2015 Annual Report - Shenandoah Valley Electric Cooperative

Shenandoah Valley
Electric Cooperative
2015 Annual Report
SVEC Mission Statement
“We exist to serve our member-owners”
We will provide reliable and safe electric service at the lowest possible cost
within our service area, consistent with sound management
and Cooperative principles.
We will continually evaluate our member-owners’ needs and work to
exceed their expectations, pursuing opportunities that will benefit them.
SVEC Core Values
As an organization we hold the following core values to be
important in the way we do business. These values include:
Commitment to Consumers and Employees, Integrity,
High Work Ethic, Honesty, Trust and Respect.
Statement of Nondiscrimination
This institution is an equal opportunity provider and employer.
In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies,
the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are
prohibited from discriminating based on race, color, national origin, religion, sex, gender identity (including gender expression),
sexual orientation, disability, age, marital status, family/parental status, income derived from a public assistance program,
political beliefs, or reprisal or retaliation for prior civil rights activity, in any program or activity conducted or funded by
USDA (not all bases apply to all programs). Remedies and complaint filing deadlines vary by program or incident.
Persons with disabilities who require alternative means of communication for program information (e.g., Braille, large print,
audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA’s TARGET Center at
(202) 720-2600 (voice and TTY) or contact USDA through the Federal Relay Service at (800) 877-8339.
Additionally, program information may be made available in languages other than English.
To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027,
found online at http://www.ascr.usda.gov/complaint_filing_cust.html and at any USDA office or write a letter addressed to
USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form,
call (866) 632-9992. Submit your completed form or letter to USDA by:
(1) mail: U.S. Department of Agriculture Office of the Assistant Secretary for Civil Rights
1400 Independence Avenue, SW, Washington, D.C. 20250-9410;
(2) fax: (202) 690-7442; or
(3) email: [email protected].
Board of Directors
Augusta/Highland counties
JOYCE R. CRAUN
Director since 2001
Frederick/Clarke counties
LARRY C. HOWDYSHELL
Director since 1992
CHARLES H. HUFFMAN
Secretary/Treasurer
Director since 2005
Page County
RICHARD C. SHICKLE
Director since 2011
Rockingham County
GARLAND H. GIBBS
Director since 2011
STEPHEN W. BURKHOLDER
Director since 1992
LARRY E. GARBER
Director since 1994
Shenandoah/
Warren counties
Shenandoah/Warren/
Page counties
Frederick/Clarke counties/
City of Winchester
FRED C. GARBER
Director since 1984
DAVID E. FERGUSON
Director since 2015
WILLIAM A. ORNDOFF
Director since 2015
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GERALD A. HEATWOLE
Vice Chair
Director since 1990
City of Winchester
ROBBIE F. MARCHANT
Board Chair
Director since 2011
To Our Member-Owners
In 2015, Shenandoah Valley Electric
implemented. Rest assured, SVEC will
Cooperative experienced another full
do everything possible to keep you
year – with things that remained the
informed of any changes.
same, such as the dedication to bring
Across the board, from the financial
you, our member-owners, safe and
aspects of business to the nuts and bolts
reliable electric service; and something
of the electric service, Shenandoah
that was incredibly different – the year
Valley Electric Cooperative is dedicated
passed without a significant weather
to serving you, our member-owners, to
incident. As part of SVEC’s determination
the best of our ability. No matter the
to deliver the safest, most reliable
conditions – difficult after extreme
electric service, the Cooperative
weather events, or regular during a
continued its yearly maintenance,
normal day – working safely is the most
upgrades to the system, adherence to
important thing to us at SVEC.
safety policies, and efforts to bring you
Fortunately, 2015 was a successful year
the best consumer service possible.
from the safety perspective. Safety
Whether it is your interaction with an
training, watching out for fellow
employee in the field, in the district
co-workers, and a commitment to safe
offices, or during a safety presentation at
work practices resulted in no lost-time
an event, SVEC wants to offer you the
accidents in 2015, with a total of
best possible experience, across the board.
631,372 man-hours worked as of
Not having a serious weather event
December 31.
affected many SVEC metrics in a to-beAnother aspect of SVEC’s service is
L-R: ROBBIE F. MARCHANT and MYRON D. RUMMEL continued system improvements. Each
expected positive way, including fewer
outage hours and lower expenses, which SVEC Board Chair and President & CEO
year, we work to increase efficiency and
were beneficial for the Cooperative’s
improve reliability within our
financials. In 2015, the average outage hours per member were 2.64,
infrastructure, and in 2015 we were able to rebuild substations in
which is a reliability rating of 99.97 percent. Financially, in 2015,
Stanley and Monterey, while completing design work for a major
SVEC had healthy margins of more than $13 million. The
upgrade to the Strasburg facility. We also continue to do line
Cooperative was able to return more than $3.6 million in Capital
rehabilitation and increase capacity (due to growth) so that we may
Credits to our members in 2015. This, added to prior-year
keep up with demands and maintain our high reliability standards.
retirements, totals more than $62.5 million that SVEC has returned
Another program that the Cooperative utilizes to minimize outage
to members since we started returning Capital Credits in 1960.
hours is incorporating the use of vegetation management, which
Talking about Capital Credits brings up another point: the
keeps lines clear of brush, limbs and other debris.
difference in Shenandoah Valley Electric Cooperative and other
There are a couple of things on the horizon that are exciting
electric utilities. As a Cooperative, those who receive their electric
events for the Cooperative. In 2016, SVEC will commemorate
service from us aren’t just “customers” but member-owners. And as a
80 years of service to you, our member-owners. SVEC was the first
member-owner of SVEC, there is much more to it than receiving
electric cooperative chartered in Virginia on June 26, 1936. Two
safe, reliable electric service: the aforementioned Capital Credits,
years later, the Cooperative served more than 1,000 people in
which you may receive once all financial obligations are met; the
Rockingham, Augusta and Shenandoah counties and steadily grew
opportunity to attend an Annual Meeting, and learn about the
as our communities prospered, adding Hardy County in the process.
yearly Cooperative business; and the involvement in the communities
In 2010, Shenandoah Valley Electric Cooperative experienced one
in which we serve.
of the most significant events in its 80-year history – the acquisition,
In serving our member-owners, SVEC works to keep costs as low
which led to the addition of more than 52,000 accounts in what
as possible, utilizing prudent management and efficiency. However,
seemed like a blink of an eye. This expansion of the Cooperative
there are circumstances when the Cooperative cannot control costs,
business model for electric utilities into more communities in
and in 2014, the Cooperative experienced something that had not
Virginia was possible because of the proven success and strength of
happened since 2001 for its legacy consumers: changes to base rates.
