ML23137A155

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

ML23137A155
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	05/02/2023
From:	Smalldridge B Dairyland Power Cooperative
To:	Office of Nuclear Material Safety and Safeguards
References
LAC-14515
Download: ML23137A155 (1)

Text

BRAD SMAllDRIDGE Otief Nudear Offia!r DAIRYlAND PO COOIPIEIRA1'1VIE May 2, 2023 In reply, please refer to LAC-14515 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, 2022 and 2021. '.)

Sincerely, BS:MGM:tco Enclosure(s) Consolidated Financial Statements as of and for the Years Ended December 31, 2022, and 2021, and Independent Auditors' Report.

cc: w/o enclosure see Service List 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-14515 Page 2 May 2, 2023 STATE OF WISCONSIN)

)

COUNTY OF LA CROSSE )

Personally came before me this 3-rJ dpy of tJ\.(l,:::,\ , 2023, the above named, Brad Smalldridge, to me known to be the person who executed the foregoing instrument and acknowledged the same. '

Courti,eg '!:. Cutd.'

!l{p(arg b6il, ounty Wisconsin State '1/'Wileo,uhi My com~ission expires q \ob\ t'J.-01/2

)

'.l

LAC-14515 May 2, 2023 cc !letter only)

La Crosse Boiling Water Reactor Service List Jerome Pedretti, Clerk Town of Genoa DPC:

E860 Mundsack Road Genoa, WI 54632 Brent Ridge, President and CEO brent. ridge@da i ryla nd power.com John B. Geissner, Region Administrator U.S. NRC, Region Ill Brad Smalldridge, Chief Nuclear*Officer 443 Warrenville Road brad.smalldridge@dairylandpower.com Lisle, IL 60532-4352 Marty Moe, ISFSI/Security Manager Bernard White, NRC Project Manager martin.moe@dairylandpower.com US Nuclear Regulatory Commission Two White Flint North John Henkelman, Licensing Engineer Mail Stop 4 B34 john.henkelman@dairylandpower.com 11545 Rockville Pike Rockville, MD 20852-2738 Joyce Peppin, General Counsel joyce.peppin@dairylandpower.com Tilda Lui, NRC Project Manager U.S. Nuclear Regulatory Commission Kathleen Galioto, Deputy General Counsel Attn: Document Processing Center kathleen.galioto@dairylandpower.com Division of Fuel Management Storage and Transportation Licensing Branch Tim Lightfoot, Assistant Contoller 11555 Rockville Pike tim.lightfoot@dairylandpower.com Rockville, MD 20852 Cheryl Olson, ISFSI Manager Jeffery Kitsembel cheryl.olson@dairylandpower.com Division of Energy Regulation Wisconsin Public Service Commission Mike Russell P.O. Box 7854 Enterprise Risk Mgmt Senior Analyst Madison, WI 53707-7854 mike.russell@dairylandpower.com jeff.kitsembel@wisconsin.gov Nicole Metzler, Controller David Leclear, Manager nicole.metzler@dairylandpower.com Radiation Protection Section Bureau of Env& Occupational Health Division of Public Health Wisconsin Department of Health Services P.O. Box 2659 Madison, WI 53701-2659 david.leclear@dhs.wisconsin.gov l,

• I

.I r.:i.

.Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of and for the Years Ended December 31, 2022 and 2021, and Independent Auditors Report

Deloitte a Toudle LLP Deloitte. Suite .!-800 so Sooth Sixth Streat Minneapolis, MN 55402-15:38 USA Tel: +1 612 397 4000 Fax: H 612 397 4450 ww*N.deloltte.com INDEPENDENT AUDITOR1S REPORT Board of Directors Dairyland Power Cooperative la Crosse, INisconsin Opinion We have audited the consolidated financial statements of Dairyland Power Cooperative and subsidiary (the "Cooperative"}, which comprise the consolidated balance sheets as of December 31, 2022 and 2021, and the related consolidated statements of revenue, expenses and comprehensive income, member and patron equities, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectiVely referred to as the "financial statements").

In our opinion, the accompany1ng financial statements present fairly, in all material respects the financial position of the Cooperative as of December 3.1, 2022 and 2021, and the results of its operations and lts cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for OplnTon We conducted our audits in accordance with auditing standards generarny accepted in the United States of America {GAAS}. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of o-ur report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the des.ign, implementation, and maintenance of internal control relevant to the preparation and falr presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events,- considered in the aggregate, that raise substantial doubt about the Company's abillty to continue as a going concern for one year after the date that the financial statements are available to be issued, Auditor's Responsibilities for tne Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from rnaterial misstatement, whether due to fraud or error, aind to lssue an auditor's report that includes our opinion. Reasonable assurance is a high levet of assurance but ts not absolute assurance and

therefore is not a guarantee that an aud1t conducted in accordance with GAAS will alwavs detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controL Misstatements are considered material ff there is a substantial likelihood that, indlvlduafly or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit 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 Company's internal control. Accord1ngly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policles used and the reasonableness of slgnrficant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's c3bility to continue as a going concern for a reasonable period of time.

We are required to communicate wrth those charged with governance regarding, among other matters, the planned scope c3nd timing of the audit, significant audit findings, and certain internal control-related matters that we tdentified during the audit April 3, 2023 DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 ASSETS ELECTRIC PLANT:

Plant and equipment-at original cost $ 2,055,884 $ 2,055,575 Less accumulated depredation (906,391} (867,431}

Net plant and equipment 1,149,493 1,188,144 Construction work in progress 142,025 87,032 Total electric plant 1,291,518 1,275,176 OTHER ASSETS:

Nuclear decommissioning funds 2,013 1,987 Intangible asset-net(Note 2} 27,568 30,566 Other investments (Note 8) 7,417 12,350 Investments in capltal term certificates of National Rural Utilities Cooperative Finance Corporation (Note 8) 9,176 9,176 Regulatory assets (Note 2) 21,059 25,614 Investment for deferred*compensation 1,581 1,776 Deferred charges (Note 2) 15,479 19,357 Total other assets 84,293 100,826 CURRENT ASSETS:

Cash and cash equivalents 25,878 46,244 Designated funds (Note 2) 19,880 22,668 Accounts receivable; Energy sales 43,867 37,111 Other 1,100 7,105 Inventories:

Fossil fuels 27,163 24,234 Materials and supplies 19,315 17,936 Prepaid expenses and other 14,951 12,675 Tota! current assets 152,154 167,973 TOTAL s 1,527,965 m

s 1,543,975 (Continued)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 CAPITALIZATION AND LIABlUTIES CAPITAUZATION:

Member and patron equities:

Membership fees $ 1 $ 1 Patronage capltal (Note 9) 354,555 341,427 Accumulated other comprehensive income 2,877 1,753 Total member and patron equities 357,433 343,181 long-term obligations (Note 6) 1,003,445 820,090 Total capitalization 1,360,878 1,163,271 OTHER L!ABILITIES:

Deferred credits (Note 2) 4,528 9,418 Obligations under finance leases (Note 7) 6,588 7,934 Postretirement health insurance obligation (Note 11) 4,006 5,164 Decommissioning and asset retirement obligatlons (Note 14) 2,257 2,2.31 Other non-current liabilities 4,413 4,Sn Total other liabilities 21,792 29,324 COMMITMENTS AND CONTINGENCIES (Note 10)

CURRENT LIABILITIES:

Current maturities of long-term obligations and obligations under finance leases 56,073 45,654 line of credit (Note 5) 6,000 209,707 Nuclear decommissioning obligations (Note 14) 56 56 Advances from member cooperatives and other prepayments 6,847 20,584 Regulatory liabilities (Note 2) 19,880 22,668 Accounts payable 31,602 33,985 Accrued expenses:

Payroll, vacation, and benefits 6,52.1 5,669 Interest 7,098 6,841 Property and other taxes 3,244 3,642 Other 7,974 2,574 Total current liabilities 145,295 351,380 TOTAL $1,527,965 $1,543,975 See notes to consolfdated financial statements. (Concluded}

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES ANO COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 UTI UTY OPERA.TIONS:

Operating revenues:

Sales of electric energy $499,262 $449,340 Other 31,861 14,254 Total operating revenues 531,123 463,594 Operating expenses:

Fuel 146,519 91,261 Purchased and interchanged power 116,420 107,852 Other operating expenses 117,739 126,704 Depreciation and amortization 65,029 53,515 Maintenance 26,212 29,284 Property and other taxes 9,652 9,534 Total operating expenses 481,571 418,150 Operating margin before interest and other 49,552 45,444 Interest and other:

Interest expense 34,557 28,855 Allowance for funds used in construction-equity (1.,165) (963)

Other-net (212) (60)

Total interest and other 33,180 27,832 OPERATING MARGIN 16,372 17,612 NONOPERATING MARGIN 1,658 NET MARGIN AND EARNINGS 18,030 19,490 OTHER COMPREHENSIVE INCOME-Postretirement health insurance obligation adjustments 1,124 377 COMPREHENSIVE INCOME s 19,154 See notes to consolidated fi nandal statements.

DAIRYLAND POWER COOPERATIVE AND-SUBSIDIARY CONSOLIDATED STATEMENTS OF MEMBER ANO PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 311 2022 AND 2021 (In thousands)

Accumulated Total Other Member Membership Patronage Comprehensive and Patron fees Capital Income Equities BALANCE-January 1, 2021 $ 1 $326,600 $1,376 $327,977 Net margin and earnings 19,490 19,490 Postretirement health insurance obligation adjustments 377 377 Retirement of capital credits (Note 9) (4,663) {4,663)

BALANCE-December 31, 2021 1 341,427 1,753 343,181 Net margin and earnings 18,030 18,030 Postretirement health insurance obligation adjustments 1,124 1,124 Retirement of capital credits (Note 9) (4,902} (4,902)

BALANCE-December 31, 2022 $ 1 $354,555 S2,877 $357,433 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE ANO SUBSIDIARY CONSOLIDATED STATEMENTS Of CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

{tn thousands}

2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin and earnings  ? 18,030 Adjustments to reconcile net margin .ind earnings to net cash provided by operating activities:*

Loss {gain} on disposal of assets 87 {2,685)

Depredat1on and amortization:

Charged to operating expenses 65,029 53,515 Charged through other operating elements such as fuel expense 2,356 Allowance for funds used in constructlon-equity {1,165} (963}

Changes In operating elements:

Accounts recefvable {751} (7,364}

Inventories {4,706} 15,2.92 Prepaid expenses and other assets (990} {1,939)

Atcounts payable (7,406} 7,730 Accrued expenses and other liabilities 6,258 10,963 Deferred charges and other 235 23,327 Total adjustmen!s 58,947 97,876 Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions {83,328} (62,971)

Asset acquisition (724} (205,221)

Proceeds from sale of assets 13,245 Purchase of investments (215} (14,154)

Proceeds from sale of rnvestments and economic development loans 1,763 Net cash used in investing activities {69,259} (267,554}

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowlngs under line of credit 20,707 209,.707 Repayments under line of credit (224,414)

Borrowings under long-term obllg.itions 242,886 23,902 Repayments of long4erm obligations (50,653) (36,135)

Retirement of capital credits (4,902) (4,663}

Borrowings of advances from member cooperatives 400,568 388,140 Repayments of advances from member cooperatives {414,629) (381,386)

Net cash (used in) provided by financing activities (30,437} 199,565 NET (DECREASE) INCREASE !N CASH, CASH EQUIVALENTS AND RESTRtCTED CASH (22,719) 49,377 CASH, CASH EQUIVALENTS ANO RESTRICTED CASH-Beginning of year 68,912 19,535 CASH, CASH EQUIVALENTS AND RESTRICTED CASH-End of year $ 46,193 $ 68,912 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, 2022 AND 2021 (AH dollar amounts in thousands) 1, NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperatlve and subsidiary ("Dairyland" or the "Cooperative"} is an electric generation and transmission cooperative organized under the laws of the states of Wisconsin and Minnesota. lhe Cooperative, whose principal offices are located in Wisconsin, provides wholesale electric service to class A members engaged ln the retatl sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa and Illinois, 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 subsidlary, Genoa Fue!Tech, Inc. AH 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,

2. SIGNIFICANT ACCOUNTING POLICIES 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 materials, allocable overhead, and allowance for funds used during 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 retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation and no profit or loss is recognized in connection with ordinary retirements of property units. A provision for these nonlegal or noncontractual costs of removat components is recognized based on depredation rates determined by a third-party depreciation study completed in September 2021 and approved by RUS in 2021 for rates effective in 2022 through 2026.

The Cooperative is unable to obtain the information to separate the cumulative removal costs as of C>ecember 31., 2022 and 2021. Maintenance, repair costs and replacement or renewal of minor items o.f property are charged to operations.

Significant components of electric plant were as follows as of December 31:

Depreciable Lives 2022 2021 Production 11-60years $1,210,889 $1,208,130 Transmission 23-S0years 656,156 642,029 Distributfon 38years 82,085 101,890 General plant S-47years 104,993 101,764 Other 32 years 1,761 1,762 Construction work in process 142,025 87,032 2,197,909 2,142,607 Less accumulated depreciation (906,391) {867,431}

Electric plant $1,291,518 $1,275,176 Depreciation-Depreciation, whicn 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 propertres. The provision for depreciation averaged 2.7%

and 2.5% of depreciable plant balances for 2022 and 2021, 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 appfylng a rate (4.169% in 2022 and 4.719% in 2021) to certain construction work in progress.'The amount of such allowance was $2,870 in 2022 and $21 549 in 2021. The borrowed funds component of AFUDC for 2022 and 2021, was $1,705 and $1,586, respectively (representing 2.445% and 2,929% in 2022 and 2021, respectively}. The equity component of AFUDC for 2022 and 2021 was $1,165 and $963, respectively, (representing 1.724% and 1.79D% in 2022 and 2021, 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-Designated funds represent the amounts collected from customers through rates and deferred for future use. Designated funds are held in cash.

Asset Acquisitions-In December 2021, the Cooperative completed their purchase of the assets of RockGen Energy Center in the amount of $210,079. RockGen Energy Center, located in Cambridge, WI, is a 503 megawatt (MW) simple*cyde, dual fuel power generating facility that runs primarily on natural gas. The facility will help the Cooperative meet its Members' power needs as the Cooperatlve transitions to more renewable resources.

Intangible Asset-In December 2021, the Cooperative recorded an intangible asset as part of their purchase of the RockGen Energy Center in the amount of $30,211. The intangible asset consists of the assignable capacity agreements that were defined in the asset purchase agreement.

