Reaching
New
Heights
2014
Annual Report South River-0414 AR.indd 1
3/12/14 12:33 PM
Board of Directors
Back Row: Carlton Martin, treasurer; William E. Tew Jr.; and George Williams. Front Row: Dr. E. Sue Godwin-Baker; Clifton McNeill Jr.; Francis Clifton, president; Kelly Harrington, vice president and Dorcas Fisher, secretary. Inset left: Sue Flowers.
South River-0414 AR.indd 2
3/12/14 12:33 PM
2012
Financial Highlights
Assets Electric Plant at Original Cost Less Depreciation Net Plant Cash Investments Accounts Receivable Materials and Supplies Prepayments, Accrued Assets & Deferred Debits Total Assets
2013
$209,534,821 52,360,215 $157,174,606 4,714,319 15,521,411 10,592,442 1,661,173 1,814,382 $191,478,333
$216,510,177 55,374,371 $161,135,806 5,180,873 18,389,356 11,839,861 1,569,779 5,895,584 $204,011,259
Liabilities Long-term Debt - RUS, CFC Consumer Deposits Accounts Payable Deferred Credits Other Liabilities Membership Fees Patronage Capital Other Equities Total Liabilities
$ 91,180,250 2,582,081 6,931,751 2,253,870 21,228,725 70,230 67,231,426 $191,478,333
$ 96,745,327 2,521,036 6,378,259 2,740,655 22,821,859 67,675 72,736,448 $204,011,259
Operating Statement Operating Revenue & Patronage Capital Expenses Cost of Purchased Power Distribution Expense Operations Consumer Accounts Expenses Customer Service and Information Expenses Administration General Expenses Maintenance Expenses Depreciation Amortization Taxes Interest on Long-Term Debt Total Cost of Electric Service
$ 92,259,918 58,247,985 2,179,640 2,534,152 2,641,178 3,996,351 5,369,582 6,142,198 2,997,618 4,729,775 $ 88,838,479
$ 94,746,262 59,469,675 2,608,578 2,716,117 2,607,927 4,284,550 5,658,775 6,443,308 3,059,382 4,612,444 $ 91,460,756
Margins Operating Margins and Patronage Capital Non-Operating Margins Other Capital Credits and Patronage Dividends Total Operating and Non-Operating Margins
$ 3,421,439 434,788 1,451,052 $ 5,307,279
$ 3,285,506 522,160 1,471,404 $ 5,279,070
unaudited
South River-0414 AR.indd 3
3/12/14 12:33 PM
New CEO: Chris M. Spears On May 1, Chris M. Spears, 51, will officially assume the position as South River EMC’s executive vice president and chief executive officer (CEO).
“We knew immediately that Chris was the right fit for South River EMC because he has a proven track record of leadership and personnel development,” said Francis Clifton, president, South River EMC Board of Directors. “He has demonstrated his ability to improve member satisfaction while providing strength of leadership and support. Additionally, we respect his Christian values and how he uses them as guideposts in every facet of his life.” Spears has extensive experience in many aspects of electric cooperative operations. He has served as an apprentice lineman for Spoon River Electric Cooperative, vice president of office services for Shelby Electric Cooperative and as general manager and executive vice president at Osceola Electric Cooperative and MJM Electric Cooperative in Carlinville, Illinois. Spears holds both bachelor’s and master’s degrees in political science, with concentrations in public service from Illinois State University. He is a graduate of the National Rural Electric Cooperative Association’s Management Internship Program and is a Certified Key Account Executive. “South River EMC is truly a premier electric cooperative and I am very thankful,
South River-0414 AR.indd 4
honored and humbled to have been selected as the Cooperative’s new CEO,” said Spears. “My professional career has revolved around providing service, and it has always been a passion of mine to provide excellent service. “I am anxious to begin working with the board of directors, management and all of the employees of South River EMC as we continue a commitment of excellence where the number one priority and focus is the member-owners of the Cooperative.” Spears is very active in the community with his church, as well as, organizations focused on economic, community and civic development. Spears and his wife, Sandy, have been married for 27 years and have three children: Ashley, 19; Austin, 16; and Amanda, 11. Spears’ brother lives in North Carolina so he and his family have visited often and are now looking to purchase a home and settle in as active members of the South River EMC community.
3/12/14 12:33 PM
Retiring CEO: Buddy G. Creed Buddy G. Creed, 71, has dedicated 45 years of his life to South River EMC, 18 of those years serving as executive vice president and chief executive officer, CEO. As he heads into retirement he is proud of his achievements and leaves confident that the Cooperative is positioned for continued success. Creed, a native of Surry County, joined South River EMC as a systems engineer in 1969. He was later promoted to manager of operations and engineering and, in 1996, named CEO upon the retirement of Marvin O. Marshall. Throughout his tenure, Creed has seen tremendous changes in the Cooperative and the industry. “When I came to work here in 1969 our system was in poor condition and our equipment limited. Marvin Marshall had just been named CEO and together we put together a workplan to bring the system up to par to ensure we provided reliable and safe electric service to our growing membership,� said Creed. Although Creed has many points of pride throughout his illustrious career, his fondest memories are the growth of the Cooperative under his leadership and the formation of Sandhills Utility Services LLC, SUS.