SVEC. Today SVEC serves over 93,000 meters in eight counties
This change came as a result of inflation, increasing costs of doing
(Augusta, Clarke, Frederick, Highland, Page, Rockingham,
business, and other factors. In 2015, wholesale power costs and
Shenandoah and Warren) and the city of Winchester.
SVEC base rates combined led to an increase for member-owners in
What better way to celebrate the beginnings, and continued
SVEC’s service area.
growth, of SVEC than to keep evolving, and finding better ways to
Another situation that could negatively impact future rates are
serve you, our member-owners. In 2016, the Cooperative will roll
the potential EPA rulings calling for more stringent regulations for
out its new, voluntary “Beat the Peak” program, which will give you
clean power plants. The proposed regulations regarding carbon
further opportunity to become involved in your Cooperative. In the
emissions to the environment could increase future rates when
“Beat the Peak” program, SVEC will offer education regarding best
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practices for energy use at certain times of the day. To make the
program more convenient, the Cooperative plans to incorporate
various means of notification to you, so that you may be prepared for
the “Beat the Peak” times.
New programs and ideas for the future have been built on the
strong foundations laid by the people who have worked to serve the
Cooperative. In 2015, SVEC Board Member Jim Zerkel retired,
after 19 years of service. During his tenure, he helped guide the
Cooperative through the acquisition in 2010. In 2015, SVEC added
two new board members, David E. Ferguson, a representative from
Shenandoah/Warren/Page counties, and William A. Orndoff, a
representative from Clarke/Frederick counties/City of Winchester.
Many people have left their mark on the Cooperative in its
80-year existence, and helped to shape it into the organization that
it is today. Allen R. Ritchie, who worked at the Cooperative for
almost 45 years, passed away on August 15, 2015. Allen, who was
the vice president of Finance and Administration, was well-known,
across the country, for his financial acumen and knowledge
regarding regulatory issues. Having someone with his breadth of
experience was a great asset to the Cooperative, and his dedication
to the member-owners of SVEC was extraordinary.
Dedication to our member-owners is at Shenandoah Valley
Electric Cooperative’s core – “We Exist to Serve Our MemberOwners” – not only through the electric service that we provide, but
also through the work we do in the communities in which we serve.
In 2015, SVEC held two blood drives, in addition to participating in
many community events throughout the service area, including
donations for the American Cancer Society, and Camp Still
Meadows; safety demonstrations at various schools and groups; and
reality town and career day events at schools. The Cooperative also
supported youth in 4-H and FFA activities, local sports and
extracurricular groups, and awarded ten $1,000 scholarships to area
high school seniors.
As a final note, I’d like to take this opportunity to share with
everyone that this will be my last letter as president & CEO of
Shenandoah Valley Electric Cooperative. It has been a tremendous
opportunity, and a great honor, for me to serve you, your families
and your communities, as president & CEO for the last 10 years.
For the 23 years I’ve been at the Cooperative, working and meeting
with people has been a wonderful part of my life – a great team effort
to bring you reliable and safe electric service – working with people
whom became not only co-workers, but friends. I’d like to thank
everyone for the support and kindness they’ve shown throughout
the years.
As always, we are honored to be of service to you, your families,
your businesses and your communities, and would like to thank you
for your support, especially when we are faced with challenges from
Mother Nature. As we prepare to celebrate 80 years, we look
forward to many more years of continued service in “keeping the
lights on” for you and your families!
Myron D. Rummel
President & CEO
Robbie F. Marchant
Board Chair
Selected Financial Data and Five-Year Growth Comparison
2015
2014
2013
2012
2011
Total Utility Plant ......................................
$490,754,782
$469,307,863
$454,682,298
$431,864,702
$406,825,300
Total Revenue ............................................
$253,549,837
$239,790,578
$212,313,185
$213,325,105
$216,482,589
Cost of Purchased Power ...........................
$182,504,002
$172,587,586
$148,466,573
$148,680,768
$154,789,464
Total Margins..............................................
$13,343,738
$12,629,471
$11,079,641
$15,244,568
$18,087,516
Equity Ratio (Equity/Total Assets)............
30.87%
30.42%
29.66%
28.87%
24.53%
Interest on Long-Term Debt......................
$12,155,125
$11,532,471
$11,135,398
$11,300,154
$7,607,233
Interest Coverage (TIER)..........................
2.10
2.09
1.99
2.35
3.38
Service Interruptions (average hours) ......
2.15
5.07
8.05
29.7
10.3
Full-time Employees...................................
215
208
202
203
199
Services in Place.........................................
94,676
93,475
92,725
92,001
89,699
Total Miles of Line .....................................
7,633
7,577
7,531
7,509
7,445
kWh Sold....................................................
2,350,356,363
2,413,648,412
2,339,529,856
2,273,838,235
2,336,745,802
Load Management Savings .......................
$1,960,790
$1,944,155
$1,870,796
$1,741,207
$1,778,912
Capital Credits Retired..............................
$3,685,105
$2,992,137
$3,532,645
$4,137,576
$2,028,743
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Annual Report
On June 26, 1936, the State Corporation Commission accepted
the charter establishing Shenandoah Valley Electric Cooperative,
prioritized and initiated to address concerns on all facilities
that were inspected.
making SVEC the recipient of the first charter issued in Virginia
under the Electric Cooperative Act. For 80 years now, SVEC has
The average number of outage hours per member in 2015 was
2.64 hours. Fortunately, electric service to SVEC members was not
continued its stated mission of providing reliable and safe electric
interrupted by a major weather event in 2015.
service at the lowest possible cost to our member-owners. Our
longstanding commitment to serving the Shenandoah Valley is as
strong today as ever, and we are focused on building on what we
have learned to make our organization better and more efficient,
now and for many decades to come.
This section of the Annual Report shares information from
each department of Shenandoah Valley Electric Cooperative,
recapping the 79th year of service. Highlights from 2015 include
System Upgrades
In 2015, SVEC made substantial changes to improve our
distribution system to better serve member-owners. The Stanley
substation in Page County and Monterey substation in Highland
County were rebuilt, while design work was completed for a major
substation upgrade planned at the Strasburg facility in
Shenandoah County.
The distribution electric service to the Carmeuse Lime and
Stone in Frederick County was upgraded to accommodate the
expansion of its mining operations. The work is the culmination of
a design and construction project completed by SVEC associates
over the past two years.
The Cooperative worked with two members who desired to
install distributed generation that would interconnect with
SVEC’s distribution system. One of the generators is a
co-generation unit in Frederick County, while the second is an
emergency generation facility in Rockingham County. Both
members sought these generators for their own use and to
participate in the Cooperative’s effort to reduce power demands
during peak periods for electricity on the system.