The carrying basis and accumu.lated amortiz.ation of the intangible asset as of December 31, 2022 and 2021 were as follows:

2022 2021 Gross intangible asset $ 29,806 $ 30,630 Less accumulated amortization {2,238) {64}

Intangible asset, net $ 27,568 $ 30,566 Amortization expense for the year ended December 31, 2022 was $1,511.

Estimated amortization expense for each of the following five years and thereafter is:

Years Ending December31 2023 $ 4,935 2024 5,951 2025 3,993 2026 2,077 2027 1,731 Thereafter 8,881 Total S 27,568 Regulatory Assets.c'._ The Cooperatlve's accounting policies and the consolidated financial statements conform to accounting prindples generally accepted ln the United States of America appl1cab[e to electric cooperatives.

The noncurrent portion of regulatory assets as of December 31, 2022 and 2021, include the following:

2022 2021 Genoa #3 unrecovered plant balances $20,414 $25,614 RockGen regulatory asset 645 Total regulatory assets $21,059 $25,614 Genoa #3 Unrecovered Plant Balances-During 2020, the Cooperative established a regulatory asset related to the unrecovered plant balances upon closure of the Genoa #3 generating station that occurred in 2021. Immaterial additlonal costs associated with the closure were added to the regulatory asset in 2022. Amounts are being recovered in rates through 2029.

The current portion of the Genoa #3 regufatory asset as of December 31, 2022 and 2021 is $5,390 and

$5,621, respectively. These amounts a:re recorded in prepayments and other assets .

RockGen Regulatory Asset- During 2022, the Cooperative established a regulatory asset related to the difference in the amount be[ng recovered in rates on a straight-line basis over the 20-year life of the RockGen Energy Center and amortization on a GAAP basis which ls being amortized based on the underlying capacity contracts which have an estimated us.eful life of seven years. The difference between the GAAP amortization and the amounts recovered in rates are deferred as the regulatory asset.

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, 2022 and 2021, the Cooperative's deferred charges are belng reflected in rates charged to customers, except the deferred nuclear litigatron as noted below. If all or a separable portlon 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, 2022 and 2021, include the following:

2022 2021 Nemadji Trail Energy Center $14,775 $ 9,986 Deferred Nuclear Utlgatlon 44 8,858 Other 660 513 Total deferred charges $15,479 $19,357 N,emadji Trail Energy Center-C9sts relating to the Nemadji Trail Energy Center natural gas project are belng accumulated ln deferred charge.s. These charges will be amortized when the plant is in servfce (currently estimated for 2.027}. ~

Deferred Nuclear Litigation-Litigation expenses from the third nuclear contract damages claim against the United States government were deferred in 2021. Settlement was reached on the third claim in January 2022 and 2021 deferred charges were extinguished and offset the proceeds. See further discussion in Note 14.

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

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

Regulatory Liabilities-As of December 31, 2022 and 2021, the Cooperative had various revenue deferrals reflected as regulatory liabilities. The revenue deferrals pertained to favorable results from market credits through transactions with the Mid-Continent Independent System Operator (MISO} in addition to favorable results due to market conditions. The summary of regulatory liabilities as of December 31, 2022 and 2021 is as follows:

2022 2021 Planned 20231.P. Madgettoutage costs $13,000 $13,000 Busfness growth and development 6,880 7,400 Planned 2022J.P. Madgettoutage costs 1,900 Electric vehicle charging stations 368

$19,880 $22,668 Planned 2023 J.P. Madgett Outage Costs-The Board of Directors approved the creation of a regulatory liability revenue deferral plan in the amount of $13,000 in 2021. The Cooperative deferred

$13,000 of 2021 revenue and plans to recognize this amount in 2023. The deferral plan was approved by RUS in February of 2022.

Business Growth and Development-In December 2021, 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 regulatory Hablllty revenue deferral in 2021 ln the amount of $1,400 for business growth and development. This amended deferral plan was approved by RUS in January 2022.

In December 2022, the Board of Directors approved the amendment to carryforward the revenue deferral balance fn the amount of $6,880 into 2023 previously set for use in 2022. The plan was approved by RUS ln January of 2023.

Planned 2022 J.P. Madgett Outage Costs-In November 2021, the Board of Directors approved the creation of a regulatof\/ liabiHty revenue deferral plan in the amount of $1,900. The deferral plan was approved by RUS ln February of 2022. The Cooperative recognized this amount in 2022.

Electric Vehicle Charging- In January 2022, the Board of Directors approved the carryforward of a 2020 revenue deferral plan in the amount of $368. The amended deferral plan was approved by RUS in February 2022. The Cooperative recognized this amount in 2022.

Deferred Credits-Deferred credits represent both future revenue to the Cooperative associated with customer prepayments and noncurrent obligations and reserves related to operations. As of December 31, 2022, the Cooperative's deferred credits are being considered when determining rates charged to customers.

Deferred credits as of December 31, 2022 and 2021 were comprised of the following:

2022 2021 Customer energy prepayments $ - $ 7,924 RockGen startup revenue deferral 2,607 Elk Mound startup revenue deferral 1,853 1,432 Other 68 62 s 4,528 $ 9,418 Sales of Electric Energy-Revenues from sales of etectric 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 2022 and 2021, the power cost adjustment to the class A members resulted in credits to sales biHed of $15,613 and $3,834, respectively. These amounts are recorded in 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-The Cooperative does not have any energy contracts that are required to be accounted for at fair value as of December 31, 2022 and 2021.

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• Leases - The Cooperative determines if an arrangement is a lease at inception of the contract, The right-of-use assets represent the right to use the underlying assets for the lease term and lease liabilities represent the obligation to make lease payments arislng from the leases. Right-of-use assets and lease liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. The Cooperative uses the implicft rate noted within the contract, when available.

Otherwise, the Cooperative uses its incremental borrowing rate estimated using recent debt issuances that correspond to various lease terms. The Cooperative does not recognize leases, for operating or finance type, with an initial term of 12 months or less (short-terms leases") on the consolidated balance sheets, and the lease expense for these short.term leases is recognized on a straight-line basis over the lease term within.

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 llabilities, and the disclosure of contingent assets and liabilities at the date of the consolidated financla! statements, and the reported amounts of revenue and expenses during the reportlng period. Significant estimates 1n the consolidated financial statements relate to postretirement benefit obligations, asset retirement obligation liabilities, fixed-asset depreciable lives, and litigation and contingencies. Actual results could differ from those estimates.

Concentration of Risk-Approximately 36.6% of the laborfon;:e for the Coop,erative is under a collective bargaining agreements that explre between January 31, 2024 and January 31, 2025.

Subsequent Events-The Cooperative considered events for recognition or disclosure in the consolidated financial state!llents that occurred subsequent to December 31, 20~2, through April 3, 2023, the date the consolidated financial statements were available to be issued.

3. ACCOUNTING STANDARDS Adopted-tn February 2016, the FASB issued new accounting guidance for leases. The new guidance increases transparency and comparability among organizations by recognizing iease 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 ea.sements. The Cooperative adopted the new lease guidance on January 1, 2022 using the modified retrospective approach. The adoption of the new lease guidance did not have a material impact on the Cooperative's financial statements.

4. INCOME TAXES The Internal Revenue Service has determlned that Dairyland is exempt from federal income taxes under Section 501(c)(12} of the ln,ternal 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.

5. UNES OF CREDIT To provide interim financing capabflttles, the Cooperative has arranged committed Hnes of credit with CoBank. The original line was executed on November 30; 2015, and amended on November 20, 2019, with availability aggregating approximately $350,000. Thrs fac:Hlty has a five~year term and provldes funds both 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, but the intent is to pay down the line of credit as permanent funding is received.

In December 2021, the Cooperative arranged a second line of credit for $215,000. The purpose of these funds was to finance the purchase of the RockGen ptant. In June of 2022, this Hne of credit was converted into long-term financing with Cobank.

Compensating balance requirements and fees relating to the lines of credit were not significant in 2022 and 2021. Information regarding line of credit balances and activity for the years ended December 31,-

2022 and 2021, is as follows:

2022 2021 Interest rate at year-end 5.39 % 1.11 %

Line l-$3SOM $ 6,000 $

Line 2-$215M 209,707 Total borrowings outstandl ng at year~e nd s 6,000 S209,707 Average borrowings outstanding during year $101,276 $ 17,476 The Cooperative also allows member cooperatives to prepay their power bllts and pays interest on these prepayments based on current short-term borrowing rates. Advances from member cooperatives totaled $6,847 and $20,584 at December 31, 2022 and 2021, respectively. Interest expense on member cooperative advances was $324 and $125 for the years ended December 31, 2022 and 2021, 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, 2022 and 2021, consist of the following:

2022 2021 Federal Financing Bank obligations-1.24%-4.49% $ 595,514 $584,270 Federal Financing Bank obligations-4.50%-5~20% 190,826 201,942 Total Federal Financing Bank 786,340 786,212 RUS obligations-4.125% and grant funds 2,036 2,557 CoBank notes-2.9% and 4.3% 201,220 3,362 Private bonds placement obligations-3.42% 67,500 70,833 Long-term debt 1,057,096 862,964 Less current maturities --

(53,651) {42,874)

Net long-term obligations s 1,003,445 S820,090 Quarterly principal and interest payments on the long-term obligations to the Federal Financing Bank (FFB) extend through 2053.

Long-term obligations to the RUS are payable in equal monthly princ!pal and interest.installments through 2024, Payments on the CoBank 2.6% and 4.32% notes are due quarterly, respectively, 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 Cooperative's long-term debt with the exception of unsecured notes to CoBank (balances of $1,345 and

$3,362 at December 31, 2022 and 2021, respectively). The Cooperatlve 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, 2022.

Scheduled maturities of the Cooperative's long-term obligations as of December 31, 2022, were as follows:

Years Ending December31 2023 $ 53,651 2024 63,618 2025 54,609 2026 56,082 ,,

2027 57,461 Thereafter 771,675 Total $ 1,057,0_96

7. LEASES The Cooperative has entered into several finance 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 price. The assets are amortized over the lesser of their related lease terms or their estimated productive lives.

The following table presents the components of the Cooperattve's right-of-use assets and liabilities related to leases and their classification in the consolidated balance sheets as of December 31:

Classification in Consolidated Component of Lease Balances Balance Sheets 2022 Asset~:

Finance lease right-of-use assets Plant and equipment - at cost $ 17,521 liabilities:

Current portion of finance lease liability Current maturities of long-term obligations and $ 2,302 obligations and obligations. under finance leases Long*term portion of finance lease liability Obllgations under finance leases 6,588 The components of lease and their classiflcat1on in the consolidated statements of revenues, expense,-

and comprehensive income for the year ended December 31 were as follows:

Classifk.tiQn in Statements of Component of lease Expenses Revenues, Expenses, and Comprehensive lncome 2022 Operating lease expense Other operating expenses $ 455 Flnance lease amortfzatlon Depreciatlon and amortization 1,834 Finance lease interest Interest expense 287 Short-term lease expense Other operating and maintenance expenses 916 Total tease expense The weighted average remaining lease term and weighted average discount rate as of and for the year ended December 31, 2022, were as follows:

Weighted Average Remaining Weighted Average Lease Term {Years) Discount Rate Finance (eases 5.05 3,12 %

Supplemental cash flow lnformat!on related to leases for the year ended December 31, 2022 was as follows:

Cash paid for amounts includ~d in the measurement of lease liabiHties:

Operating cash outflows from finance leases $ 3,149 Right-to-use assets obtained in exchange for lease obligations:

Finance leases 977 The reconciliation of the future undiscounted cash flows to the lease liabilities presented on the Consolidated Balance Sheet as of December 31, 2022, were as follows:

Finance Leases 2023 $2,683 2024 2,186 2025 2,114 2026 1,619 2027 997 Thereafter Total lease payments 10,555 Less dis.count (1,665)

Total lease liabilities $8,890 IAMY@HW#

The undiscounted annual minimum le<1ses payments due under the Cooperative's finance leases following the previous lease accounting standard as of December 31, 2021, were as follows:

Finance Leases 2022 $3,130 2023 2,388 2024 1,890 2025 1,818 2026 1,323 Thereafter 976 Total lease payments 11,525 Amounts representing interest {811)

Present value of minimum lease payments 10,714 Current maturities (2,740)

Longuterm obligations $7,974

8. FINANCJAL 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, 2022 and 2021, is estimated to be as follows:

2022 2021 Recorded Fair Recorded Fair Value Value Value Value Assets:

Other investments $ 7,417 $ 7,147 $ 12,350 $ 12,350 Investments in capital term certificates of NRUCFC 9,176 9,176 9,176 9,176 Liabilities-long-term debt 1,057,096 950,059 862,964 979,972 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 identicat assets or llablllties. Level 2 inputs consist of observable market data, other than that included ln level l, that are either directly or indirectly observabfe. Level 3 inputs consist of unobservabte market data, which are typically based on an entity's own assumptions of what a market participant would use in pricing an asset or liability 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 whlch 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 liability.

The following table summarizes the Cooperative's assets and liablHties measured at fair value on a recurring basis as of December 31, 2022 and 2021, aggregated by the level in the fair value hierarchy w!thTn which those measurements fall:

fair Value Measurements Using Quoted Prices in Significant Acti11e Markets for Other Significant Identical Assets Observable Unobservable and Uabilities Inputs lnputs 2022 FalrValue (Level 1) (Level 2) (Level 3)

Assets-investments:

Nuclear decommissioning funds $ 2,070 $ 2,070 $ * $ .

Other investments 7,417 435 1,428 5,554 Investments in ca pita I term certificates of National Ruta[ Uti!lties Finance Corporation 9,176 9,176 lrlvestment for deferred compensation 1,748 1,748

$ 20,411 $ 2,505 $3,176 $14,730

=

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and l!abllities Inputs Inputs 2021 Fair Value (Level 1) (Level 1) rLevel 3)

Assets-investments:

Nuclear decommissioning funds $ 2,043 $ 2,043 $* $ .

Other investments 12,350 4,235 1,364 6,751 Investments in capital term certificates of National Rura! Utilitie~ Finance Corporation 9,176 9,176 I nve.stment for deferred compensation 1,941 1,941

$3,305 $15,927 The changes in Level 3 recurring fair value measurements using significant unobservable inputs for the years ended December 31, 2022 and 2021, are as follows:

2022 2021 Other investments:

Balance-beginning of year $6,751 $8,096 New investment and loans made loan repayments received and current maturities (409)

Patronage capital allocations 52 55 Patronage capital retirements {1,249) (991}

Balance~end of year $5,554 $6,751 The valuation of these assets involved management's judgment after conslderation of market factors and the absence of market transparency, market Hquidity and observable inputs.