South River-0414 AR.indd 5
Creed was an integral part of the creation of SUS, which owns, operates and maintains the electric distribution system on Fort Bragg. SUS is owned by four electric cooperatives, including South River EMC. Since the 50-year contract was signed in 1999, SUS has assumed other responsiblities such as metering, sportsfield lighting and generator maintenance. He has also overseen the construction of two new offices to better meet the needs of the growing cooperative. Creed knows he is leaving the Cooperative in good shape for the next CEO and that gives him comfort. After retirement, Creed will enjoy his time with his wife of 49 years, Lynda. The Creeds have two sons; Chris, who lives in Florida with his wife and two children; and Clint, who lives in Harnett County with his wife and two children. Creed plans to spend time with family, and to squeeze in as much hunting and fishing as possible.
3/12/14 12:33 PM
Executives’ Report
The past year was one marked with adjusting to increasing industry cost pressures and preparation for the retirement of our CEO of 18 years. After an exhaustive nationwide search, we found the one person we know is the best fit for the members and employees of South River EMC. A good portion of the year was also spent in the midst of a cost of service study. The final result was that our rates needed to be adjusted to meet the growing cost of doing business. The biggest driver is the cost of purchasing power. Raw natural resource costs have not risen significantly, but the costs associated with meeting a myriad of federal regulations has caused fuel prices to rise. South River EMC has not been immune to the economic pressures of the past couple of years. Although the weather extremes of 2010 and 2011 enabled us to return nearly $13 million to members in the form of energy credits and through annual capital credit refunds, the pressure on rates the last couple of years has been tremendous. There are three primary drivers of rising utility rates. Utilities have been heavily affected by regulations that are making it difficult to use cheaper fuels to generate electricity and many renewable energy resources are more expensive and intermittent in availability.
South River-0414 AR.indd 6
Additionally, the country’s “grid” is old and in desperate need of upgrades. This cost will be borne by all rate payers across the country. We have also made substantial investments in technology to meet changing member demands and expectations. While we are all working to mitigate the impact of these drivers, when combined, this set of challenges gave way to the need for a change in rates. Once this comprehensive study was completed it was determined that our rate structure was no longer sufficient to meet our business and financial obligations. These increases have not been sudden – they have come on over the past couple of years. We have been using a wholesale power cost adjustment (WPCA) on bills to offset the difference. November 1, South River EMC implemented a modest rate change. Although our rates changed, we continue to be committed to taking measures to control costs, especially by leveraging our investments in technology to ensure we are providing you with quality service at the most affordable cost.
3/12/14 12:33 PM
As part of our ongoing commitment to technology, South River EMC is deploying a mobile workforce. By installing computers in the Cooperative vehicles, field personnel are able to receive work directly in the field, which enables them to complete work quicker and more efficiently. During the past year, there has been a lot of discussion regarding activity in Washington DC that could lead to much higher electric rates. The EPA is currently drafting regulations that will be imposed on new and existing coal-fired generation plants. These regulations are being drafted at the direction of President Obama who states the Clean Air Act as the basis for such regulations. Using the Clean Air Act for the purpose of addressing climate change is an overreach of historic scale. The law was never intended to be used this way. U.S. Rep. John Dingell, one of the Act’s principal authors, famously said using the Clean Air Act to regulate greenhouse gases would result in a “glorious mess.”
end we are seeking solutions by: • Leading the electric utility industry in the deployment and use of demand response, grid modernization and other technologies that enable more efficient energy management. •
Studying the feasibility of ground-breaking multi-pollutant control technologies for coal-fired power plants, which builds on our strong record of achievement in producing and delivering cleaner energy.
•
Working hard to build a strong foundation for an affordable, secure and clean energy future.
As we move forward into 2014 with new leadership, you can count on your cooperative to always look out for you. We might have a new CEO, but our committment to you is unchanged. We are as focused as ever on ensuring our members are our top priority.
Electric co-ops support a real “all of the above” energy strategy, not just a rhetorical one, in our effort to provide reliable, affordable power 24 hours a day, 365 days a year. While the White House pushes regulatory mandates, not-for-profit, consumer-owned electric co-ops have long argued for a balanced, technically realistic, and economically feasible approach to environmental and climate change policy. To that
South River-0414 AR.indd 7
3/12/14 12:33 PM
17494 US 421 S PO Box 931 Dunn, North Carolina 28335
South River-0414 AR.indd 8
3/12/14 12:33 PM