A 10.3-mile circuit upgrade serving as a tie between substations
in western Rockingham and northwestern Augusta counties was
finished. The work improves the reliability of service to memberowners in both jurisdictions.
In addition, the Cooperative designed and constructed 55.8
miles of electric distribution line that expanded the distribution
system to 7,633 total line miles during 2015.
system upgrades, the retirement of Capital Credits, reaching safety
milestones and expanding energy efficiency programs.
Migration Plan & Rate Change
Through an acquisition-stipulation agreement approved by the
State Corporation Commission, rates increased for some members
in SVEC’s acquired territory who were formerly served by
Allegheny Energy. This change is designed so that members
transitioning from the acquired area would not see a large
increase at the time of the acquisition in 2010. This migration
plan will consolidate all SVEC rate schedules into a single set
of rate schedules applicable to all members throughout the
service territory.
Maintenance Update
Providing safe and reliable electric service requires year-round
planning and work to keep power lines clear of trees, brush and
other debris. SVEC accomplishes this through our vegetation
management program. This initiative continued in 2015, using
mechanized and manual ground crews, as well as herbicides, to
manage right-of-way beneath and around power lines throughout
our service territory.
More than 1,007 miles of right-of-way were maintained
during 2015.
Additionally, SVEC crews inspected and performed
maintenance on all poles within the 37 miles of transmission
line owned by the Cooperative. More than 1,400 structures on
SVEC’s distribution underground system were also inspected
and maintained. Plans for corrective action were identified,
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Safety
SVEC places a high priority every day on delivering reliable
and efficient electric service in the safest way possible. Team
members combine the proper training and techniques with
diligence and concern for others to perform their duties efficiently
and safely.
4
With that in mind, we’re pleased to announce that 2015 was
another banner year for SVEC. There were no lost-time accidents
Consumer Services and Billing
SVEC consumer service representatives work hard every day to
provide quality support to members related to energy use, billing,
conservation and other programs. Representatives strive to deliver
timely responses to member inquiries on a daily basis and also must
file all required regulatory reports on time.
Consumer service representatives answered 124,483 businessrelated calls in 2015. The average speed of answering these calls
was 89 seconds.
SVEC also launched Facebook, Twitter and LinkedIn accounts
as means to increase communication with member-owners, and
the Cooperative rebuilt www.svec.coop for easier navigation of
company news, energy-saver tips, and more.
after 631,372 hours were worked throughout SVEC’s service
territory. The Winchester District office finished 2015 with
2.2-million hours since its last lost-time accident, while the
Rockingham District office had safely worked 1.2-million hours
without a lost-time accident by the end of 2015.
Margins and Capital Credits
Margins are the amount remaining, after all proper expenses are
deducted from revenues, for a given year. Capital Credits are the
amount of margins assigned, or allocated, to each member based
on their patronage. Member-owners receive a notice of this
allocation amount each year.
Once all financial obligations are met and the Board of
Directors determines that a retirement of Capital Credits may be
made, members receive their share of the retirement as credits on
their bills for current consumers, or in the form of checks for
former SVEC members. Receiving Capital Credits is part of the
Cooperative Advantage.
In 2015, the Cooperative paid over $3.6 million in Capital
Credit retirements. Since 1960, the total amount retired by SVEC,
and returned to members, is more than $62.5 million.
Community Service
SVEC believes strongly in giving back to the communities we
serve. In 2015, the Cooperative held two blood drives, which led
to 54 pints of blood being donated to the American Red Cross.
That amount equates to 162 lives saved.
Employees also participated in events benefitting or gave
donations to: American Cancer Society, the National Multiple
Sclerosis Society, Wounded Warriors and Camp Still Meadows.
SVEC also presented its safety demonstration at schools,
festivals and county fairs, and the VMDAEC hot-line trailer was
used for a safety demonstration at the annual meeting at James
Madison University. The Cooperative also supported youth in the
communities we serve through 4-H and FFA activities, local sports
and extracurricular groups, and by awarding ten $1,000
scholarships to deserving area high school seniors.
Efficiency
In an effort to cut down on energy costs when the demand for
power is at its peak, SVEC employs a load management program
for member-owners. When members sign up, a switch is installed
on their water heater and they receive a free water-heater
inspection and water-heater blanket to help keep their water hot.
SVEC’s program included 9,036 switches by the end of 2015.
Those devices contributed $842,302 toward load-control program
savings in 2015.
The Cooperative also continues to distribute compact
fluorescent light bulbs (CFLs) and CFL coupons. Energy Saver
Guides and other energy-efficiency-related materials are also
available at all of SVEC’s offices. Additionally, tips are included
on the Cooperative’s website, www.svec.coop, Facebook and
Twitter pages, and monthly e-newsletter and magazine,
Cooperative Living.
In Memoriam
On August 15, 2015, SVEC suffered a loss with the passing of
Vice President of Finance & Administration Allen Ritchie. Allen
had been with the Cooperative for almost 45 years, and worked
with four SVEC leaders.
Our thoughts and prayers continue to be with Allen’s family.
5
5
Charts and Graphs
Total Margins
Capital Credits Returned
$20 Million
$5 Million
$4 Million
$15 Million
$3 Million
$10 Million
$2 Million
$5 Million
$1 Million
$0
2011
2012
2013
2014
$0
2015
Average Monthly Residential Bill
2011
2012
2013
2014
2015
How Your Dollar Was Spent
2.28% 2.02%
4.81%
4.38%
0.47%
$150
$120
Consumer Accounting
Administrative & General
Interest on Dept
1,270 kwh
1,322 kwh
1,277 kwh
$60
1,266 kwh
$90
1,211 kwh
6.19%
Operating Margins
7.70%
Information & Sales
0.17%
Depreciation
Operations & Maintenance
$30
Taxes & Other
$0
2011
2012
2013
2014
2015
71.97%
Wholesale Power Cost
Senior Management
J. MICHAEL AULGUR
Vice President
Member Services
THOMAS V. BEAMON
Vice President
Finance & Accounting
JOHN A. COFFEY
Vice President
Engineering & Operations
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WAYNE HANNAH JR.