9. RETIREMENT OF CAPITAL CREDffS The Cooperative's Board of Directors has adopted a policy of ret1r1ng capital credits allocated to members on a firsUn, first-out basis. As part of an equity development strategy adopted in 2003, patronage capital retired wtll 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 non operating margins assigned to members each year is at the discretion of the Board of Of rectors. Any unassigned nonoperating margins wilt become unallocated reserves and part of permanent equity.

Patronage capital amounts for the years ended December 31, 2022 and 2021, are as follows:

Assigned Unassigned Total Balance-December 31, 2020 $233,138 $93,461 $326,600 Retirement of capital credits (4,663) {4,663) current year margins 16,649 2,841 19,490 Balance-December 31, 2021 245,124 96,302 341,427 Retirement of capital credits .. (4,902) (4,902)

Current year margins *, 15,208 2,823 18,030 Balance-December 31, 2022 $255A30 $99,125 $354,555

10. COMMITMENTS AND CONTINGENCIES The Cooperative is a party to a number of generation,. transmission and distribution agreements, under which costs and/or revenues ar.e recognized currently based upon the Cooperative's interpretations of the provisions of the related agreements. Differences between the estimates used in the consolldated financial statements and the finaf 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, 2022, is as follows:

Years Ending December31 2023 $ 45,198 2024 32,388 2025 14,629 2026 1,149 Total $ 93,364 The Cooperative has been named as a defendant in various lawsuits and claims arising In the 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 without a material effect on the consolidated finandal position; results of operations or cash flows of the Cooperatfve.

11. EMPLOYEE BENEFJTS 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. Pensron benefits are funded in accordance wlth the provisions of the 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 Ac:t of 1980, imposes certain llabHities 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 to withdraw from participation.

Since the RS Plan is a rnultiemployer plan for accounting purposes, all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits. to employees of other participating employers. The Cooperative may be contingently liable for its share of the RS Plan's unfunded vested liabilities.

The Cooperative's contributions to the RS Plan in 2022 and 2021 represented less than 5% of the totaf contributions made to the plan by all participating employers. In 2013, the Cooperative made a voluntary prepayment of $26,899 to this p!an to reduce future contribution amounts. The remaining prepayment was fully amortized in 2021. Expense for the RS Plan was $8,712 in 2022 and $15,161 in 2021. The 2022 expense includes contributions to the plan of $8,712 and $0 of prepayment amortization. The 2021 expense indudes contributions to the plan of $9,781 and $5,380 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 individual employer. In total, the RS Plan was over 80%

funded on both January 1, 2022 and 2021, 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 valuatTon of the plan and may change as a result of plan experience.

Postretirement Health Insurance Obligation-Certaln employees of the Cooperative retiring at or after age 55 are eligible to participate in a postretirement 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 premium amount fer 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 medicaf claims experience of retirees only, the resulting premlum for retirees would be higher. The difference between the premium paid by retirees and the potential actual premium amount is the basis for the postrettrement benefit obligation. The Cooperative uses a December 31 measurement date for its plan. The postretirement heatth care plan is unfunded,

• 20-

The accumulated postretirement benefit obligation (APSO) and the amounts recognized in the consolidated finand.al statements as of and for years ended December 31, 2022 and 2021, are as follows:

2022 2021 Amount recognized in the consolidated balance sheets:

Total accrued qualified and nonqualified beneflt obligation $ 4,392 $ 5,560 Less current portion included in accrued expenses-other {386} (396)

Long-term portion S 4,006 S 5,164 Change in benefit obligation:

AP BO-beginning of year $ 5,560 $ 5,825 Service cost 295 354 Interest cost 137 117 Actuarial loss {1,204) (434)

Benefits paid {396) (302}

APBO-end of year S 5,560 Funded status of plan December 31 ${4,392) $(5,560)

Accrued postretirement health insurance obligations recorded at year-end S 4,392 S 5,560 Change in plan assets:

Employer contribution $ (396) $ (302}

Benefits paid 396 302 Change in accumulated other comprehensive income:

Net Income at prior measurement date $ 1,753 $ 1,376 Actuarial assumption changes 1,204 434 Recognition in expense:

Amortization of prior service cost Amortization of unrecognized actuarial gain (80) (57)

Accumulated other comprehensive income S 2;877 Components of net periodic postretirement benefit cost:

Service cost-benefits attributed to service during the year $ 295 $ 354 Interest cost on accrued postreti rement hearth insurance obligation 137 117 Amortization of prior service cost Amortization of unrecognlzed actuarial gain (80) (57)

Net periodic postretirement benefit expense 352 $

w 414 w

Employer cash contribut1ons expected to be made to the plan during the fiscal year ending December 31 1 2023, ls $386. The amount of accumulated other comprehensive income expected to be recognized during the fiscal year ending December 31, 2023, is an actuarial gain of $162 and amortization of prior service cost of $0. All prior service costs have been fully amortized.

For measurement purposes, a 4.93% and 2.55% discount rate was assumed for 2022 and 2021, respectively, to determine net periodic benefit cost. The 2022 and 2021 annual health care cost increase assumed is 6.25% and 6.50%, respectively, decreasing gradually to 4.46% for 2041 and thereafter.

Estimated future benefit payments from the plan as of December 31, 2022, are as foflows:

Years Ending December31 2023 $ 386 2024 330 2025 339 2026 402 2027 357 2028~2032 1,466 Defined-Contribution Plan-Dairyland has a qualified tax-deferred savings plan for eligible employees.

Eligible participants hired prior to January 1, 2020 may make pretax contributions, as defined, with the Cooperatlve 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 partfcipants' annual compensation. Contributions to this plan by the Cooperative were

$1,589 and $1,409 for 2022 and 2021, 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 attributable to those amounts (until paid 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 daim of general creditors. Partldpants' rights under the plans are equal to those of general creditors of the Cooperative in an amount equal to the fair market value of the deferred account for each participant.

The related assets and liabilities, totaling $1,748 and $1,941 as of December 31, 2022 and 2021, respectively, are reported at contract value, which approximates fair value ..

The Cooperative also provides employees with medical insurance coverage, vision and dental insurance coverage; short-term and long-term disabillty, and life insurance, which are funded by employer and employee contributfons. The Cooperative's costs related to these benefits were $9,180 and $9,867 for 2022 and 2021, respectively. The liabitity for these plans of $47 and $59 as of December 31, 2022 and 2021, respectively, are recorded tn other accrued expenses on the consolidated bafance sheets.

- 22 *

12. RELATED~PARTY TRANSACTIONS The Cooperative provides electric and other services to its class A members. The Cooperative recelved revenue of $408,146 and $376,523 in 2022 and 2021, respectively, for these services. The Cooperative has accounts receivable from its class A members of $35,879 and $30,829 as of December 31, 2022 and 2021, respectively.

The Cooperative has advances from class A members of $6,847and $2G,584 as of December 31, 2022 and 2021, respectively, related to the prepayment program. Class A members have the option of paying their electrk bill in advance, and in turn, the Cooperative pays the members' interest income. The Cooperatfve's interest expense related to the prepayment program was $324 and $125 for the years ended December 31, 2022 and 2021, respectively.

13. ASSET RETIREMENT OBLIGATIONS An asset retirement obligation (ARO) is the result of legal or contractual obligations associated with the retirement of a tangible long-rived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. The Cooperative determines these obligations 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 capitalites the asset retirement cost by increasing the carrying amount of the related long-Hved asset by the same amount as the liabitity. The Cooperative allocates that asset retirement cost to expense using the straight-line method over the remaining useful life of the related

!ong-Hved asset. The accr.~tiqn of the obligation is recognized over tlme up to t~e 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 ret[rement cost capitalized as part of the carrying amount of the related long-lived asse.t.

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 ARO balance related to the future removal and disposal of asbestos was $244 as of both December 31, 2022 and 2021. The balance is recorded within Other Liabilities on the consolidated balance sheets.

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 thfs trust in the amount of

$2,070 and $2,043 as of December 31, 2022 and 2021, respectively, are outside the Cooperative's administrative control and are ava[lable sofe!y to satisfy the future costs of decommissioning. As the expected completlon is planned for 2023, the bal;mce of the trust as of.December 31, 2022 of $57 is recorded as current in the consolidated balance sheet. The remaining $2,013 is related to the annual ISFSI costs that will remain after completion of the decommissioning.

The Cooperative did not record a conditional ARO related to the dismantlement of the dam and drainage reservoir for the hydro generation plant at Flambeau, the removal of transmission lines in various corrfdors, and RockGen Energy Center because the Cooperative does not have suffklent information to estimate the fair value of the ARO.

14. NUCLEAR REACTOR License-The La Crosse Bolling Water Nudear 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 20161 the NRC approved transfer of the license to La CrosseSolutlons LLC (Solutlonst a subsidiary of EnergySolutions LLC. Solutions will temporarily hold the license and assumes responslbiHty for the decommissioning of the site. The license wHI revert back to the Cooperative following completion of decommlssionlng activities. While Solutions undertakes decommissionfng, the Cooperative retains a license for its continued ownership of the spent fuel.

Nuc.lear Waste Polley Act of 1982 (NWPA)-Under the NWPA, the United States government is responsible for the storage and disposal of spent nuclear fuet removed from nuclear reactors, By statute and under contract, the United States government was to have begun accepting spent fuel in January 1998, but has not yet licensed and established a repository.

The Cooperative has filed two successful breach of contract damage claims against the United States government in the United States Court of Federal Clarms to recover its costs generally incurred after 1998 through 2013 related to spent fuel remalning at LACBWR. The Cooperative received damage award payments of $37,659 and $73,500 in January 2013 and November 2017, respectively, Proceeds from the.award payments were used to defease the nuclear related regu(atory asset and deferred charges for nuclear related lltigatfon and plant costs. Remaining proceeds have been refunded to Class A Members.

In January of 2022, the Board of Directors approved a motion to accept a partial summary judgement 1n the amount of $23.1 million from the United States government related to the NWPA third contract damage claim. Claim proceeds, less accrued legal fees, were refunded back to Class A Members in February 2022.

Subsequent damage 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 slte and completed the move of the LACBWR spent nuclear fuel to this JSFSI facility in September 2012.

The spent nuclear fuel will remain at the ISFSI until it is able to be transferred to the government.

Annual ISFS! costs are recorded on an as incurred basis and incorporated into the annual budget and rate making process.

Decommissioning-ihe Solutions decommissioning plan anticipates completion of decommissioning LACBWR, not lndudrng the ISFSI, in 2023. The estimated costs of c;lecomrnisslonin"g the nuclear generating facility are based on the Solutions cost study and decommissronlng plan filed with the NRC as part of the license transfer. Costs incurred for decommissioning projects are charged against the decommissionlng liabiHty, As costs are incurred, Solutions submits requests for withdrawals to the Cooperative for release of funds from the nuclear decommissioning trust.

• 24 -

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION The statement of cash ffows includes the following supplemental information as of December 31, 2022 and 2021:

2022 2021 Cash paid for interest $35,928 $24,062 Electric plant additions funded through accounts payable and accrued expenses 5,367 4,357 Electric plant additions under capital leases 977 4,337 The amount shown in the consolidated statements of cash flows for cash, cash equivalents and restricted cash as of December 31, 2022 of $46,193 ls comprised of cash and cash equivalents of

$25,878, designated funds of $19,880 and $435 of restricted c-0sh included in other investments. The amount shown in the consolidated statements of cash flows for cash, cash equivalents and restricted cash as of December 31, 2021 of $68,912 ts comprised of cash and cash equlvalents of $46,244 and designated funds of $22,668.

16. REVENUE FROM CONTRACTS WITH CUSTOMERS Sales of electr[c energy consists of sales to members pursuant to long-term wholesale electric contracts. Dairyland recognizes revenue based on the amount of energy delivered to each customer at 0

agreed upon rates. The measurement of energy sales to customers rs generally based on meter data, which is collected through the last day of the month. At the end of each month, amounts of energy delivered to customers is 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 M[SO Energy Markets. Purchase and sale transactions are recorded using settlement information provided by MISO. Purchase transactions are accounted for on a net hourly position. 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 ln other sales. For sales to the MISO Energy Markets, we have no performance obligation until the energy is sold.

The Cooperative's members consist of Class A, C1 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 determlned by the Wholesale Power Contract that is [n effect until December 31, 2062. The contract automatically extends an additional (2} years in each odd-numbered year beginning January 1, 2021 unless efther 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 which were recognized through 2021, Class D memoer revenues are based on various contracts with wholesale municipal members. Class E member revenues primarily reflect sales to MfSO.

The following table disaggregates revenue by major source for the years ended December 31, 2022 and 2021:

2022 2021 Class A $408,146 $376,522 Class C 21387 Class D 21,423 16,879 Class E, including MISO 69,693 53,552 Other sales 31,861 14,254

• Total S531,123 S463,594

. l Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of and for the Years Ended December 31, 2022 and 2021, and Independent Auditors Report

Deloitte.

Deloitte & Touche LLP Suit~ 2800 so South Slxth Street Mll'll"IC!<lpolls, MN 55402-1538 USA Tel; +1 512 397 4000 fax: +1 612 J,;17 4450 www.de.loitte.com INDEPENDENT AUDITOR1S REPORT Board of Directors Dairyland Power Cooperative La Crosse, Wisconsin Opinion We have audited the consolidated fin;mc1al statements of Dairyland Power Cooperative and subsidic;1ry

{the "Cooperative"), which comprise the consolidated balance sheets as of December 31, 2022 arid 2021, and the related consolidated statements of revenue, expenses and comprehensive income, member and p;;itron equities, and flows for the years then ended, and the related notes to the consolidated financial statements lcollectivety referred to as the "financial statements"),

In our opinion, the accompanylng financial statements present fairly, in all material respects the financial posftion of the Cooperative as of December 31, 2022 and 2021, and the results of lts operations and its cash flows for the years then ended in accordance with accounting prindples generally accepted in the United States of America.

Basis for Oplnlon We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GMS}, Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence *we have obtarned is sufficient and appropriate to provide a basis for our audit opinion.

ResponsibTlities of Management for the Fina ncia I Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the deslgn, implementation, and maintenance of internal control relevant to the preparation and falr presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparlng the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued, Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but ts not absolute assurance and

therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. M*isstatements are considered material ff there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GMS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the rfsks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks, Such procedures include examining, on a test basi:s, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal controt relevant to the audit 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 Company's internal control. Accordlngly, no such opinion ls expressed.

