust as of December 3 1, 2021, of $56 is recorded as current in die consolidated bala.J1ce sheet. ll1e cemaining $ 1,987 is related to me annual ISFSI costs diat will remain after completion of d1e decommissioning.
Nucleai* decommissioning a.J1d omer asset retirement obligations as of December 3 1, 202 1 a.J1d 2020, are as follows:
Nudear Other Total Balanc~- December 31, 2019........................
$ 2,389
$ 2,970
$ 5,359 Increase in estimated obligation.....................
9 9
Incurred r.osts on projects........................ --~!_354~l-------~~
(354)
Balanc-Oecember 31, 2020........................
$ 2,044
$ 2,970
$ 5,014 Incurred costs on projects......................... ---~!l~l--~~~-~~~
(2.n6) 12.nn Balanc-Oecember 31. 2021........................ _$._2_.04
__ 3 _ _..._ _____......_="--
$ 244
$ 2,287 The Cooperative did not record a conditional ARO related to d1e dismandement of me dam a.J1d drainage reservoir for the hydro generation plIDt at Flambeau, me removal of tra.J1smission lines in various corridors, a.J1d RockGen Energy Cencer because me Cooperative does not have sufficient information to estimate the fuir value of me ARO.
LASER FOCUSED I 2021 ANNUAL REPORT
14 I Nuclear Reactor License I The La Crosse Boiling Water Nuclear Reacror (LAC BWR) was volLU1tarily removed from service by the Cooperative effective April 30, 1987. The intent was ro terminate operation of the reacror, and a possession-only license was obtained from the Nuclear Regularory Commission (NRC) in August 1987. LACBWR will remain in safe srorage status (SAFSTOR) uncil the final stage of decommissioning ofLACBWR, involving dismantlement and decontamination, can be completed. L1 May 2016, the NRC approved transfer of the license ro La CrosseSolutions LLC (Solucions), a subsidiary of EnergySolutions LLC. Solmions will temporarily hold the license and assu.n'les responsibility for the decommissioning of the site. The license will revert back ro 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 W aste Policy Act of 1982 (NWPA) I Under the NWPA, the United States government is responsible for the storage and disposal of spent nuclear fuel removed from nuclear reactors. By statute and LU1der contract, cl1e United Scates government was ro have begun accepting spent fuel in January 1998, but has not yet licensed and established a reposirory.
TI1e Cooperative has filed two successful breach of contract damage claims against cl1e United Scates government in cl1e United Scates Court of Federal
!aims ro recover its coses generally incurred after 1998 cl1rough 2013 related to spent fuel rema.ining ac LAC BWR. The Cooperative received damage award payments of$37,659 and $73,500 in January 20 13 and November 2017, respectively. Proceeds from cl1e award payments were used ro defease cl1e nuclear related regulatory asset and deferred charges for nuclear related litigation and plam coses. Remaining proceeds have been refunded to Class A Members.
In January of 2022, the Board of Directors approved to accept a partial summary judgement in cl1e amount of$23,153 from the United Scates goverrunenc related to the N WPA third contract damage claim. Claim proceeds, less accrued legal fees, were refunded back to C lass A Members in February 2022.
Subsequent damage claims will be filed to recover the continuing coses arising from d1e presence of the spent fuel.
ISFSI I TI1e Cooperative completed the temporary dry srorage facility project located on the LACBWR site and completed the move of the LACBWR spent nuclear fi.,el to this ISFSI fucility in September 201 2. The spent nuclear fuel will remain at the ISFSI uncil it is able to be transferred to the goverrunenc. Annual JSFSI coses are recorded on an as incurred basis and incorporated into the armual budget and race making process.
Decommissioning I The Solutions decommissioning plan anticipates completion of decommissiorung LACBWR, nor including the ISFSI, in 2022. lbe estimated coses of decommissioning the nuclear generating fucility are based on the Solutions cost study and decommissioning plan filed with the N RC as pare of the license transfer. Coses incurred for decommissioning projects are charged against me decommissioning liability. As coses are incurred, Solutions submits requests for withdrawals to the Cooperative for release of funds from the nuclear decommissioning cruse.
15 Supplemental Disclosures of Cash Flow Information TI1e sea cement of cash Rows includes the following supplemental information as of December 3 1, 202 1 and 2020:
2021 Cash paid for interest........................................ $
2,062 Electric plant additions funded through accounts payable and accrued expenses................................