Vice President
Information Technology
VIVIAN M. MICHAEL
Vice President
Corporate Services & HR
SVEC Full-Time and Part-Time Employees
As of April 1, 2016
Mike Alexander
Susan Alexander
Kevin Alger
Cynthia Allen
Jeremy Ambler
Rocky Anthony
Connie Arey
Brian Argenbright
Jason Armentrout
Sam Armentrout
Scottie Armentrout
Jared Armstrong
Lance Armstrong
Corey Ashby
Mike Aulgur
Scott Austin
Terry Baker
Brandon Batton
Tom Beamon
Bryan Beavers
Nathan Berry
Don Biller
Craig Bockey
Heidi Bodanske
Brian Bogolin
Jennifer Bolinger
Robert Bontz
Scott Boyd
Cyndi Braxton
Kevin Brewster
Carrie Brumfield
Sheila Buckley
Jason Burch
Todd Butcher
Cody Campbell
Fay Campbell
Ben Cash
Sherri Christian
Tim Cleveland
Keith Click
James Clifton
Jayson Collins
Temple Combs-Wilkes
John Coffey
Doug Colvin
Myron Conner
Kevin Coy
Donald Coyner
Curtis Craig
Erica Crawford
Kayla Creasey
Jonathan Cromer
Teri Crorken
Ron Crowe
James Cubbage
Jeff Damron
Barbara Davis
Tina Davis
Tony Dean
Jeff Deaver
Ethan Dellinger
Allen Desper
Shannon Detamore
Katie DeWarf
Mark Dillashaw
Dale Dove
Joel Dove
Martin Driver, IV
Laura Drummond
Matt Durbin
Gary Durdock
Ed Eudy
Reda Eye
Terry Eye
Amanda Fadley
Jessica Farrow
Mark Feltner
LeAnna Fifer
Nick Fortin
Andrew Frey
Barbara Frye
Taylor Fulk
Jeff Fuss
Sonia Getic
Eddie Giles
Randy Glick
Leigh Glovier
Jennifer Goff
Blair Good
Joshua Good
Kevin Good
Brian Graham
Kenny Grandstaff
June Grove
Lisa Halterman
Dennis Hamrick
Wayne Hannah
Renea Harlow
Hunter Harman
Cole Hart
Daniel Hawkins
Brian Hazelwood
Josh Hedrick
Mike Hepner
Eddie Luna Hernandez
Kevin Hill
Richard Hill
Ashley Hoch
Holly Housden
Kim Huffman
Kathy Hulvey
Felicia Jack
Orlando Jenkins
Tracy Johnson
Dirk Junkins
Jim Keeley
Alice Kenney
Jessica Koontz
Preston Knight
Sam Knupp
Bradley Kochel
Danny LaClair
Sam Lilly
Will Link
Sathena Liskey
BriAnna Litten
Curtis Lockridge
Brandon Long
Mary Lutz
Bruce Mabe
Tammy Marion
Deanna Marrah
Kent May
Tracy Mayer
Terry Mayes
Billy McAlister
Tom McCampbell
Ray McGill
Michele McGinnis
Ben McInturff
John Medved
Jim Messick
David Metzler
Vivian Michael
Max Miller
Tara Miller
Brandon Moomaw
Jeff Mongold
Scott Morris
Alan Moyers
Tracy Mullins
Brian Murphy
Linda Murtadha
Brenda Muterspaugh
Brent Neff
Joe Nelson
Joshua Nicol
Roger Pace
Chris Pellerin
William Perry
Kenneth Pierson
Debbie Presgraves
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Jesse Proffitt
Wade Ramey
Beth Ray
Bill Rees
Dan Rhodes
Linda Rhodes
Mindy Robinson
Sam Robinson
Greg Rogers
Josh Romick
Lee Ruffner
Myron Rummel
Bryan Runkles
Wes Rusmisel
Josiah Sargent
Jason Scheermesser
Julie Sengul
Justin Sherman
Ron Shickel
Barry Shifflett
Scott Shingleton
Stacy Shipe
Roger Shoemaker
Jerry Showalter
Sam Showalter
C. A. Shuler
Kyle Simmons
Teresa Simmons
Jon Sisler
Anne Smallwood
Julie Smith
Sherry Smith
Scott Sorrels
Chris Strecky
Phillip Strickler
Sherman Summers
Sarah Surface
Jon Swartz
Brenda Swink
Mike Taylor
Charlie Tusing
Cammie Tutwiler
Doug VanSant
Ron Whetzel
Tim Whitcomb
Bev Wilharm
Danny Williams
Michael Williams
Jeremy Wisman
Doug Wood
Matthew Wood
Kelly Zimbro
Independent Auditor’s Report
ADAMS, JENKINS AND CHEATHAM
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
The Board of Directors
Shenandoah Valley Electric Cooperative
Mt. Crawford, Virginia
Report on the Financial Statements
We have audited the accompanying financial statements of Shenandoah Valley Electric Cooperative (the “Cooperative”) which comprise the
balance sheets as of December 31, 2015 and 2014 and the related statements of operations, equities and cash flows for the years then ended, and
the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with
auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Cooperative’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Cooperative’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shenandoah Valley
Electric Cooperative as of December 31, 2015 and 2014, 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated February 6, 2016, on our consideration of Shenandoah
Valley Electric Cooperative’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or
on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the
Cooperative’s internal control over financial reporting and compliance.