• Evaluate the appropriateness of accounting polldes used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period of time, We are required to communicate wtth those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we fdentified during the audit Aprfl 3, 2023 DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS Of DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 ASSETS ELECTRIC PLANT:

Plant and equipment-at original cost $ 2,055,884 $ 2,055,575 Less accumulated depreciation {906,391} (867,431}

Net plant and equipment 1,149,493 1,188,144 construction work in progress 142,025 87,032 Total electric plant 1,291,518 1,275,176 OTHER ASSETS:

Nuclear decommissioning funds 2,013 1,987 Intangible asset-net (Note 2} 27,568 30,566 Other investments (Note 8} 7,417 12,350 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation (Note 8) 9,176 9,176 Regulatory assets (Note 2) 21,059 25,614 Investment for deferred compensation 1,581 1,n6 Deferred charges (Note 2) 15,479 19,357 Total other assets 84,293 100;826 CURRENT ASSETS:

Cash and cash equivalents 25,878 46,244 Designated funds (Note 2) 19,880 22,668 Accounts receivable:

Energy sales 43,867 37,111 Other 1,100 7,105 Inventories:

Fossil fuels 27,163 24,234 Materials and supplies 19,315 17,936 Prepaid expenses and other 14,951 12,675 Tota! current assets 152,154 167,973 TOTAL s 1,527,965 s 1,543,975

{Continued)

• 3-

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOUDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 CAPlTAUZATION ANO UABILmEs CAPITALIZATION:

Member and patron equities:

Membership fees $ 1 $ 1 Patronage capltal (Note 9) 354,555 341,427 Accumulated other comprehensive income 2,877 1,753 Total member and patron equities 357,433 343,181 Long-term obligations (Note 6) 1,003,445 820,090 Total capitalization 1,360,878 1,163,271 OTHER LIABILITIES:

Deferred credits (Note 2) 4,528 9,418 Obligations underfinance leases (Note 7) 6,588 7,934 Postretirement health insurance obligation {Note 11) 4,006 5,164 Decommissioning and asset retirement obligatlons (Note 14) 2,257 2,231 Other non-current liabilities 4,413 4,sn Total otherllabHities 21,792 29,324 COMMITMENTS AND CONTINGENCIES (Note 10)

CURRENT LIABILITIES:

Current maturities of long-term obligations and obligations under finance leases 56,073 45,654 Line of credit (Note 5) 6,000 209,707 Nuclear decommissioning obligations (Note 14} 56 56 Advances from member cooperatives and other prepayments 6,847 20,584 Regulatory liabilities {Note 2} 19,880 22,668 Accounts payable 31,602 33,985 Accrued expenses:

Payrol I, vacation, and benefits 6,521 5,669 Interest 7,098 6,&41 Property and other taxes 3,244 3,642 Other 7,974 2,574 Total current liabilities 145,29S 351,380 TOTAL $1,527,965 $1,543,975 See notes to consolidated financial statements. {Concluded}

DAIRYlAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES ANO COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 UTILITY OPERATIONS:

Operating revenues:

Sales of electric energy $499,262 $449,340 Other 31,861 14,254 Total operating revenues S31,123 463,594 Operating expenses:

Fuel 146,519 91,261 Purchased and interchanged power 116,420 107,852 Other operating expenses 117,739 126,704 Deprnciation and amortization 65,029 53,515 Maintenance 26,212 29,284 Property and other taxes 9,652 9,534 Total operating expenses 481,571 418,150 Operating margin before interest and other 49,552 45,444 lnte rest and other:

Interest expense 34,557 28,855 Allowance for funds used in construction-equity (1,165) (963)

Other-net (212~ (60)

Total interest and other 33,180 27,832 OPERATING MARGIN 16,372 17,612 NONOPERATING MARGIN 1,658 1,878 NET MARGIN AND EARNINGS 18,030 19,490 OTHER COMPREHENSIVE INCOME-Postretirement health insurance obligation adjustments 1,124 377 COMPREHENSIVE fNCOME $ 19,154 s 19,867 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND-SUBSIDIARY CONSOLIDATED STATEMENTS OF MEMBER ANO PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 311 2022 AND 2021 (In thousands)

Accumulated Total Other Member Membership Patronage Comprehensive and Patron Fees Capital Income Equities BALANCE-January 1, 2021 $ 1 $326,600 $1,376 $327,977 Net margin and earnings 19,490 19,490 Postretirement health insurance obltgation adjustments 377 377 Retirement of capital credits (Note 9) (4,663) (4,663)

BALANCE-December 31, 2021 1 341,427 1,753 343,181 Net margin and earnings 18,030 18,030 Postretirement health insurance, obllgation adjustments 1,124 1,124 Retirement of capital credits ( Note 9} {4,902) (4,902) .

BALANCE-December 31, 2022 S 1 $2,877 S357,433 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER Sl, 2022 AND 2021

{In thousands) 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES:

Net margin and earnings $ .. 18,030 $ 19,490 Adj1,1stments to reconcile net margin and earnings to net cash provided by operating activities:

loss (gain) on disposal of assets 87 (2,685)

Depreciatlon and amortization:

Charged to operating expenses 65,0:29 53,515 Charged through other operating elements such as fuel expense 2,356 Allowance for funds used in constructlon-equity (1,165) (963)

Changes ln operating elements:

Accounts receivable (751) (7,364}

Inventories (4,706) 15,292 Prepaid expenses and other assets (990} (1,939)

Accounts payable {7,406) 7,730 Accrued expenses and other liabilities 6,258 10,963 Deferred charges a,nd other

~--- 235 23,327 Total adjustments _ 58,947 97,876 Net cash provided by operating activities 76,977 117,366 CASH FLOWS FROM INVESTING ACTIVITIES:

Electric plant additions (83,328) (62,971)

Asset ac~uisltion (724) {205,221)

Proceed$. from sale of assets 13,245 Purchase of lnvestmerits (215) (14,154}

Proceeds from sale of fnvestments and economic development loans 1,763 14,792 Net cash used in investing activities -~} (267,554)

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings. under line of credit 20,707 209,707 Repayments under line of credit (224,414}

Borrowings under long*term obligations 242,886 23,902 Repayments of long-term obrigations (50,653} {36,135)

Retirement of capital credits (4,902) (4,663}

Borrowings of advances from member cooperatives 400,568 388,140 Repayments of advances from member cooperatives (414,629} {381,386)

Net cash (used in) provided by financing activities (30,437) 199,565 NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS ANO RESTRtCTED CASH (n,1i9J 49,377 CASH, CASH EQUIVALENTS ANO RESTRICTED CASH-Beginning of year 68,912 19,535 CASH, CASH EQUIVALENTS AND RESTRICTED CASH-End of year $ 46,193 $ 68,912 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, 2022 AND 2021 (AH dollar amounts in thousands)

1. NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperative and subsfdiary {Dafryland" or the '1Cooperative") is an electric generation and transmission cooperative organized under the laws of the states of Wisconsin and Minnesota. The Cooperative, whose principal offices are located in Wisconsin, provides wholesale electric service to class A members engaged ln the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa and Hlinois, and provides electric and other servkes to class C, D and E members.

Principles of Consolidation-The consolidated financial statements include the accounts of Dairyland and Dalryland's wholly owned subsidlary, Genoa FuelTech, Inc. AH intercompany balances and transactions have been eHminated in consolidation.

Accounting System and Reporting- The accounting records of the Cooperative are mainta[ned 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.

2. SIGNIFICANT ACCOUNTING POLICIES Electric Plant-The cost of renewals and betterments of units of property (as dlstinguished from mlnor items of property) includes contract work, direct labor and materials, allocable overhead, and allowance for funds used during construction, and is charged to electric plant accounts. Included in accumulated depreclation are nonlegal or noncontract.ual costs of removal components. As a result, the cost of units of property retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation and no profit or loss is recognized in connection wrth 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 September 2021 and approved by RUS in 2021 for rates effective in 2022 through 2026.

The Cooperative is unable to obtain the information to separate the cumulative removal costs as of December 31, 2022 and 2021. Maintenance, repair costs and replacement or renewal of minor items of property are charged to operations.

Significant components of electrtc plant were as follows as of December 31:

Depreciable lives 2022 2021 Production 11-60years $1,210,889 $1,208,130 Transmission 23-S0years 656,156 642,029 Distri but[ on 38years 82,085 101,890 General plant 5-47years 104,993 101,764 Other 32 years 1,761 1,762 Construction work in process 142,025 87,032 2,197,909 2,142,607 Less accumulated depreciation {906,391) {867,431)

Electric plant $1,291,518 $1,275,176 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 propertres. The provision for depreciaUon averaged 2.7%

and 2.5% of depreciable plant ba!ances for 2022 and 2021, 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 (4.169% in 2022 and 4.719% in 2021) to i;:ertain construction work in progres~tThe amount of such allowance was $2,870 in 2022 and $2,549 in 2021. The borrowed funds component of AFUDC for 2022 and 2021, was $1,705 and $1,586, respectively {representing 2.445% and 2.929% in 2022 and 2021, respectively). The equrty component of AFUDC for 2022 and 2021 was $1,165 and $963, respectlve[y, (representing 1.724% and 1.79,0% in 2022 and 2021, 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-Designated funds represent the amounts collected from customers through rates and deferred for future use. Designated funds are held in cash.

Asset Acquisitions-In December 2021, the Cooperative completed their purchase of the assets of RockGen Energy Center fn the amount of $210,079. RockGen Energy Center, located frt Cambridge, WI, is a 503 megawatt (MW) simple-cycle, dual fuel power generating facility that runs primarily on natural gas. The fadHty will help the Cooperative meet its Members' power needs as the Cooperative transitions to more renewable resources.

Intangible Asset-In December 2021, the Cooperative recorded an intangible asset as part of thelr purchase of the RockGen Energy Center in the amount of $30,211. The intangible asset consists of the assignable capacity agreements that were defined in the asset purchase agreement.

The carrying basis and accumulated amortlzation of the intangible asset as of December 31, 2022 and 2021 were as fofiows:

2022 2021 Gross intangible asset $ 29,806 $ 30,630 Less accumulated amortization (2,238) {64}

Intangible asset, net $ 27,568 $ 30,566 Amortization expense for the year ended December 31, 2022 was $1,511.

Estimated amortization expense for each of the following five years and thereafter is:

Years Ending December31 2023 $ 4,935 2024 5,951 2025 3,993 2026 2,077 2027 1,731 Thereafter 8,881 Total S 27,568 Regulatory Assets- The Cooperative's accounting policies and the consolidated financial statements conform to accounting principles generally accepted in the Un1ted States of America applicable to electric cooperatives.

The noncurrent portion of regulatory assets as of December 31, 2022 and 2021, include the following:

2022 2021 Genoa #3 unrecovered plant balances $20,414 $25,614 RockGen regulatory asset 645 Tota! regulatory assets $21,059 $2.5,614 Genoa #3 Unrecovered Plant Balances-During 2020, the Cooperative established a regulatory asset related to the unrecovered plant balances upon closure of the Genoa #3 generating station that occurred in 2021. Immaterial additlonal costs associated with the closure were added to the regulatory asset in 2022. Amounts ~re being recovered in rates through 2029.

The current portion of the Genoa #3 regutatory asset as of December 31, 2022 and 2021 is $5,390 and

$5,621, respectively. These amounts are recorded in prepayments and other assets, RockGen Regulatory Asset- During 2022, the Cooperative established a regulatory asset related to the difference in the amount being recovered in rates on a straight-line basls over the 20-year life of the RockGen Energy Center and amortization on a GAAP basis which ls being amortized based on the underlying capacity contracts which have an estlmated us.eful life of seven years. The difference between the GAAP amortization and the amounts recovered in rates are deferred as,the regulatory asset.

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, 2022 and 2021, the Cooperative's deferred charges are being reflected in rates charged to customers, except the deferred nuclear litigation as noted below. If 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 determfne any impairment to the carrying costs of deregulated plant and tnventory assets.

The noncurrent portion of deferred charges as of December 31, 2022 and 2021, include the following:

2022 2021 Nemadji Trai I Energy Center $14,775 $ 9,986 Deferred Nuclear Utlgatlon 44 8,858 Other 660 513 Total deferred charges S19,357 Nemadji Trail Energy Center-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 servlce (currently estimated for 2027}.

Deferred Nuclear Litigation-Litigation expenses from the third nuclear contract damases claim against the United States government were deferred in 2021. Settlement was reached on the third claim fn January 2022 and 2021 deferred charges were extinguished and offset the proceeds. See further discussion in Note 14.

Cash and Cash Equivalents-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 market.

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

Regulatory Liabilities-As of December 31, 2022 and 2021, the Cooperative had various revenue deferrals reflected as regulatory liabilities. The revenue deferrals pertained to favorable results from market credit~ through transactions with the Mid-Continent Independent System Operator {MISC} in addition to favora.ble results due to market conditions. The summary of regulatory liabilities as of December 31, 2022 and 2021 is as follows:

2022 2021 Planned 2023J.P. Madgett outage costs $13,000 $13,000 Business growth and development 6,880 7,400 P!anned 2022 J.P. Madgett outage costs 1,900 Electric vehicle charging stations

$19,880 Planned 2023 J.P. Madgett Outage Costs-The Board of Directors approved the creation of a regulatory liability revenue deferral plan in the amount of $13,000 in 2021. The Cooperative deferred

$13,000 of 2021 revenue and plans to recognize this amount in 2023. The deferral plan was approved by ROS in February of 2022, Business Growth and Development-ln December 2021, 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 additlonal regulatory lfablllty revenue deferral in 2021 ln the amount of $1,400 for business growth and development, This amended deferral plan was approved by RUS in January 2022.

In December 2022, the Board of Directors approved the amendment to carryforward the revenue deferral balance in the amount of $6,880 into 2023 previously set for use in 2022. The plan was approved by RUS in January of 2023.

Planned 2022 J.P. Madgett Outage Costs-ln November 2021, the Board of Directors approved the creation of a regufato.-y liability revenue deferral plan in the amount of $1,900. The deferral plan was approved by RUS 1n February of 2022. The Cooperative recognized this amount in 2022.

• Electric Vehicle Charging - In January 2022, the Board of Directors approved the carryforward of a 2020 revenue deferral plan in the amount of $368. The amended deferral plan was approved by RUS ln February 2022. The Cooperative recognized this amount in 2022, Deferred Credits-Deferred credits represent both future revenue to the Cooperative associated with customer prepayments and noncurrent obl1gatrons and reserves related to operations. As of December 31, 2022, the Cooperative's defe'rred credits are being considered when determining rates charged to customers.

• Deferred credits as of December 31, 2022 and 2021 were comprised of the following:

2022 2021 Customer energy prepayments $ $ 7,924 RockGen startup revenue deferral 2,607 Elk Mound startup revenue deferral 1,853 1,432 Other 68

$ 4,528 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 actuat power costs compared to plan. For 2022 and 2021, the power cost adju-stment to the class A members resulted in credits to sales bllled of $15,613 and $3,834, respectively. These amounts are recorded in sales of electric energy in operatlng 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-The Cooperative does not have any energy contracts that are required to be accounted for at fair value as of December 31, 2022 and 2021.