,357 Electric plant additions under capital leases.......................
,357 Non-cash payment of long-term debt............................
2020 32.096 2,888
,758 809 The amoLU1t shown in the consolidated statements of cash Rows for cash, cash equivalents and restricted cash as of December 31, 2021 of$68,9 12 is comprised of cash and cash equivalents of $46,244 and designated funds of $22,668.
16 I Revenue from Contracts with Customers Sales of electric energy consists of sales to members pursuant ro long-term wholesale electric contracts. The Cooperative recognizes revenue based on the amount of energy delivered to eacl1 customer at agreed upon races. The measurement of energy sales to customers is generally based on meter data, which is collected through the lase day of the mond1. Ac the end of each month, amounts of energy delivered to customers is recognized.
Dairyland is an active participant in cl1e MISO market, where it bids generation into cl1e Day Ahead and Real Time markets and procures electricity for its wholesale customers and sells energy at prices determined by the MISO Energy Markets. Purchase and sale transactions are recorded using settlement i11fonnation provided by M ISO. Purchase transactions are accounted for on a nee hourly position. Net purcl1ases 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 Markers, TI1ey have no performance obligation until the energy is sold.
The Cooperative's members consist of Class A, C, D, and E members. Class A members purcl1ase wholesale electric service and rares are sec 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. ll1e contract automatically extends an adrlitional (2) years in each odd-numbered year beginning January 1, 202 1, unless either the Cooperative or member give notice no lacer than the preced ing September 1 of its election not to extend further. C lass C member revenue represents contractual sales to GRE which were recognized through 2021. Class D member revenues are based on various contracts with wholesale municipal members. Class E member revenues primarily reRecc sales to MISO.
The following cable disaggregates revenue by major source for the years ended December 3 1, 2021 and 2020:
2021 Class A..................................................... $ 376,522 Class C.....................................................
2,387 Class D.....................................................
Class E, Including MISO........................................
16,879 53.552 2020
$ 38-4,98-4 5,729 10,151 2,350 Other Sales..................................................
l,25 17,217 Total....................................................... $ 63.59
$ 2,31
YEARS U ~
j DAIRYLAND PO' COOPERATIVE For decades, the absence of electricity was the single most important distinction between urban and rural life in the United States, On May 11, 1935, President Franklin Roosevelt, by Executive Order, established the Rural Electrification Administration (REA) to help bring electricity to rural America.
The significance of this event for rural America remains monumental today. Through the REA, electric cooperatives were created throughout the country and arranged to purchase power from generating plants and build power lines in rural areas.
2 At long last, farmers could gain access to electricity and use electric tools and appliances that would save them hours of back-breaking labor.
DECEMBER 1941: CREATION OF DAIRYLAND POWER COOPERATIVE Working together, 10 northern Wisconsin cooperatives created the Wisconsin Power Cooperative to meet their electric power needs. In 1938, the Chippewa Diesel Station became the first cooperative generating plant in the nation to produce power for rural America.
Later that year, five southern Wisconsin electric cooperatives combined their resources to meet their electrical needs and those of consumers in rural Iowa and Minnesota. Together, they formed Tri-State Power Cooperative, and completed a coal-fired steam plant at Genoa, Wis., in 1941.
A transmission line and the commitment to generate and transmit affordable power to their members linked these two pioneering cooperatives. After much discussion, the 17 directors these two cooperatives signed the Articles oflncorporation which were filed on December 11, 1941, by Attorney Floyd Wheeler. Five days lacer, a final consolidation meeting was held in Genoa and the strengths of the two cooperatives merged, creating a new cooperative serving thousands of people throughout the region-Dairyland Power Cooperative.
While Dairyland has grown and evolved with its members, these pioneers set the cornerstone for Dairyland's strong foundation and mission to improve the quality oflife in rural communities. By providing members with value in the form of safe, reliable, sustainable and competitively-priced electricity, Dairyland continues that mission.
PHOTOS TOP DOWN: I. General Counsel Floyd Wheeler helps set the Alma Station cornerstone in 1946. 2. Transmission construction was challenging in the 1940s. 3.Field crews and their Dairyland truck long before electric vehicles. 4. Alma Station control room in the 1950s. 5. The 6,000 kW Genoa Station was completed in 1941. 6. Storm restoration in Dairyland's early years.
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