Richmond, Virginia
February 6, 2016
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Financial Statements
Balance Sheets
Shenandoah Valley Electric Cooperative
December 31,
Assets
Electric plant
Electric plant
Less accumulated provision for depreciation
Other property and investments
Investments in associated organizations
Other investments
Current assets
Cash and cash equivalents
Accounts receivable, net
Materials and supplies
Accrued unbilled revenue
Other current assets
Deferred charges
Equities and Liabilities
Equities
Patronage capital
Other equities
Memberships
Current liabilities
Accounts payable
Consumer deposits
Current maturities of long-term debt
Other current and accrued liabilities
Long-term debt
Deferred credits
See Independent Auditor’s Report and Notes to Financial Statements
9
2015
2014
$ 490,754,782
172,004,798
___________
$ 469,307,863
164,016,775
___________
318,749,984
305,291,088
47,802,812
268,660
___________
48,071,472
45,054,740
537,748
___________
45,592,488
43,154,983
14,973,809
8,962,906
8,653,150
229,195
___________
75,974,043
26,717,655
15,339,847
9,786,183
11,126,386
685,221
___________
63,655,292
9,413,644
___________
11,904,595
___________
$___________
452,209,143
___________
$___________
426,443,463
___________
$ 126,266,341
12,948,313
379,905
___________
139,594,559
$ 117,402,790
11,975,734
378,945
___________
129,757,469
17,903,657
7,627,926
4,309,000
1,534,034
___________
31,374,617
19,616,703
7,393,499
3,125,000
2,102,262
___________
32,237,464
280,837,196
402,771
___________
263,715,320
733,210
___________
$___________
452,209,143
___________
$___________
426,443,463
___________
Statements of Operations
Shenandoah Valley Electric Cooperative
Year Ended December 31,
2015
2014
$ 253,549,837
$ 239,790,578
Operating revenues
Operating expenses
Cost of power
Transmission
Distribution – operation
Distribution – maintenance
Consumer accounts
Customer service and informational
Sales expense
Administrative and general
Depreciation and amortization
Taxes
Interest on long-term debt
Other
182,504,002
107,925
7,423,275
12,998,251
5,101,642
937,954
137,395
5,283,937
17,120,381
351,271
12,155,125
2,095
___________
244,123,253
___________
Operating Margins Before Patronage Allocations
Patronage allocations
Generation and transmission
Other
Net Operating Margins
Nonoperating income
Investment income, net
Other
Net Margins
172,587,586
100,855
6,945,121
11,419,878
4,842,590
868,893
257,071
5,471,819
14,965,045
304,595
11,532,471
(7,414)
___________
229,288,510
___________
9,426,584
10,502,068
2,572,584
411,691
___________
2,984,275
___________
1,259,042
401,536
___________
1,660,578
___________
12,410,859
12,162,646
859,378
73,501
___________
932,879
___________
392,100
74,725
___________
466,825
___________
$___________
13,343,738
___________
$___________
12,629,471
___________
Statements of Equities
Shenandoah Valley Electric Cooperative
Years Ended December 31, 2015 and 2014
Balance, December 31, 2013
Net margins
Retirement of capital credits
Net change in donated capital
Net change in memberships
Balance, December 31, 2014
Net margins
Retirement of capital credits
Net change in donated capital
Net change in memberships
Balance, December 31, 2015
Patronage
Capital
$ 108,114,771
12,162,646
(2,874,627)
__________
117,402,790
12,410,859
(3,547,308)
__________
$126,266,341
__________
__________
See Independent Auditor’s Report and Notes to Financial Statements
10
Other
Equities
$ 11,442,127
466,825
Memberships
$ 377,950
66,782
__________
11,975,734
932,879
995
________
378,945
39,700
__________
$__________
12,948,313
__________
960
________
$________
379,905
________
Total
$ 119,934,848
12,629,471
(2,874,627)
66,782
995
___________
129,757,469
13,343,738
(3,547,308)
39,700
960
___________
$___________
139,594,559
___________
Statements of Cash Flows
Shenandoah Valley Electric Cooperative
Year Ended December 31,
2015
2014
Cash Flows from Operating Activities
Cash received from members
Cash paid to suppliers and employees
Interest received
Interest paid
Net Cash Provided by Operating Activities
$ 257,065,634
(217,126,926)
363,348
(4,024,792)
___________
36,277,264
$ 243,443,256
(204,180,621)
181,102
(7,640,567)
___________
31,803,170
Cash Flows from Investing Activities
Extension and replacement of plant
Plant removal costs
Contribution in aid of construction
Proceeds from the sale of plant
Proceeds from retirement of investments in CTC’s
Redemption of CFC member capital credit certificate
Net Cash Used by Investing Activities
(27,811,804)
(3,409,314)
1,356,236
108,882
9,862
___________
(29,746,138)
(18,684,293)
(2,692,019)
926,908
82,046
9,495
125,000
___________
(20,232,863)
Cash Flows from Financing Activities
Proceeds from long-term debt
Advance payments to RUS cushion of credit
Principal payments on long-term debt
Capital credits paid to members, net
Proceeds from capital credits and other investments
Net change in consumer deposits
Net change in memberships
Net Cash Provided by Financing Activities
24,203,000
(10,000,000)
(3,533,522)
(1,494,092)
495,429
234,427
960
___________
9,906,202
___________
24,000,000
(10,000,000)
(5,165,519)
(957,388)
170,150
1,025,070
995
___________
9,073,308
___________
Net Increase in Cash and Cash Equivalents
16,437,328
20,643,615
Cash and cash equivalents – beginning of year
Cash and Cash Equivalents – End of Year
26,717,655
___________
$___________
43,154,983
___________
6,074,040
___________
$___________
26,717,655
___________
Net Margins
$ 13,343,738
$ 12,629,471
Adjustments to reconcile net margins to net cash
provided by operating activities:
Depreciation and amortization
Increase in cash value of life insurance
Noncash capital credits received
Capital credits applied to member accounts
Interest expense applied from cushion of credit
Interest income earned on cushion of credit
(Increase) decrease in:
Accounts receivable
Other current assets
Deferred charges
Increase (decrease) in:
Accounts payable
Other current and accrued liabilities
Deferred credits
Net Cash Provided by Operating Activities
17,120,381
(14,908)
(2,969,367)
(2,013,516)
8,132,428
(496,030)
14,965,045
(14,152)
(1,646,426)
(1,850,457)
3,884,490
(210,998)
2,839,274
456,026
2,490,951
3,201,270
(494,955)
2,564,105
(1,713,046)
(568,228)
(330,439)
___________
$___________
36,277,264
___________
See Independent Auditor’s Report and Notes to Financial Statements
11
(1,497,572)
115,359
157,990
___________
$___________
31,803,170
___________
Notes to Financial Statements
Shenandoah Valley Electric Cooperative
December 31, 2015 and 2014
Note A – Nature of Operations and Summary of
Significant Accounting Policies
Nature of Operations
Shenandoah Valley Electric Cooperative (the “Cooperative”) is a memberowned, not-for-profit company organized to provide electric service to its
members essentially residing in the counties of Rockingham, Augusta,
Shenandoah, Clarke, Frederick, Highland, Page, Warren, and the City of
Winchester in the Commonwealth of Virginia.
Basis of Presentation
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
(GAAP), including GAAP for regulated operations.
December 31, 2015:
Transmission plant
Distribution plant
Load management equipment
General plant
Office furniture and equipment
2.75%
2.20 - 11.43%
5.93%
2.38 - 20.00%
20.00 - 33.00%
December 31, 2014:
Transmission plant
Distribution plant
Load management equipment
General plant
Office furniture and equipment
2.75%
2.86 - 9.12%
5.93%
3.00 - 10.00%
20.00 - 30.00%
Depreciation rates for the assets acquired from Potomac Edison Company
d/b/a Alleghany Power (PE) (Note P), which were used by PE and included
in their retail rates were used by the Cooperative. Prior to the implantation
of the new depreciation rates in 2015, these rates were as follows:
The system of accounts of the Cooperative are maintained in accordance
with the Uniform System of Accounts as prescribed by the Federal Energy
Regulatory Commission (FERC) for Class A and B electric utilities modified
for electric borrowers of the Rural Utilities Service (RUS) and the State
Corporation Commission of the Commonwealth of Virginia (SCC).