Leases- The Cooperative determines if an arrangement is a lease at inception of the contract The right-of-use assets represent the right to use the underlying assets for the lease term and leas,e liabilitfes represent the obligation to make lease payments arising from the leases. Right-of-use assets and lease liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. The Cooperative uses the implicit rate noted within the contract, when available.

Otherwise, the Cooperative uses its incremental borrowing rate estimated using recent debt issuances that correspond to various lease terms. The Cooperative does not recognli:e leases1 for operating or finance type, with an initial term of 12 months or less ("shorMerms leases") on the consolidated balance sheets, and the lease expense for these shorUerm leases is recognized on a stra1ght-line basis over the tease term within.

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 liabifities, and the disclosure of contingent assets and liabilities at the date of the consolidated financlal statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates 1n the consolidated financial statements relate to postretirement benefit obligations, asset retirement obligation liabilities, fixed-asset depreciable lives, and litigation and contingencies. Actual results could differ from those estimates.

Concentration of Risk-Approximate[y 36.6% of the labor force for the Cooperative is under a collective bargaining agreements that expire between January 31, 2024 and January 31, 2025.

Subsequent Events-The Cooperative considered events for recognitlon or disclosure in the consolidated financial state\Tlents that occurred subsequent to December 31, 2022, through April 3, 2023, the date the consolidated financial statements were available to be issued.

3. ACCOUNTING STANDARDS Adopted-Jn February 2016, the FASB issued new accounting gu1dance for leases. The new guidance increases transparency and comparability among organizations by recognizing leas-e 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 cooperative adopted the new lease guidance on January 1, 2022 using the modified retrospective approach. The adoption of the new lease guidance did not have a material impact on the Cooperative's financial statements.

4. INCOME TAXES The Internal Revenue Service has determined that Dairyland is exempt from federal income taxes under Section S01(cj(12) of the lnter,nal 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.

5. LINES OF CREOIT To provide interim financing capabllities, the Cooperative has arranged committed lines of credit with CoBank. The original line was executed on November 30, 2015, and amended on November 20, 2019, with avaHabllity aggregating approximately $350,000. This facHlty has a fivewyear term and provides funds both for shorMerm working capital requirements and for capital projects until permanent financing can be obtained. Some capital projects will last longer than one year, but the intent ls to pay down the line of credit as permanent funding is received.

• In December 2021, the Cooperative arranged a second line of credit for $215;000. The purpose of these funds was to finance the purchase of the RockGen plant. In June of 2022, this line of credit was converted into fong-term financing with Cobank.

Compensating balance requirements and fees relating to the lines of credit were not significant in 2022 and 2021. Information regarding line of credit balances and activity for the years ended December 31, 2022 and 2021, is as follows:

2022 2021 Interest rate .at year-end 5.39 % 1.11 %

line l-$3SOM $ 6,000 $

Line 2-$215M 209,707 Total borrowings outstand1 ng at year~e nd s 6,000 $209,707 Average borrowings outstanding during year $101,276 S 17,476 The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowlng rates. Advances from member cooperatives totaled $6,847 and $20,584 at December 31, 2022 and 2021, respectively. Interest expense on member cooperative advances was $324 and $125 for the years ended December 31, 2022 an.d 2021, 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, 2022 and 2021, consist of the following:

2022 2021 Federal Flnandng Bank obligations-1.24%-4.49% $ 595,514 $584,2.70 Federal Financing Bank obligations-4.50%-5.200/4 190,826 201,942 Total Federal Financing Bank 786,340 786,212 RUS obligations-4.125% and grant funds 2,036 2,557 CoBank notes-2.9% and 4.3% 201,220 3,362 Private bonds placement obligations---'-3.42% 67,500 70,833 Long-term debt 1,057,096 862,964 Less current maturities {53,651} (42,874)

Net long-term obligations s 1,003,445 S820,090 Quarterly principal and interest payments on the long-term obligations to the Federal Financing Bank (FFB) extend through 2053.

Long~term obligations to the RUS are payable in equal monthly principal and interest installments through 2024. Payments on the CoBank 2.6% and 4.32% notes are due quarterly, respectively, 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 e><tend 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 grantor 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 Cooperative's long-term debt with the exception of unsecured notes to CoBank {balances of $1,345 and

$3,362 at December 31, 2022 and 2021, respectively). The Cooperatlve is required to maintain and has maintalned certain financial ratios related to earnings in accordance with the covenants of its loan agreements as of December 31, 2022.

Scheduled maturities of the Cooperative's long-term obligations as of December 31, 2022, were as follows:

Years Ending December:U 2023 $ 53,651 2024 63,618 202S 54,609 2026 J 56,082 2027 57,461 Thereafter 771,675 Totaf $ 1,057,096

7. L.EASES The Cooperative has entered into several finance 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 price, The assets are amortized over the lesser of their related lease terms or the fr estimated productive lives.

The following table presents the components of the Cooperative' s right-of-use assets and liabilitfes related to leases and their classification in the consolidated balance sheets as of December 31:

Classification in Consolidated Component of Lease Balances Balance Sheets 2022 Assets:

Finance lease right-of-use assets Plant and equipment - at co,st $17,521 liabilities:

Current portion of finance lease liabillty Current maturities of long-term obligati<:ms and $ 2,302 obligations and obligations under finance leases Long-term portion of finance lease liability Obligations under finance teases 6,588

-15

• The components of tease and their classlfkation in the consolidated statements of revenues, expense, and comprehensive income for the year ended December 31 were as follows:

• Classffitation in Statemenn of Component of lease Expenses Revenues, Expenses, and Comprehensive Income 2022 Operating lease expense Other operating expenses $ 455 Finance tease amortization Depredation and amortiz;ation 1,834 Finance lease interest Interest expense 287 Short-term lease expense Other operating and maintenance expenses Total lease expense The weighted average remaining

$3,492 term and weighted average discount rate as of and for the year ended December 31, 2022, were as follows:

Weighted Average Remaining Weighted Average Lease Term (Years} Discount Rate Finance leases 5.05 3.12 %

Supplemental cash flow information related to leases for the year ended December 31, 2022 was as follows:

Cash paid for amounts indud.~d in the measurement of lease liabilities:

Operating cash outflows from finance leases 3,149 Right-to-use assets obtained in exchange for lease obligations:

Finance leases 977 The reconciliation of the future undiscounted cash flows to the lease liabrlitles presented on the Consolidated Balance Sheet as of December 31, 2022, were as follows:

Financ;e Leases 2023 $2,683 2024 2,186 2025 2,114 2026 l,619 2027 997 Thereafter 956 Total lease payments 10,555 Less discount Total lease liabilities $8,890 The undiscounted annual minimum leases payments due under the Cooperative's finance leases following the previous lease accounting standard as of December 31, 2021, were as follows:

Finance leases 2022 $3,130 2023 2,388 2024 1f890 2025 1,818 2026 1,323 Thereafter 976 Total lease payments 11,525 Amounts representing interest {811)

Present value of minimum lease payments 10,714 Current maturities (2,740)

Long-term obligations $7,974

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, 2022 and 2021, is estimated to be as foHows:

2022 2021 Recorded Fair Recorded Fair Value Value Va.lue Value Assets:

Other investments $ 7,417 $ 7,147 $ 12;350 $ 12,350 Investments in capital term certificates of NRUCFC 9,176 9,176 9,176 9,176 Liabilities-long-term debt 1,057,096 950,059 862,964 979,972 Assets and Liabilities Measured at Fair Value-Accounting principles generally accepted in the United States of America establish a framework for measuring falr 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 hereln 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 identical assets or Habllities. 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 typicatly based on an entity's own assumptions of what a market participant would use in pridng an asset or liability 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 withln whlch 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 partk:ular input to the fair value measurement In its entirety requires judgment and considers factors specific to the asset or liabtllty.

The following table summarizes the Cooperative's assets and liablHties measured at fair value on a recurring basis as of December 31, 2022 and 2021, aggregated by the level in the fair value hierarchy within whlch those measurements fall:

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservable and Liabmties Inputs Inputs 2022 Fair Value (Level 1) (Level 2) (Le11el 3)

Asserts-i nwstm1?nts:

NucJ.ear decommissioning funds $ 2,070 $ 2,070 s. $ .

Other investments 7,417 435 1,428 5,554 Investments in capital term certificates of National RUl<ll Utilities Finance Corporation 9,176 9,176 Investment for deferred compensation 1,748

$ 20,411 $3,176 $14,730

Falr Value Measurements Using Quoted Prices in *Significant Active Marltets for Other Significant Identical Assets Observable Unobs.lrvable and lfabmtles Inputs lnpl.l't5 2021 FalrValue (Level 1) (level 2) (Level 3)

Assets-investments:

Nuclear decommissioning funds $ 2,043 $ l,043 $* $ .

Other investments 12.,350 4,23.S 1,364 6,751 Investments in capital term certificates of National Rural Utilities Finance Corporation 9,176 9,176 Investment for deferred compensation 1,941

$25,510 $3,305 $15,927

=

The changes in level 3 recurring fair value measurements using significant unobservable Inputs for the years ended December 31, 2022 and 2021, are as follows:

2022 2021 Other investments:

Balance-beginning of year $6,751 $8,096 New investment and loans made Loan repayments received and current maturities (409)

Patronage capita! allocations 52 55 Patronage capital retirements (1,249) (991)

Balance~end of year $~751 The valuation of these assets involved management's judgment after conslderation of market factors and the absence of market transparency, market liquidity and 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 firsNn, first-out basis. As part of an equity development strategy adopted in 2003, patronage capital retired wfll 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 nonopf;rating margins assigned to members each year is at the discretion of the Board of Directors. Any unassigned nonoperating margins wm become unallocated reserves and part of permanent equity.

Patronage capital amounts for the years ended December 31, 2022 and 2021, are as follows:

Assigned Unassigned Total Balance-December 31, 2020 $233,138 $93,461 $326,600 Retirement of capital credits (4,663) {4,663}

Current year margins 16,649 2,841 19,490 Balance-December 31, 2021 245,124 96,302 341,427 Retirement of capital credits (4,902) (4,902)

-~~

Current year margl ns 15,208 2,823 . 18,030 Balance-December 31, 2022 $255,430 $99,125M' $354,555 WW

10. COMMITMENTS AND CONTINGENCIES The Cooperative is a party to a number of generation, transmission and distribution agreements, under which costs and/or revenues ar-e recognized currently based upon the Cooperative's interpretations of the provisions of the related agreements. Differences between the estimates used in the consolidated financial 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, 2022, is as follows:

Years Ending December31 2023 $ 45,198 2024 32,388 2025 14,629 2026 1,149 Total s 93,364 The Coope.rative has been named as a defendant in various lawsuits and claims arising in the 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 without a material effect on the consolidated financial position,. results of operations or cash flows of the Cooperatrve.

11. EMPLOYEE BENEFITS Muftiemployer Defined-Benefit Pension Plan-Pension benefits for substantially afl 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. Pensron benefits are funded in accordance with the provisions of the RS Plan and are based on salaries, as defined, of each partlcipant.

The Employee Retirement Income Security .Act of 19741 as amended by the Multiemployer Pension Plan Amendment Act of 1980, imposes certain llabllities 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 terrnfnated, nor has the Cooperative undertaken any plans to withdraw from participation.

Since the RS Plan is a multiemployer plan for accounting purposes, all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participating employers. The Cooperative may be contingently liable for its share of the RS Plan's unfunded vested liabilities.

The Cooperative's contr1butions to the RS Plan in 2022 and 2021 represented less than 5% of the total contributions made to the plan by all part1cipating employers. In 2013, the Cooperative made a voluntary prepaymenfof $26,899 to this ptan to reduce future contribution amounts. The remaining prepayment was fully amortized in 2021. Expense for the RS Plan was $8,712 in 2022 and $15,161 in 2021. The 2022 expense includes contributions to the plan of $81712 and $0 of prepayment amortization. The 2021 expense includes contributions to the plan of $9,781 and $5,380 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 individual employer. In total, the RS Phm was over 80%

funded on both January 1, 2022 and 2021, 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 retiring at or after age 55 are eligible to participate in a postretirement health care plan through age 65. Eligible dependents of the retired Cooperative employees are atso eligible to participate in this plan through age 65. Retirees pay 100% of the premium 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 medicaf claims experience of retirees only, the resulting premium for retirees would be higher. The difference between the premium paid by retlrees 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 heatth care plan is unfunded.

The accumulated postretlrement benefit obligation {APBO} and the amounts recognized in the consolidated financial statements as of and for the years ended December 31, 2022 and 2021, are as follows:

2022 2021 Amount recognized in the consolidated balance sheets:

Total accrued qualified and nonqualified benefit obligation $ 4,392 $ 5,560 Less current portion included in accrued expenses-other {386) (396)

Long-term portion S 4,006 S 5,164 Change in benefit obligation:

APBO-beginning of year $ 5,560 $ 5,825 Service cost 295 354 Interest cost 137 117 Actuarial loss {1,204) (434)

Benefits paid (396} (302)

APBO-end of year S 4,392 S 5,560 Funded status of plan-December 31 $(4,392) $(5,560)

Accrued postretirement health insurance obligations recorded at year-end S 4,392 S 5,560 Change in pl an assets:

Employer contribution $ {396) $ (302)

Benefits paid 396 302 s - s .

Change in accumulated other comprehensive income:

Net income at prior measurement date $ 1,753 $ 1,376 Actuarial assumption changes 1,204 434 Recognition in expense:

Amortization of prlorservice cost Amortization of unrecognized actuarial gain (80) (57)

Accumulated other comprehensive income S 2;877 $ 1,753 Components of net periodic postretirement benefit cost:

Service cost-benefits attributed to service during the year $ 295 $ 354 Interest cost on accrued postretirement health .

insurance obligation 137 117 Amortization of prior service cost Amortization of unrecognized actuarial gain (80) (57}

Net periodic postretirement benefit expense $ 352 s 414

• 21 -

Emp[oyer cash contributions expected to be made to the plan during the fiscal year ending December 31 1 2023, is $386. The amount of accumulated other comprehensive income expected to be recognized during the fiscal year ending December 31, 2023, is an actuarial gain of $162 and amortization of prior servfce cost of $0. All prior service costs have been fully amortfzed.

for measurement purposes, a 4.93% and 2.55% discount rate was assumed for 2022 and 2021, respectively, to determine net periodic benefit cost. The 2022 and 2021 annual health care cost increase assumed is 6.25% and 6.50%, respectively, decreaslng gradually to 4.46% for 2041 and thereafter.