December 31, 2014:
Distribution plant
General plant
Regulatory Assets and Liabilities
The Cooperative complies with the accounting guidance set forth by the
Financial Accounting Standards Board (FASB) regarding the effect of certain
types of regulation. The FASB allows a regulated Cooperative to record
certain costs and credits that have been or are expected to be allowed in the
ratemaking process in a period different from the period in which the costs
would be charged to expense or income by a non-regulated enterprise.
Accordingly, the Cooperative records certain assets and liabilities that result
from the regulated ratemaking process that would not be recorded under
GAAP for non-regulated entities.
1.52 - 2.94%
2.38 - 20.00%
Materials and Supplies
Materials and supplies inventories are generally used for construction,
operation and maintenance work, and are not for resale. They are valued at
the lower of moving average unit cost or market.
Accounts Receivable
The Cooperative provides for the uncollectible accounts monthly, based on
a percentage of sales which past experience has indicated will be
uncollectible. When accounts are deemed to be uncollectible, they are
charged against the provision for uncollectible accounts.
Accounting Estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.
Advertising Costs
Advertising costs are expensed as incurred.
Revenues
The Cooperative records electric revenues as energy is delivered to consumers
on a monthly basis. The billing rate schedules of the Cooperative contain
provisions to either increase or decrease the consumers’ billing from the base
level billing schedules dependent upon the cost of the wholesale power
adjustment passed on from the vendor for electrical energy purchased for
resale. The base billing rates of the newly acquired PE territory, per order of
the SCC, were required to be the same rates which were billed or would have
been billed by PE except for the wholesale power adjustment clause which
was effective from July 1, 2011 until July 1, 2014. On July 5, 2015, the
Cooperative increased base billing rates as a result of a rate case
implementation approved by the SCC in 2014.
Electric Plant
Electric plant is stated at the original cost of construction, which includes
the cost of contracted services, direct labor, materials and overhead items.
Acquired plant was recorded based on information received pursuant to
purchase contracts as approved by the SCC. Contributions from others
toward the construction of electric plant are credited to the applicable plant
accounts.
When property, which represents a retirement unit, is replaced or removed,
the average cost of such property as determined from the continuing property
records is credited to electric plant and such cost, together with cost of
removal less salvage is charged to the accumulated provision for depreciation.
Maintenance and repairs, including the renewal of minor items of plant not
comprising a retirement unit, are charged to the appropriate maintenance
accounts, except repairs of transportation and service equipment are charged
to clearing accounts and redistributed to operating expenses and other
accounts.
Cost of Power
The Cooperative utilizes a deferred method of accounting for wholesale
power cost adjustments. Under this method, the cost of power is adjusted to
recognize as expense that portion of the pass-through power charge that is
billed to consumers. Any amounts collected in advance or not billed to
consumers are recorded as a deferred charge or deferred credit as applicable.
Depreciation
Provision for depreciation has been made by application of the straight-line
method to the original cost, by groups of depreciable properties in service. In
2015 a new depreciation study was implemented as approved by RUS and
the SCC. Current depreciation rates, which are estimated to amortize the
cost of existing plant over the service lives, were as follows:
Income Taxes
The Cooperative has been granted exemption from income tax under
Internal Revenue Service Code Section 501(c)(12). Accordingly, no
provision for income taxes has been made in the financial statements. The
tax years from 2012 to 2014 remain subject to examination by the taxing
authorities.
12
Cash and Cash Equivalents
The Cooperative considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.
Note E – Concentrations of Credit Risk
The Cooperative places its cash on deposit with financial institutions located
in the United States of America, which are insured by the Federal Deposit
Insurance Corporation (FDIC). The FDIC provides insurance coverage for
up to $250,000 of cash held by the Cooperative in each separate FDIC
insured bank and savings institution. From time to time, the Cooperative
may have amounts on deposit in excess of the insured limits. As of December
31, 2015, the Cooperative had approximately $14,879,000 of deposits that
exceed the insured limits.
Subsequent Events
Subsequent events have been evaluated through February 6, 2016, which is
the date the financial statements were available to be issued.
Note B – Assets Pledged
All assets are pledged as security for the long-term debt to RUS, National
Rural Cooperatives Finance Corporation (CFC), Federal Financing Bank
(FFB) and CoBank.
Concentrations of credit risk with respect to consumer accounts receivable
generally are limited due to the large number of consumers comprising the
consumer base. The Cooperative services ten consumers that represented
approximately 14% of total operating revenues for the years ended December
31, 2015 and 2014. Generally, the rate structure of the Cooperative is
designed in such a manner that all classes of consumers contribute equitably
to net margins.
Note C – Electric Plant
Listed below were the major classes of electric plant:
December 31,
2015
2014
Distribution plant
$ 381,447,857 $ 368,423,160
Acquisition adjustments
43,229,911
43,229,911
General plant
42,516,916
40,776,234
Transmission plant
5,582,976
5,459,485
____
_______
_____
______
Electric plant in service
472,777,660
457,888,790
Construction work in progress
17,977,122
11,419,073
____
_______
_____
______
$____
490,754,782
469,307,863
_______ $_____
______
Note F – Accounts Receivable
Accounts receivable consisted of the following:
Consumer accounts receivable
Other accounts receivable
Federal Emergency Management
Agency receivable
December 31,
2014
2015
$ 13,997,400 $ 15,368,231
1,589,551
395,490
242,161
___________
15,829,112
Less provision for uncollectible accounts ___________
855,303
$____
14,973,809
_______
In accordance with GAAP and FERC as adopted by the RUS, the
Cooperative has determined that it had no legal asset retirement obligations
for the years ended December 31, 2015 and 2014. Regarding non-legal
retirement costs, the Cooperative follows the regulatory principle of intergenerational cost allocation by including net salvage (gross salvage less cost
of removal) as a component of depreciation rates.
402,274
___________
16,165,995
826,148
___________
$____
15,339,847
_______
Note G – Other Current Assets
Other current assets consisted of the following:
Note D – Investments in Associated Organizations
Investments in associated organizations consisted of the following:
December 31,
2014
2015
Patronage capital:
ODEC
$ 42,878,952 $ 40,306,368
CFC
1,703,896
1,525,389
CoBank
205,417
214,655
Other
402,678
386,597
___________
_____
______
45,190,943
42,433,009
Capital Term Certificates (CTC):
Subscriptions (SCTC’s)
1,213,509
1,213,509
Loan (LCTC’s)
300,950
300,950
Loan (ZCTC’s)
588,704
598,566
___________
_____
______
2,103,163
2,113,025
Other:
TEC Trading, Inc.