Estimated future benefit payments from the plan as of December 31, 2022, are as foflows:

Years Ending December31 2023 $ 386 2024 330 2025 339 2026 402 2027 357 2028-2032 1,466 Defined-Contribution Plan-Dairyland has a qualified tax-deferred savings plan for eligible employees.

Eligible partlclpants hired 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. Contributlons to this plan by the Cooperative were

$1,589 and $1,409 for 2022 and 2021, 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 attributable to those amounts

{until paid 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 daim of general creditors. Participants' rights under the plans are equal to those of general creditors of the Cooperatfve in an amount equal to the fair market value of the deferred account for each participant.

The related assets and liabilities, totating $1,748 and $1,941 as of December 31, 2022 and 2021, respectively, are reported at contract value, which approximates falr value.

The Cooperative also provides employees with medicat insurance coverage, vision and dental Insurance coverage; short-term and long-term disability, and life Insurance, which are funded by employer and employee contributfons. The Cooperative's costs related to these benefits were $9,180 and $9,867 for 2022 and 2021, respectively. The liabHity for these plans of $47 and $59 as of December 31, 2022 and 2021, respectively, are recorded in other 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 $408,146 and $376,523 in 2022 and 2021, respectively, for these services. The Cooperative has accounts receivable from its class A members of $35,879 and $30,829 as of December 31, 2022 and 2021, respectively.

The Cooperative has advances from class A members of $6,847and $20,584 as of December 31, 2022 and 2:021, respectively, related to the prepayment program. Class A members have the option of paying their electrk bill in advance, and in tum, the Co-operative pays the members' interest income. The Cooperatfve's interest expense related to the prepayment program was $324 and $125 for the years ended December 31, 2022 and 2021, respectively.

13. ASSET RETIREMENT OBLIGATIONS An asset retirement obligation (ARO} is the result of legal or contractual obligations associated with the retirement of a tangible long-fived asset that results from the acquisition, construction, or development and/or the normal operation of a long-lived asset. The Cooperative determines these obligations 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 capitali2es the asset retirement cost by increasing the carrying amount of the related long-Hved asset by the same amount as the liability. The Cooperative allocates that asset retirement cost to expense using the straight-line method overthe remaining useful life ofthe related fong-Hved asset. The accretiqn of the obllgation is recognized over time up to the ~ettlement date. Any future change in estimate wi)I be recognized as an increase or a decrease in the ca!rying amount of the ti ability 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 tegally restricted for purpose of settling the ARO related to future removal and disposal of asbestos. The ARO balance related to the future removal and disposal of asbestos was $244 as of both December 31, 2022 and 2021. The balance is recorded within Other Liabilities on the consotidated balance sheets, The Cooperative has established a decommissioning trust to accumulate the estimated amounts necessary to decomm[ssion a nuclear power plant that the Cooperative formerly operated and the related Independent Spent Fuel Storage lnstallation (!SFSI}. The assets of this trust in the amount of

$2,070 and $2,043 as of December 31, 2022 and 2021, respectively, are outside the Cooperative's administrative control and are available solely to satisfy the future costs of decommissioning. As the expected completion ls planned for 2023, the balance of the trust as of December 31, 2022 of $57 is recorded as current in the consolidated balance sheet, The remaining $2,013 is related to the annuaf ISFSI costs that will remain after completion of the decommissioning.

The Cooperative did not record a conditional ARO related to the dismantlement of the dam and dra1nage reservoir for the hydro generation plant at Ftambeau, the removal of transmission lines in various corridors, and RockGen Energy Center because the Cooperative does not have sufficient en formation to estimate the fair value of the ARO.

- 23.

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 llcense 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 20161 the NRC approved transfer of the license to La CrosseSolutions LLC (Solutions}, a subsidiary of EnergySolutions llC. Solutions will temporarily hold the license and assumes responslbiHty for the decommissioning of the site. The license wm revert back to the Cooperative following completion of decommlssionlng activities. While Solutions undertakes decommisslonfng, the Cooperative retalns 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 responsible for the storage and disposal of spent nuclear fuel removed from nuclear reactors, By statute and under contract, the United States government was to have begun accepting spent fuel in January 1998, but has not yet licensed and established a repository, The Cooperative has filed two successful breach of contract damage claims against the United States government in the United States Court of Federal Claims to recover its costs generally incurred after 1998 through 2013 related to spent fuel remalning at LACBWR. The Cooperc!tive recefved damage award payments of $37,659 and $73,500 in January 2013 and November 2017, respectively. Proceeds from the award payments were used to defease the nuclear related regulatory asset and deferred charges for nuclear related litigation and plant costs. Remaining proceeds have been refunded to Class A Members.

In January of 2022, the Board of Directors approved a motion to accept a partial summary judgement in the amount of :$23.1 million from the United States government related to the NWPA third contract damage claim. Claim proceeds, accrued legal fees, were refunded back to Class A Members in February 2022.

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

ISFS1-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 2.012.

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 incorporated into the annual budget and rate making process.

Decommissioning-The Solutions decommissioning plan anticipates completion of decommissioning LACBWR, not lnduding the lSFSI, in 2023. The estimated costs of decommissioning the nudear 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 Cooperat1ve for release of funds from the nuclear decommissioning trust .

• 2.4.

15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION The statement of cash flows includes the following supplemental information as of December 31, 2022 and 2021:

2022 2021 Cash paid for interest $35,928 $24,062 Electric plant acld1ttons funded through accounts payable and accrued expenses 5,367 4,357 Electric plant additions under capital leases 977 4,337 The amount shown in the consolidated statements of cash flows for cash, cash equivalents and restrlcted cash as of December 31, 2022 of $46,193 ls comprised of cash and cash equivalents. of

$25,878, designated funds of $19,880 and $435 of restricted cash in-eluded in other investments. The amount shown in the consolidated statements of cash flows for cash, cash equrvalents and restricted cash as of December 31, 2021 of $68,912 is comprised of cash and cash equivalents of $46,244 and designated funds of $22,668.

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

We are an active participant in the MISO Energy Markets, where we bid our generation into the Day Ahead and Rea! 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 provided by MISO. Purchase transactions are accounted for on a net hourly positron. 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 ln other sales. For sales to the MISO Energy Markets, we have no performance obligation until the energy is sold.

The Cooperative's members consist of Class A, C1 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 determlned by the Wholesale Power Contract that is in effect unt11 December 31, 2062. The contract automatically extends an additional (2) years in 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 which were recognlied through 2021, ctass D member revenues are based on various contracts with wholesale municipal members. Class E member revenues primarily reflect sales to MISO.

The following table disaggregates revenue by major source for the years ended December 31, 2022 and 2021:

2022 2021 Class A $408,146 $376,522 Class C 2,387 Class D 21,423 16,879 Class E, including MISO 69,693 53,552 Othersaies 31,861 14,254 t Total $531,123 Dairyland Power Cooperative and Subsidiary Consolidated Financial Statements as of and for the Years Ended December 31, 2022 and 2021, and Independent Auditor's Report

Deloitteo Deloitte & To11che LLP Suite 2800

SO South Slxth Str~et M!nncapolls, MN 55402-1538 USA Tel; +1 612 397 4000 Fax: +l 612 397 4450 w't,W.deloitte.<:nm INDEPENDENT AUDITOR'S REPORT Board of Directors Dairyland Power Cooperative la Crosse, Wisconsin Opinion We have audited the consolidated financial statements of Dairyland Power Cooperative and subsidiary (the "Cooperative"), which comprise the consolidated balance sheets as of December 31, 2022 and 2021, and the related consolidated statements of revenue, expenses .and comprehensive income, member and patron equities, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the "financial statements").

In our opinion, the accompany1ng financial statements present fairly, in all material respects the financial position of the Cooperative as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for OpinTon We conducted our audits in accordance with auditlng standards generally accepted in the Un1ted States of America (GAAS}. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. V*/e are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

ResponsibTlities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements ln accordance with accounting principles generally accepted in the United States of America, and for the deslgn, implementation, and maintenance internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to or error.

In preparlng the financial statements, management is required to evaluate whether there c1re conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a gofng concern for one year after the date that the financia.J statements are available to be issued.

Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial stat1::ments as a whole are from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and

therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when It exists. risk of not detecting a material misstatement resulting from fraud ls higher than for one resulting from .error, as fraud may Involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. M*isstatements are considered material if there is a substantial likelihood that, indivldually or ih the aggregate, they would lnfluence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks, Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements,

• Obtain an understanding of internal control relevant to the audit 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 Company's internal control. Accordingly, no such opinion ls expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our Judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's abnity to continue as a going concern for a reasonable period of time.

We are required to communicate witl7 those charged with governance regarding, among other matters, the planned scop@ and timing of the audit, significant audit fir1dlngs, and certain internal control-related matters that we identified during the audit, April 3, 2023

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 On thousands) 2022 2021.

ASSETS ELECTRIC PLANT:

Plant and equipment-at original cost $ 2,055,884 $ 2,055,575 less accumulated depredation (906,391} {867,431)

Net plant and equipment 1,149,493 1,188,144 Construction work in progress 87,032 Total electric plant 1,291,518 1,275,176 OTHER ASSETS:

Nuclear decommissioning funds 2,013 1,987 Intangible asset-net (Note 2) 27,568 30,566 Other investments (Note 8} 7,417 12,350 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation (Note 8) 9,176 9,176 Regulatory assets (Note 2) 21,059 25,614 Investment for deferred cohlpensation 1,581 1,776 Deferred charges (Note 2) 15,479 19,357 Tota[ other assets 84,293 100,826 CURRENT ASSETS:

Cash and cash equivalents 25,878 46,244 Designated funds (Note 2) 19,800 22,668 Accounts receivable:

Energy sales 43,867 37,111 Other 1,100 7,105 Inventories:

Fossil fuels 27,163 24,234 Materials and supplies 17,936 Prepaid expenses and other 12,675 Total current assets 152,154 167,973 TOTAL s 1,527,965

~

{Continued)

. 3.

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 CAPITALIZATION ANO l.lABIUTiES CAPITALIZATION:

Member and patron equities:

Membership fees $ 1 $ l Patronage capltal (Note 9} 354,555 341,427 Accumulated othercomp:rehensive income 1,753 Total member and patron equities 357,433 343,181 long-term obligations (Note 6) 1,003,445 820,090 Total capitallz.ati on 1,360,878 1,163,271 OTHER LIAEHllTIES:

Deferred credits (Note 2) 4,528 9,418 Obligations under finance leases (Note 7) 6,588 7,934 Postretirement health insurance obligation {Note 11) 4,006 5,164 Decommissioning and asset retirement obligations (Note 14) 2,257 2,231 Other non-current liabilities 4,577 Total other liabilities 21,792 29,324 COMMITMENTS AND CONTINGENCIES (Note 10)

CURRENT LIABILITIES:

current maturities of long-term obligations and obligations underflnance leases 56,073 45,654 line of credit (Note 5) 6,000 209,707 Nuclear decommissioning obligations (Note 14) 56 56 Advances from member cooperatives and other prepayments 6,847 20,584 Regulatory liabillties (Note 2) 19,880 22,668 Accounts payable 31,602 33,985 Accrued expenses:

Payroll, vacation, and benefits 6,521 5,669 Interest 7,098 6,841 Property and other taxes 3,244 3,642 Other 7,974 2,574 Total current liabilities 145,2.95 351,380 TOTAL $1,527,965 $1,543,975 See notes to consol!dated financial statements. {Concluded)

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOUDATED STATEMENTS OF REVENUES, EXPENSES AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (In thousands) 2022 2021 UTILITY OPERATIONS:

Operating revenues:

Sales of electric energy $499,262 $449,340 Other 31,861 14,254 Total operating revenues 531,123 463,594 Operating expenses:

Fuel 146,519 91,261 Purchased and interchanged power 116,420 107,852 Other operating expenses 117,739 126,704 Depreciation and amortization 65,029 53,515 Maintenance 26,212 29,284 Property and other taxes 9,652 9,534 Total operating expenses 481,571 418,150 Operating margin before interest and other 49,552 45,444 Interest and other:

Interest expense 34,557 28,855 Allowance for funds used in construction-equity (1,165) {963)

Other-net (212) (60)

Total interest and other 33,180 27,832 OPERATING MARGIN 16,372 17,612 NONOPERATING MARGIN 1,658 1,878 NET MARGIN AND EARNINGS 18,030 19,490 OTHER COMPREHENSfVE INCOME-Postretirement health insurance obligation adjustments 1,124 377 COMPREHENSIVE INCOME $ 19,154 $ 19,867 See notes to consolidated financial statements.

DAIRYLAND POWER COOPERATIVE AND*SUBSIDIARY CONSOUOATEO STATEMENTS OF MEMBER ANO PATRON EQUITIES FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (In thousands)

Accumulated Total Other Member Membership Patronage Comprehensive and Patron Fees Capital Income Equities BALANCE- January 1, 2021 $ 1 $326,600 $1,376 $327,977 Net margin and earnings 19,490 19,490 Postretirement health insurance obligation adjustments 377 377 Retirement of capital credits (Note 9) (4,663) {4,663)

BAlANCE~December 31, 2021 1 341,427 1,753 343,181 Net margin and earnings 18,030 18,030 Postretirement health insurance}

obligation adjustments 1,124 1,124 Retirement of capital credlts (Note 9) (4,902) (4,902)

BALANCE-December 31, 2022 1 .S3S7,433 See notes to consolidated financial statements.

-6*

DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY CONSOLIDATED STATEMENTS Of CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

{In thousands) 2022 2021 CASH FLOWS FR.OM OPERATING ACTIVITIES:

Net margin and earnings $ 18,030 Adjustments to reconcile net margin and e;amings to net c<J::.h provided by operating activities:

loss (gain} on disposal of assets 87 (2,685)

Depredatlon and amortization:

Charged to operating expenses 65,029 53,515 Charged through other operating elements such as fuel expense 2,356 Allowance for funds used in construction-equity {1,165} (963)

Changes in operating elements:

Accounts receivable (751) (7,364)

I nventor1es (4,706} 15,292 Prepaid expenses and other assets (990} (1,939)

Accounts payable {7,406} 7,730 Accrued expenses and other liabilities 6,258 10,963 Deferred charges and other 235 23,327 Total adjustmen,ts 58,947 __,!?7,876 Net cash provided by operating activities 117,366 CASH FLOWS FROM INVESTING ACTMTIES:

Electric plant additions {83,328} (62,971)

Asset acquisition (724) (205,221)

Proceeds from sale of assets 13,245 Purchase of investments (215} (14,154)

Proceeds from sale of Investments and economk development loans 1,763 14,792 Net cash used in investing activities (69,259) (267,554}

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowlngs under line of credit 20,707 209,707 Repayments under line of credit {224,414)

Borrowings under !ong*term obligations 242,8$6 23,.902 Repayments of long*term obligations (50,653) (36,135)

Retirement of capital credits {4,902] (4,663}

Borrowings of advances from member cooperatives 400,568 388,140 Repayments of advances from member cooperatives (414,629) (381,386)

Net cash (used in) provided by financing activities {30,437) 199,565 NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (22,719) 49,377 CASH, CASH EQUIVALENTS A.ND RESTRICTED CASH-Beginning of ye;:ir 58,912 19,535 CASH, CASH EQUIVALENTS AND RESTRICTED CASH-End of year $ 46,193 $ 68,.912 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, 2022 AND 2021 (AH dollar amounts in thousands}

1. NATURE OF BUSINESS AND ORGANIZATION Business-Dairyland Power Cooperative and subsidiary ("Dairyland" or the ***cooperative") [s an electric generation and transmission cooperative organized under the laws of the states of Wisconsin and Minnesota. The Cooperative, whose principal offices are located in Wisconsin, provides wholesale electrfc service to class A members engaged ln the retafl sale of electrkitv to member consumers located in Wisconsin, Minnesota, Iowa and Illinois, 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 1 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 UtiHties Service {RUS), the Cooperative's principal regulatory agency.

2. SIGNIFICANT ACCOUNTING POUCIES 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 materials, allocable overhead, and allm.vance for funds used during construction, and is charged to electric plant accounts. Included in accumulated depreciation are nonlegal or noncontract_ual costs of removal components. As a result, the cost of units of property retired, sold or otherwise disposed of, plus removal cos.ts, less salvage, is charged to accumulated depreciat1on and no profit or loss is recognized in connection wrth ordinary retirements of propertv un[ts. A provision for these nonlegal or noncontractual costs of removal components is recognized based on depredation rates determined by a third-party depreciation study completed in September 2021 and approved by RUS in 2021 for rates effective in 2022 through 2026.

The Cooperative is unable to obtain the information to separate the cumulative removal costs as of December 31, 2022 and 2021. Maintenance, repair costs and replacement or renewal of minor items of property are charged to operations.

Significant components of electric plant were as follows as of December 31:

Depreciable Uves 2022 2021 Production 11-60years $1,210,889 $1,208,130 Transmission 23-S0years 656,156 642,029 Distribution 38years 82,085 101,890 General plant S-47years 104,993 101,764 Other 32 years 1,761 1,762 Construction work in process 142,025 87,032 2,197,909 2,142,607 Less accumulated depredation (906,391} {867,431)

Electric plant $1,291,518 Depreciation-Depredation1 which is based on the straight-line method at rates that are designed to amortize the original cos.t of properties over their estimated useful lives, includes a provision for the cost of removing and decommissioning the properties. The provision for depreciation averaged 2.7%

and 2.5% of depreciable plant balances for 2022 and 2021, '""""""_,.m,oiv 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 {4.169% in 2022 and 4.719% In 202.1) to certain construction work in progress.The amount of such allowance was $2,870 in 2022 and $2,549 in 2021. The borrowed funds component of AFUDC for 2022 and 2021, was $1,705 and respectively (representing 2.445% and 2.929% in 2022 and 2021, respectively}. The equity component of AFUDC for 2022 and 2021 was $1,165 and $963, respectively, (representing 1.724% and 1.790% in 2.022 and 2021, respectively). The borrowed funds components were lnduded as a reduction of interest expense fn the consolidated statements of revenues, expenses and comprehensive Income.

Designated Funds-Designated funds represent the amounts collected from customers through rates and deferred for future use. Designated funds are held in cash.

Asset Acquisitions-In December 2021, the Cooperative completed their purchase of the assets of Rock.Gen Energy Center in the amount of $210,079. RockGen Energy Center, located in Cambridge, WI, is a 503 megawatt (MW} simple-cycle, dual fuel power generating facility that runs primarily on natural gas. The fadlfty will help the Cooperative meet its Members' power needs as the Cooperatlve transitions to more renewable resources.

Intangible Asset-In December 2021, the Cooperative recorded an intangible asset as part of purchase of the RockGen Energy Center in the amount of $30,211. The intangible asset consists of the assignable capacity agreements that were defined in the asset purchase agreement.

The carrying basis and accumulated amortization of the intangible asset as of December 31, 2022 and 2021 were as fo!lows:

2022 2021 Gross intangible asset $ 29,806 $ 30,630 Less accumulated amortization (2,238) {64)

Intangible asset, net $ 30,566

'  ; H

=

Amortization expense forthe year ended December 31, 2022 was $1,511.

Estimated amortization expense for each of the following five years and thereafter is:

Years Ending December31 2023 $ 4,935 2024 5,951 2025 3,993 2026 2,077 2027 1,731 Thereafter 8,881 Total S 27,568 Regulatory Assets- The Cooperatfve's accountlng policies and the consolidated financial statements conform to accounting principles generally accepted In the United States of America applicable to electrfc cooperatives.

The noncurrent portion of regulatory assets as of December 31, 202.2 and 2021, include the following:

2022 202.1 Genoa #3 unrecovered plant balances $20,414 $25,614 RockGen regulatory asset 645 Total regulatory assets $21,059 Genoa f/3 Unrecovered Plant Balances-During 2020, the Cooperative established a regulatory asset related to the unrecovered plant balances upon closure of the Genoa #3 generating station that occurred in 2021. Immaterial additional costs associated with the closure were added to the regulatory asset in 2022. Amounts are being recovered in rates through 2029.

The cur.rent portion of the Genoa #3 regulatory asset as of December 31, 2022 and 2.021 is $5,390 and

$5,621 1 respectively. These amounts are recorded in prepayments and other assets.

RockGen Regulatory Asset- During 2022, the Cooperative established a regulatory asset related to the difference in the amount being recovered in rates on a straight-line basis over the 20-year life of the Rock.Gen Energy Center and amortization on a GAAP basis which ls belng amortized based on the underlying capacity contracts which have an estimated useful life of seven years. The difference between the GAAP amortization and the amounts recovered in rates are deferred as the regulatory asset.

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, 2022 and 2021, the Cooperative's deferred charges are belng reflected in rates charged to customers, except U1e deferred nuclear litigation as noted below. If all or a separable portlon 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, 2022 and 2021, include the following:

2022 2021 Nemadji Trail Energy Center $14,775 $ 9,986 Deferred Nudear Litigation 44 8,858 Other 660 513 Total deferred charges $15,479 $19,357 Nemadji Trail Energy Center-Costs relating to the Nemadji Trnrl Energy Center natural gas project are being accumulated in deferred charges. These charges will be amortized when the plant fs in service (currently estimated for 2027).

Deferred Nuclear Litigation-Litigation expenses from the third nuclear contract damages claim against the United States government were deferred ln 2021. Settlement was reached on the thtrd claim in

.January 2022 and 2021 deferred charges were extinguished and offset the proceeds. See further discussion in Note 14.

Cash and Cash Equivalents-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 market.

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

Regulatory Liabilities-As of December 31, 2022 and 2021, the Cooperative had various revenue deferrals reflected as regulatory liabilities. The revenue deferrals pertained to favorable results from market credits through transactions with the Mid-Continent Independent System Operator (MISO} in addition to favorable results due to market conditions. The summary of regulatory liabfHtles as of December 31, 2022 and 2021 is as follows:

2022 2021 Planned 2O23J.P. Madgett outage costs $13,000 $13,000 Business growth and development 6,880 7,400 Planned 2022J.P. Madgett outage costs 1,900 Electric vehicle charging stations 368

$19,880 $22,668 Planned 2023 J.P. Madgett Outage Costs-The of Directors approved the creation of a regulatory liability revenue deferral plan in the amount of $13,000 in 2021. The Cooperative deferred

$13,000 of 2021 revenue and plans to recognize this amount in 2023. The deferral plan was approved by RUS in February of 2022.

Business Growth and Development-In December 2021, 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 regulatory liablllty revenue deferral in 2021 ln the amount of $1,400 for business growth and development. This amended deferral plan was approved by RUS in Januarv 2022.

In December 2022, the Board of Directors approved the amendment to carryforward the revenue deferral balance in the amount of $6,880 into 2023 previously set for use in 2022. The plan was approved by RUS in January of 2023.

Planned 2022 J.P. Madgett Outage Costs-In November 2021, the Board of Directors approved the creation of a regulatory liabntty revenue deferral plan in the amount of $1,900. The deferral plan was approved by RUS in February of 2022. The Cooperative recognized this amount in 2022.

Electric Vehicle Charging - In January 2022, the Board of Directors approved the carryforward of a 2020 revenue deferral plan in the amount of $368. The amended deferral plan was approved by RUS in February 2012. The Cooperative recognized this amount in 2022. ..

Deferred Credits-Deferred credits represent both future revenue to the Cooperative associated with customer prepayments and noncurrent obligations and reserves related to operations. As of December 2022, the Cooperative's deferred credits are being considered when determining rates charged to customers.

Deferred credits as of December 31, 2022 and 2021 were comprised of the following:

2022 2021 Customer energy prepayments $ - $ 7,924 RockGen startup revenue deferral 2,607 Elk Mound startup revenue deferral 1,853 1,432 Other

$ 4,528 S 9,418 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 2022 and 2021, the power cost adjustment to the class A members resulted in credits to sales billed of $15,613 and $3,834, respectively. These amounts are recorded ln 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-The Cooperative does not have any energy contracts that are required to be accounted for at fair value as of December 31, 2022 and 2021.

-12

• Leases - The Cooperative determines if an arrangement is a lease at inception of the contract The right-of-use assets represent the right to use the underlying assets for the lease term and lease liabilities represent the obligation to make lease payments arising from the leases. Right-of-use assets and lease liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. The Cooperative uses the lmplicit rate noted within the contract, when available.

Otherwise, the Cooperative uses its incremental borrowing rate estimated using recent debt issuances that correspond to various lease terms, The Cooperative does not recognize leases, for operating or finance type, with an initial term of 12 months or less (short-terms leases") on the consolidated balance sheets, and the lease e:{pense for these short-term leases is recognized on a stralghUine basis over the lease term within.

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 of revenue and expenses during the reporting period. Significant estimates in tne consolidated financial statements relate to postretirement benefit obligations, asset retirement obligation liabilities, fixed-asset depreciable lives, and litigation a11d contingencies. Actual results could differ from those estimates.

Concentration of Risk-Approximately 36.6% of the labor force for the Cooperative is under a collective bargaining agreements that expire between January 31, 2024 and January 31, 2025.

Subsequent Events-The Cooperative considered events for recognitlon or dlsdosure in the consolidated financial stat~rnents that occurred subsequent to December 31, 20~2, through April 3, 2023, the date the consolidated financial statements were available to be issued.

3. ACCOUNTING STANDARDS Adopted-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 20161 to simplify the transition to the new guidance for land easements. The Cooperative adopted the new lease guidance on January 1, 2022 using the modified retrospective approach. The adoption of the new lease guidance did not have a material impact on the Cooperative's financial statements.

4. 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.

5. UNES OF CREDIT To provide interim financing capabilities, the Cooperative has arranged committed lines of credit with CoBank. The original line was executed on November 30, 2015, and amended on Novernber 20, 2019, with avaHability aggregating approximately $350,000. This facility has a five-year term and provides funds both for shorMerm working capital requirements and for capital projects until 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.

In December 2021, the Cooperative arranged a second Hne of credit for $215,000. The purpose of these funds was to finance the purchase of the RockGen ptant. In June of 2022, this line of credit was converted into long-term financing with Cobank.

Compensating balance requirements and fees relating to the lines of credit were not significant in 2022 and 2021. Information regarding line of credit balances and activity for the years ended December 31, 2022 and 2021, is as follows:

2022 2021 Interest rate at year-end 5.39 % 1.11 %

Line 1-$350M $ 6,000 $

Line 2-$215M 209,707 Total borrowings outstanding at year-end s 6,000 $209,707 Average borrowings outstanding during year $101,276 $ 17,476 The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowlng rates. Advances from member cooperatives totaled $6,847 and $20,584 at December 31, 2022 and 2021, respectively. Interest expense on member cooperative advances was $324 and $125 for the years ended December 31, 2022 and 2021; 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, 2022 and 2021, consist of the following:

2022 2021 Federal Financing Bank obllgations-1.24%-4.49"/ci $ 595,514 $584,270 Federal Financing Bank obligations-4.50%-5.20% 190,826 201,942 Total Federal Financing Bank 786,340 786,212 RUS obligations-4.125% and grant funds 2,036 2,557 CoBank notes-2.9% and 4.3% 201,220 3,362 Private bonds placement oblfgations-3.42% 67,500 70,833 Long-term debt 1,057,096 862,964 Less current maturities (53,651) (42,874)

Net long-term obligations s 1,003,445 $820,090 Quarterly principal and interest payments on the long-term oblfgatfons to the Federal Financing Bank (FFB) extend through 2053.

Long-term obligations to the RUS are payable in equal monthly principal and interest installments through 2024. Payments on the CoBank 2.6% and 4.32% notes are due quarterly, respectively, through 2023. The private bond placement is an amortizing 30-year term loan at an interest rate of 3.42%.

Quarterly principal and [nterest 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 grantor 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 Cooperative's long-term debt with the exception of unsecured notes to CoBank (balances of $1,345 and

$3,362 at December 31, 2022 and 2021, 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, 2022.

Scheduled maturities ofthe Cooperative's long-term obligations as of December 31, 2022 1 were as follows:

Years Ending December31 2023 $ 53,651 202.4 63,618 2.025 54,609 2026 56,082 2027 57,461 Thereafter 771,675 Total $

er*

1,05742,96

7. LEASES The Cooperative has entered into several finance 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 price. The assets are amortized over the lesser of their related lease terms or their estimated productive lives.