470,365
470,365
Investment in building – Virginia,
Maryland, Delaware Association
of Electric Cooperatives
36,320
36,320
Membership fees
2,021
2,021
___________
___________
508,706
508,706
___________
_____
______
$____
47,802,812
45,054,740
_______ $_____
______
Prepayments
Interest receivable
December 31,
2014
2015
$
211,795 $
667,821
17,400
17,400
___________
___________
$ ___________
229,195 $___________
685,221
Note H – Deferred Charges
Deferred charges consisted of the following:
NRECA prepayment (Note N)
Acquisition costs (Note P)
Wholesale power cost adjustment
Other
Deferred fuel costs
December 31,
2014
2015
$ 5,473,408 $ 6,255,323
2,581,260
2,699,244
1,158,365
200,611
168,188
2,781,840
___________
____
_______
$ ____
9,413,644
11,904,595
_______ $____
_______
Note I – Patronage Capital
Patronage capital consisted of the following:
Assigned
Assignable
The capital term certificates invested in CFC are unsecured and
subordinated. The SCTC’s bear interest at an annual rate of 5% payable
semiannually and the LCTC’s bear interest at an annual rate of 3% payable
semiannually. The ZCTC’s are non-interest bearing.
Retired
December 31,
2014
2015
$ 175,860,043 $ 163,579,887
12,548,622
12,280,156
____
_______
____
_______
188,408,665
175,860,043
(62,142,324)
(58,457,253)
____
_______
____
_______
$____
126,266,341
117,402,790
_______ $____
_______
Under provisions of the long-term debt agreements and Title 7 of the Code
of Federal Regulations (Part 1717.617), the Cooperative may refund capital
to patrons without limitation if total equity is equal to or greater than 30%
of total assets and there are no instances of default. If equities are between
20% and 30% of total assets, general refunds are limited to 25% (adjusted
The investment in TEC Trading, Inc. represents an unconsolidated joint
venture with other members of ODEC. The Cooperative has a noncontrolling ownership interest that has been accounted for under the cost
method.
13
for returns to estates, which are not limited) of patronage capital or margins
received in the preceding year. Total equities and margins amounted to 31%
and 30% of total assets for 2015 and 2014, respectively.
In addition to the mortgage notes, the Cooperative had established unsecured
lines of credit in the amounts of $9,000,000 with CFC, $9,000,000 with
CoBank, and $2,000,000 with SunTrust Bank at variable interest rates. Total
aggregate borrowing between the three lines of credit is not to exceed
$9,000,000. At December 31, 2015 and 2014, there were no outstanding
balances against the lines of credit.
Note J – Other Equities
Other equities consisted of the following:
December 31,
2015
2014
$ 10,798,795 $ 9,865,916
2,149,518
2,109,818
____
_______
____
_______
$____
12,948,313
11,975,734
_______ $____
_______
Permanent equity
Donated capital
Under the terms of the loan agreements with RUS and CFC, there are
certain restrictions, which include requirements to maintain a TIER (times
interest earned ratio) of 1.25 and DSC (debt service coverage) of 1.25. As of
December 31, 2015 and 2014, the Cooperative was in compliance with these
requirements. There were also no restrictions on the return of capital to
patrons as discussed in Note I.
Note K – Long-Term Debt
Long-term debt consisted of the following:
December 31,
2015
FFB
Mortgage notes, fixed
Advanced payments, unapplied
CFC
Mortgage notes, fixed
RUS
Mortgage notes, fixed
Advanced payments, unapplied
CoBank
Mortgage notes, fixed
2014
$ 196,297,813 $ 175,624,160
(2,436,525)
(4,039,204)
____
_______
____
_______
193,861,288
171,584,956
71,664,705
75,130,386
18,319,465
____(429,975)
_______
17,889,490
18,878,112
____(551,689)
_______
18,326,423
1,730,713
____
_______
285,146,196
4,309,000
____
_______
$____
280,837,196
_______
Less current maturities
Note L – Other Current and Accrued Liabilities
Other current and accrued liabilities consisted of the following:
December 31,
2014
2015
Accrued taxes and amounts withheld
from employees
$ 751,823
$ 879,567
Accrued vacation
457,071
366,324
Accrued salaries and wages
235,140
751,371
Deferred compensation
90,000
105,000
_________
_________
$ _________
1,534,034
$ _________
2,102,262
Note M – Deferred Credits
Deferred credits consisted of the following:
1,798,555
____
_______
266,840,320
3,125,000
____
_______
$____
263,715,320
_______
Advance pole rentals
Consumer advances
Long-term debt payable to RUS is represented by mortgage notes with rates
ranging from 2.00% to 5.23%. The notes generally have 35-year maturity
periods, maturing 2029 to 2037, and are payable on an installment basis.
Principal and interest payments are due monthly in the amount of
approximately $121,000. During 2015, the Cooperative elected to participate
in the RUS cushion of credit program, whereby a portion of principal and
interest payments are prepaid to RUS and earn interest at a rate of 5.00%.
For the year ended December 31, 2015, the Cooperative had prepaid
approximately $2,900,000, which has been reflected in the financial
statements as a reduction of long-term debt payable to RUS and FFB.
Note N – Retirement Plans
Defined Benefit Retirement Security Plan
The National Rural Electric Cooperative Association (NRECA) Retirement
Security Plan (RS Plan) is a defined benefit pension plan qualified under
Section 401 and tax-exempt under Section 501(a) of the Internal Revenue
Code. It is a multiemployer plan under the accounting standards. The plan
sponsor’s Employer Identification Number is 53-0116145 and the Plan
Number is 333.
A unique characteristic of a multiemployer plan compared to a single
employer plan is that 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.
Long term debt payable to CoBank is represented by a mortgage note payable
with interest at 4.98%, maturing in 2029. Principal and interest installments
are due monthly in the amount of approximately $13,000.
Long-term debt payable to FFB is represented by mortgage notes with rates
ranging from 2.34% to 3.88%. The notes mature from 2045 to 2046. Principal
and interest installments are due quarterly in the amount of approximately
$2,730,000. The Cooperative had unadvanced funds of $84,315,000 available
from FFB at December 31, 2015.
The Cooperative’s contributions to the RS Plan in 2015 and in 2014
represented less than 5 percent of the total contributions made to the plan
by all participating employers. The Cooperative made contributions to the
plan of approximately $2,418,000 and $2,367,000 in 2015 and 2014,
respectively. There have been no significant changes that affect the
comparability of 2015 and 2014 contributions.
Long-term debt payable to CFC is represented by mortgage notes with rates
ranging from 2.25% to 6.75%. The notes mature from 2016 to 2046. Principal
and interest installments are due quarterly in the amount of approximately
$1,800,000.
For 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 percent funded at January 1, 2015 and January 1, 2014 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.
Approximate annual maturities of existing long-term debt were as follows:
Year Ending December 31,
2016
2017
2018
2019
2020
Thereafter
December 31,
2014
2015
$ 242,629
$ 235,666
160,142
497,544
_________
_________
$ _________
402,771
$ _________
733,210
$
4,309,000
7,640,000
8,162,000
8,140,000
7,493,000
249,402,196
$ __________
285,146,196
14
At the December 2012 meeting of the I&FS Committee of the NRECA
Board of Directors, the Committee approved an option to allow participating
cooperatives in the RS Plan to make a contribution prepayment and reduce
future required contributions. The prepayment amount is a cooperative’s
share, as of January 1, 2013, of future contributions required to fund the RS
Plan’s unfunded value of benefits earned to date using RS Plan actuarial
valuation assumptions. The prepayment amount will typically equal
approximately 2.5 times a cooperative’s annual RS Plan required
contributions as of January 1, 2013. After making the prepayments, for most
cooperatives, the billing rate is reduced by approximately 25%, retroactive
to January 1, 2013. The 25% differential in billing rates is expected to
continue for approximately 15 years. However changes in interest rates, asset
returns and other plan experience different from expected, plan assumption
changes and other factors may have an impact on the differential in billing
rates and the 15 year period.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value
due to the short maturity of these instruments.
Accounts Receivable
The carrying amount of accounts receivable approximates fair value due to
the short period of time amounts are outstanding.
Investments in Associated Organizations
Fair value of capital term certificates and member capital certificates was
determined by computing the present value of estimated future cash flows,
discounted at the long-term treasury rate of 3.01% and 2.75% for the years
ended December 31, 2015 and 2014, respectively. The fair value of patronage
capital is not determinable since no legal obligation exists to retire capital
credits.
The fair value of the cost method investment is not estimated since there are
no identified events or changes in circumstances that may have a significant
adverse effect on the fair value and it is not practicable to estimate fair value.
The carrying value of memberships approximates fair value.
On March 29, 2013 the Cooperative made a prepayment of $7,819,154 to
the NRECA RS Plan. The Cooperative elected to finance the prepayment
through a draw on an approved FFB loan with a fixed interest rate of 3.21%.
Interest expense associated with the prepayment loan is being accounted for
in accordance with RUS. The Cooperative is amortizing the prepayment
over 10 years.
Accounts Payable
The carrying amount of accounts payable approximates fair value due to the
short period of time amounts are outstanding.
Deferred Income Plan – 401(k)
In addition to the NRECA Retirement and Security Program, substantially
all employees of the Cooperative are eligible to participate in the NRECA
SelectRE pension plan, a defined contribution multi-employer deferred
income plan qualified under Section 401(k) of the Internal Revenue Code.
The Cooperative’s required contribution to the Plan and its net pension cost
was approximately $475,000 and $442,000 for the years ended December 31,
2015 and 2014, respectively.
Long-Term Debt
The carrying amount of the Cooperative’s long-term debt includes certain
interest rates that are below quoted market prices for the same or similar
issues. Therefore, the fair value of long-term debt is estimated based on
current market prices for the same or similar issues offered for debt of the
same and remaining maturities which was 5.85% and 5.40% for the years
ended December 31, 2015 and 2014, respectively.
Note O – Fair Value of Financial Instruments
The Cooperative has recorded all financial instruments based on the carrying
amount (book value) in the financial statements in accordance with GAAP.
According to guidance from FASB, the Cooperative is required to disclose
the fair value of financial instruments. Accordingly, the following methods
and assumptions were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
Consumer Deposits
The carrying amount approximates fair value due to the relatively short
maturity of the deposits.
The estimated fair values of the Cooperative’s financial instruments were as
follows:
December 31,
__________________________________________________________________________
2015
2014
_________________________________
_________________________________
Fair Value
Carrying Value
Fair Value
Carrying Value
Assets:
Investments in associated organizations:
Capital term certificates
$
Liabilities:
RUS, CFC, FFB and CoBank notes payable
including current portion
$ 285,146,196
2,103,163
15
$
2,554,000
$ 230,932,000
$
2,113,025
$ 266,840,320
$
2,719,000
$ 245,121,000
Note P – Acquisition
During 2010, the Cooperative completed an asset purchase agreement with
PE for the distribution plant assets and approximately 52,000 electric service
accounts located in the Commonwealth of Virginia. At December 31, 2015,
the Cooperative had returned all rate mitigation payments to acquired
members as a result of the stipulation agreement approved by the SCC at the
time the purchase was approved. At December 31, 2014, the Cooperative
had approximately $1,960,000 of accounts payable for rate mitigation
payments due to acquired members.
The Cooperative was a member of the Virginia, Maryland and Delaware
Association of Electric Cooperatives, an association organized to serve rural
electrification in those three state areas by providing group efforts on a
regional basis in public and member relations, government affairs, human
resource development, technical services, and legal services.
Note R – Commitments
Purchased Power
The Cooperative, as a member of ODEC, an organization composed of
electric cooperatives in Virginia, Maryland and Delaware, has entered into a
long-term contract with ODEC for the acquisition of wholesale power
through ODEC as have other members of the organization. The cost of
wholesale power purchases through ODEC may increase or decrease based
upon rates established by the Board of Directors of ODEC.
Note Q – Related Party Transactions
The Cooperative was a member of the following organizations and conducted
business transactions during the current and prior years as set forth below:
The Cooperative was a member of the CFC and CoBank, national financing
organizations, and had investment assets and mortgage notes payable at
various interest rates and maturities.
Construction Contracts
The Cooperative had approximately $3,700,000 associated with various
contracted construction projects at December 31, 2015 that were not yet
completed.
The Cooperative, as a member of the ODEC, an organization composed of
electric cooperatives, has entered into a contract for the acquisition of
wholesale power. The rates for wholesale power sales to members are
determined by the Board of Directors of ODEC.
Officers’ and Directors’ Compensation
Officers’ Total Compensation:
Non-Officer Directors’ Compensation
$699,053.55
$150,137.85
16
Frederick
City of
Winchester
Clarke
Warren
Shenandoah
Page
Rockingham
Highland
Augusta
“We exist to serve our member-owners”
P.O. Box 236 | 147 Dinkel Avenue | Mt. Crawford, Virginia 22841-0236 | www.svec.coop
This institution is an equal opportunity provider and employer. SVEC supports our armed services and veterans in employment opportunities.