The following table presents the components of the Cooperative's right-of-use assets and liabilitres refated to !eases and their classification In the consolidated balance sheets as of December 31:

Classification in Consolidated Component of lease Balances Balance Sheets 2022 Assets:

Finance lease right-of-use assets Plant and equipment - at cost $17,521 Liabilities:

Current portion of finance lease liability Current maturities of (ong-term obligations and $ 2,302 obllgatlon.s and obligations under finance leases Long-term portion of finance lease liability Obligations under finance leases 6,588 The components of lease and their classification in the consolidated statements of revenues, expense, and comprehensive income for the year ended December 31 were as follows:

Classification in Statements of Component of Lease Expenses Revenues, Expenses, and Comprehensive Income 2022 Operating lease expense Other operating expenses $ 455 finance lease amortlzatkm Depred<itlon and amortization 1,834 finance lease Interest Interest ex;pem;e 287 Short-term lease expense Other ope,ating and maintenance expenses 916 Total lease expense The weighted average remainlng lease term and welghted average discount rate as of and for the year ended December 31, 2022, were as follows:

Weighted Average Remaining Weighted Average Lease Term (Years) Discount Rate Finance leases 5.05 3.12 %

Supplemental cash flow information related to leases for the year ended December 31, 2022 was as follows:

Cash paid for amounts indud~d in the measurement of lease liabilities:

Operating cash outflows from finance leases $ 3,149 Right-to-use assets obtained in exchange for lease obligations:

Finance leases 977 The reconciliation of the future undiscounted cash flows to the lease liabiHties presented on the Consolidated Balance Sheet as of December 31, 2022, were as follows:

Finance leases 2023 $2,683 2024 2,186 2025 2,114 2026 1,619 2027 997 Thereafter 956 Total lease payments 10,555 Less discount (1,665)

Total lease liabilities The undiscounted annual minimum leases payments due under the Cooperative's finance leases following the previous lease accounting standard as of December 31, 2021, were as follows:

Finance leases 2022 $3,130 2023 2,388 2024 1,890 2025 1,818 2026 1,323 Thereafter 976 Total lease payments 11,525 Amounts representing interest (811)

Present value of minimum lease payments 10,714 Current maturities (2,740)

Long-term obligations $7,':J74

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 avaikibte as of December 31, 2022 and 2021, is estimated to be as folfows:

2022 2021 Recorded Fair Recorded Fair Value Value Value Value Assets:

Other investments $ 7,417 $ 7,147 $ 12,350 $ 12,350 Investments in capftal term certificates of NRUCFC 9,176 9,176 9,176 9,176 Liabilities-long-term debt 1,057,096 950,059 862,964 979,972 Assets and liabilities Measured at Fair Value-Accounting principles generally accepted in the United States of America establish a framework for measurlng fair value by creating a hferarchy for observable independent market inputs and unobservable market assumptions and provides for required disdosures about fair value measurements. Considerable judgment mav 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 actlve markets for identical assets or liabrnties. 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 typicatly based on an entity's own assumptions of what a market participant would use in pricing an asset or liability 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 withln which the entire fafr 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 liability.

The following table summarizes the Cooperative's assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021, aggregated by the level rn the fair value hierarchy within which those measurements fall:

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Significant Identical Assets Observable Unobservabte and Lia biiiti es Inputs Inputs 2022 Fair Value (Level l) ('Level 2) (Level 3)

Assets-investments:

Nuclear decommissioning funds $ 2,070 $ 2,070 s. $ .

Other investments 7,417 435 1,42B 5,554 Investments in capital term certificate; of National Rural Utilities Finance Corporatron 9,176 9,176 Investment for deferred compensation l,748 1,748

$ 20,411 $ 2,505 $3,176 $14,730

.~

= ~

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Other Sfgnlficant ldentltal Assets Observable Unobservable and liabllitles Inputs Inputs 2021 FafrValue (Level 1) (Level 2) (Level 3)

Asset:s-i nvestments:

Nuclear decommissioning funds $ 2,043 $ 2,043 $. $ .

Other investments 12,350 4,235 1,364 6,751 Investments in capital term certificates of National Rural Utilities Finance Corporation 9,176 9,176 Investment for deferred compensation 1,941 1,941

$25,510 $ 6,278 $3,30S $1.S,927

-=== = = =

The changes in Level 3 recurring fair value measurements using significant unobservable inputs for the years ended December 31, 2022 and 2021, are as follows:

2022 2021 Other investments:

Balance-beginning of year $6,751 $8,096 New investment and loans made Loan repayments received and current maturities (409)

Patronage capital allocations 52 55 Patronage capital retirements {1,249) (991)

Balance-end of year $5,554

~

$6,751 cnm The valuation of these assets involved management's judgment after consideration of market factors and the absence of market transparency, market liquidity and 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 Oirectors. Any unassigned nonoperating margins will become unallocated reserves and part of permanent equity.

Patronage capital amounts for the years ended December 31,, 2022 and 2021, are as follows:

Assigned Unassigned Total Balance-December 31, 2020 $233,138 $93,461 $326,600 Retirement of capital credits (4,663) {4,663)

Current year margins 16,649 2,841 19,490 Balance-December 31, 2021 245,124 96;302 341,427 Retirement of capital credits (4,902) (4,902)

Current year margins 15,208 2,823 18,030 Balance-December 31, 2022 s2ssi430 $354,555

~~

10. COMMITMENTS AND CONTINGENCIES The Cooperative is a party to a number of generation, transmission and distribution agreements, under which co.sts and/or revenues c\r-e recognized currently based upon the Cooperative's interpretations of the provisions of the related agreements. Differences between the estimates used in the consolidated financial 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, 2022, is as follows:

Years Ending December31 2023 $ 45,198 2024 32,388 2025 14,629 2026 1,149 Total The Cooperative has been named as a defendant in various lawsuits and claims arising in the 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 without a material effect on the consolidated financial position, results of operations or cash flows of the Cooperative.

11. EMPLOYEE BENEFITS Mu(tiemployer Defined-Benefit Pension Plan-Pension benefits for substantially afl employees are provided through participation in the Nat1onal 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 Employee Retirement income Security Act of 1974, as amended by the Multiemploy,er Pension Plan Amendment Act of 1980, imposes certain liabilities 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, all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other partlcipatlng employers. The Cooperative may be contingently liable for its share of the RS Plan's unfunded vested liabflities.

1 The Cooperative s contributions to the RS Plan in 2022 and 2021 represented less than 5% of the total contributions made to the p[an by all participating employers. In 2013, the Cooperative made a voluntary prepayment of $26,899 to this plan to reduce future contribution amounts. The remain[ng prepayment was fully amortized in 2021. Expense for the RS Plan was $8,712 in 2022 and $15,161 in 2021. The 2022 expense includes contributions to the plan of $8,712 and $0 of prepayment amortization. The 2021 expense includes contributions to the plan of $9,781 and $5,380 of prepayment amortization.

In the RS Plan, a "zone status" determination fs 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 individual employer. In total, the RS Plan was over 80%

funded on both January 1, 2022 and 2021, 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 retiring at or after age 55 are eligible to participate in a postretirement healtt1 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 premium 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 difference between the premium paid by retirees and the potential actual premium amount 1s 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.

- 2.0-

The accumulated postret1rement benefit obligation (APBO) and the amounts recogn1zed in the consolidated financial statements as of and for the years ended December 31, 2022 and 2021, are as follows:

2022 2021 Amount recognized in the consolidated balance sheets:

Total accrued qualified and nonqualified benefit obligation $ 4,392 $ 5,560 Less current portion included in accrued expenses-other {386) (396)

Long-term portion S 4,006 $ 5,164 Change in benefit obllgat!on:

APBO-beginning of year $ 5,560 $ 5,825 Service cost 295 354 Interest cost 137 117 Actuarial Ioss (1,204) (434)

Benefits paid (396) (302)

APBO-end of year $ 4,392 $ 5,560 Funded status of plan-December 31 ${4,392) $ (5,560)

Accrued postretirement health insurance obligations recorded at year-end S 4,392 $ 5,560 Change in plan assets:

Employer contribution $ (396) $ (302)

Benefits paid 396 302 s - s -

Change in accumulated other comprehensive income:

Net income at prior measurement date $ 1,753 $ 1,376 Actuarial assumption changes 1,204 434 Recognition in expense:

Amortization of prior service cost Amortization of unrecognized actuarial gain (80) (57)

Accumulated other comprehensive income s 2;877 $ 1,753 Components of net periodic postreti reme nt benefit cost:

Service cost-benefits attributed to service during the year $ 295 $ 354 Interest cost on accrued postretirement health insurance obligation 137 117 Amortization of prior service cost Amortization of unrecognized actuarial gain (80) (57)

Net periodic postretirement benefit expense 352 414 Employer cash contributions expected to be made to the plan during the fiscal year ending December 31, 2023, is $386. The amount of accumulated other comprehensive income expected to be recognized during the fiscal year ending December 31, 2023, is an actuarlal gain of $162 and amortization of prior service cost .of $0. All prior service costs have been fully amortized.

for measurement .purposes, a 4.93% and 2.55% discount rate was assumed for 2022 and 2021, respectively, to determine net periodic benefit cost. The 2022 and 2021 annual health care cost increase assumed fs 6.25% and 6.50%, respectively, decreasing gradually to 4.46% for 2041 and tt,ereafter.

Estimated future benefit payments from the plan as of December 31, 2022, are as follows:

Years Ending December31 2023 $ 386 2024 330 2025 339 2026 402 2027 357 2028-2032 1,466 Defined-Contribution Plan-Dairyland has a qualified tax-deferred savings plan for eligible employees.

Eligible partlcipants hired 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

$1,589 and $1,409 for 2022 and 2021, respectively.

Other Plans-The Cooperative offers key employees deferred compensation plans available through NRECA. The plans permit qualifying employees to defer a portion oftheir 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 attributable to those amounts

{until paid 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 daim of general creditors. Participants' rights under the plans are equal to those of general crnditors of the Cooperative in an amount equal to the fair market value of the deferred account for each participant.

The related assets and liabilities, totaling $1,748 and $1,941 as of December 31, 2022 and 2021, respectively, are reported at contract 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 insurance, which are funded by employer and employee contributions. The Cooperative's costs related to these benefits were $9,180 and $9,867 for 2022 and 2021, respectively. The liability for these plans of $47 and $59 as of December 31, 2022 and 2021, respectively, are recorded in other 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 $408,146 and $376,523 in 2022 and 2021, respectively, for these services. The Cooperative has accounts recefvable from its class A members of $35,879 and $30,829 as of December 31, 2022 and 2021, respectively.

The Cooperative has advances from class A members of $6,847and $20,584 as of December 31, 2022 and 2021, respectively, related to the prepayment program. Class A members have the option of paying their electric bill in advance, and in tum, the Cooperative pays the members' interest income. The Cooperatfve's interest expense related to the prepayment program was $324 and $125 for the years ended December 31, 2022 and 2021, respectively.

13. ASSET RETIREMENT OBLIGATIONS 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 1 or development and/or the normal operation of a lon@/lived asset. The Cooperative determines these obligations 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 capitaliz.es 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 fong-lived asset. The accretiqn of the obligation is recognized over time up to the ~ettlement date. Any future change in estimate wi,11 be recognized as an increase or a decrease in the carrying amount of the ti ability 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 ARO balance related to the future removal and disposal of asbestos was $244 as of both December 31, 2022 and 2021. The balance ls recorded within Other Liabilities on the consolidated balance sheets.

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 (lSFSI'). The assets of this trust in the amount of

$2,070 and $2,043 as of December 31, 2022 and 2021, respectively, are outside the Cooperative's admlnistrative control and are available solely to satisfy the future costs of decommissioning. As the expected completlon ls planned for 2023, the balance of the trust as of December 31, 2022 of $57 is recorded as current in the consolidated balance sheet. The remaining $2,013 is related to the annual ISFSI costs that will remain after completion of the decommissioning.

The Cooperative did not record a conditional ARO related to the dismantlement of the dam and drainage reservoir for the hydro generation plant at Flambeau, the removal of transmission lfnes ln various corridors, and RockGen Energy Center because the Cooperative does not have sufficient rnformation 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 llcense 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 20161 the NRC approved transfer of the license to La CrosseSolutions LLC (Solutions), a subsidiary of EnergySolutions LLC. Solutions will temporarily f1old 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 Polley Act .of 1982 (NWPA)-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 under contract, the United States government was to have begun accepting spent fuel in January 1998, but has not yet licensed and established a repository.

The Cooperative has filed two successful breach of contract damage claims against the United States government in the United States Court of federal Claims to recover its costs generally incurred after 1998 through 2013 related to spent fuel remalning at LACBWR. The Cooperative received damage award payments of $37,659 and $73,500 in January 2013 and November 2017, respectively. Proceeds from the award payments were used to defease the nuclear related regulatory asset and deferred charges for nuclear related Htigation and plant costs. Remaining proceeds have been refunded to Class A Members.

In January of 2022, the Board of Directors approved a motion to accept a partial summary judgement in the amount of $23.1 million from the United States government related to the NWPA third contract damage claim. Claim proceeds, less accrued legal fees, were refunded back to Class A Members in February 2022.

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

ISiFSl-The Cooperative completed the temporary dry storage fadHty project located on the LACBWR site and completed the move of the LACBWR spent nuclear fuel to this lSFSI faciHty in September 2012.

The spent nuclear fuel will remain at the ISFSI until [t is able to be transferred to the government.

Annual ISFSI costs are recorded on an as incurred basis and incorporated into the annual budget and rate making process.

Decommissioning-The Solutions decommissioning pfan anticipates completion of decommlssioning LACBWR, not lndudrng the ISFSi, in 2023. The estfmated costs of decommissioning the nudear 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 liability. As costs are rrn::urred, 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, 2022 and 2021:

2022 2021 Cash paid for interest $35,928 $24,062 Electric plant additions funded through accounts payable and accrued expenses 5,367 4,357 Electric plant additions under capital leases 977 4,337 The amount shown in the consolidated statements of cash flows for cash, cash equivalents and restrlcted ca.sh as of December 31, 2022 of $46,193 ls comprised of cash and cash equivalents of

$25,878, designated funds of $19,880 and $435 of restricted cash included in other investments. The amount shown in the consolidated statements of cash flows for cash, cash equivalents and restricted cash as of December 31, 2021 of $68,912 is comprised of cash and cash equivalents of $46,244 and designated funds of $22,668.

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

We are an active participant in the MISO Energy Markets, where we bid our generation into the Day Ahead and Rea! 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 provided by MISO. Purchase transactions are accounted for on a net hourly position. 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 ln other sales. For sales to the MISO Energy Markets, we 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 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 fs [n effect untll December 31, 2062. The contract automaticafly extends an additional {2) years in each odd-numbered year beginning January l, 2021 unless either the Cooperative or member give notice no later than the preceding September 1 of fts election not to extend further. Class 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 reflect sales to MISO.

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The following table disaggregates revenue by major source for the years ended December 31 1 2022 and 2021:

2022 2021 Class A $408,146 $

Class C 2,387 Class D 21,423 16,879 Class E, including MISO 69,693 53,552 Other sales 31,861 14,254

• Total S531,123