2021 Dixie Electric Cooperative Annual Report

Table of Contents

Executive Report 3

Board of Trustees

Management Team

Emerging from the Pandemic 6

Member Services 6

Member Assistance

System Growth

System Maintenance & Reliability

2021 Facts and Figures 9

2021 Balance Sheet

Secretary-Treasurer’s Report 11

Financial Report 11

2021 Statement of Operations 11

Distribution of Expense Dollar 11

Executive Report

Emergence and growth seemed to be the common theme for your cooperative during 2021. The past few years have brought about changes for everyone, both personally and professionally. Most everyone was impacted by the pandemic in some way, with many losing friends and loved ones to COVID-19. Some of the challenges we faced initially with the pandemic in 2020, and the resulting changes we implemented with our business operations, were carried over into 2021. However, the year 2021 also revealed an emergence from the pandemic environment through significant growth in all sectors of our membership including commercial, industrial and residential development.

Dr. Fritijof Capra, an Austrian author and physicist, once said, “The phenomenon of emergence takes place at critical points of instability that arise from fluctuations in the environment, amplified by feedback loops.” The pandemic undisputedly brought about instability across the world, and yet through persistence and resilience we are emerging from it with greater knowledge and hope for a brighter future.

Our 2021 Annual Report includes data from various cooperative areas of operation. This data represents much of the work performed on a daily basis by our team to ensure we are achieving our mission of safely providing you with economical and reliable electric power, while offering you superior member service.

As we continue to emerge and grow, we want you to know what a privilege it is to serve you, our members. Despite the challenges and changes that occur, your cooperative is always looking out for you.

R. Gary Harrison President/CEO

Dixie Electric Cooperative BOARD OF TRUSTEES

THOMAS ELLIS

DISTRICT 1, SEAT 1

Thomas Ellis, and his family, have owned and operated Priester’s Pecans for many generations. He grew up in the business, working as a laborer in the pecan shelling plant, working and supervising on the production side, overseeing customer service, handling computer management, and eventually managing the corporate responsibilities as president of the company. He also owns and operates Triple E Farm, which raises both cattle and poultry. Ellis is very active in agricultural and economic development organizations in the community and throughout the state. He is also actively involved in his church serving in leadership capacities and participating in various mission trips. He received his Board Leadership Certificate, is a Credentialed Cooperative Director, and is currently pursuing his Director Gold certification.

TOM JAMES

DISTRICT 1, SEAT 2

Tom James has a bachelor’s degree in civil engineering from MIT and a master’s degree from the University of Houston. He served as a lieutenant in the United States Navy during Vietnam. James was in the heavy industrial construction busi ness for over 35 years, working with com panies such as Shell Oil, ORBA Corpora tion, Blount Energy Resource Corporation, and Zachry Industrial, Inc. Through this experience he has firsthand experience in all types of power generation facilities, cement plants, steel man ufacturing, and other large industrial projects. He has held the position of secretary/treasurer, vice chairman, and chairman of Dixie’s board of trustees. He received his Board Leadership Cer tificate, is a Credentialed Cooperative Director, and completed the Director Gold Credential Program through NRECA.

JAMES SIKES

DISTRICT 1, SEAT 3

James Sikes has a bachelor’s degree in agricultural education from Auburn University. He is the owner of Sikes & Kohn’s Country Mall, a widely recognized business that was established in 1970 and has been a vital part of the community for more than 52 years. He has served on Dixie’s board since 1986 and has held the position of secretary/treasurer and vice chairman. He has previously served on the board of Cooperative Utility Services, LLC and PowerSouth Energy Cooperative. He has served as chairman of the cooperative’s buildings and grounds committee, and served on both the capital credits and wage and salary committees.

HELENA DUNCAN

DISTRICT 2, SEAT 4

Helena Duncan received her bachelor’s degree in fi nance from Auburn University Montgomery. She has over 30 years of experience in the banking indus try with the majority of her time serving in executive management positions. Duncan currently serves as senior vice president of operations and investor re lations with the Business Council of Alabama where she is responsible for building and growing member relations and developing strong partnerships within the business communi ty. She also oversees accounting, communications, human resources, mar keting and membership. Duncan is actively involved as a community leader. She has served as chairman of the board for Saint James School, and as a board member for the Montgomery Area Chamber of Commerce, Child Protect, Women in Business Task Force, Central Alabama Community Foun dation, and the Board of Governance for Committee of 100.

KIM JACKSON

VICE CHAIRMAN

DISTRICT 2, SEAT 5

Kim Jackson has a bachelor’s degree from Ohio Uni versity and spent his entire professional career with PricewaterhouseCoopers, from which he retired in 2010. As a financial services assurance partner, he specialized in the audit of public company banks, and worked with other industries such as construc tion and real estate development. He played a lead ing role in the development of the Firm’s internal audit services practice, and assisted numerous companies in their implementation of the Sarbanes-Ox ley internal control requirements. Following retirement, Jackson served as business manager at Montgomery Catholic Preparatory School until 2019. He has served on Dixie’s board since 2015. He received his Board Leader ship Certificate, his Director Gold certification and is a Credentialed Coop erative Director.

JOHN LIVINGS

DISTRICT 2, SEAT 6

John Livings is a practicing CPA, and is the founder and president of Livings, Lankford, Lambert & Co. CPAs. He is an active member of the Alabama Society of CPAs and the American Institute of CPAs. He is also president and owner of Designer Homes, Inc., as well as owner, manager and partner in Waugh Properties, LLC. He has served on Dixie’s board since 2006 and has held the position of secretary/ treasurer, vice chairman, and chairman. He has also served on the board of the Alabama Rural Electric Association, Cooperative Utility Services, LLC, and PowerSouth Energy Cooperative. He is chairman of the capital credits committee, and serves on the governance, wage and salary, renewables and rates, and scholarship committees. He has completed the NRECA Credentialed Cooperative Director, Board Leadership and Director Gold programs.

ANDREW CALLAWAY CHAIRMAN

DISTRICT 3, SEAT 7

Andrew Callaway received his bachelor’s in agriculture and holds a doctor of veterinary medicine degree from Auburn University. Following graduation from Auburn, Callaway served as a captain in the U.S. Air Force where he assisted the Navy with the inspection of food going into the Atlantic nuclear submarine fleet. Callaway opened a veterinary clinic in Eufaula following his military career, and practiced there for 25 years. He later moved his practice to Hurtsboro when he returned to live in his homeplace in Roba. This is the same home his parents lived in when his father became a charter member of Dixie. Callaway continues to practice veterinary medicine today. He has held the position of secretary/treasurer, vice chairman and is currently the chairman of Dixie’s board of trustees. He received his Board Leadership Certificate, is a Credentialed Cooperative Director and completed the Director Gold Credential Program through NRECA.

ALBERT PERRY

DISTRICT 3, SEAT 8

Albert Perry has served on Dixie’s board since 1996. He currently serves on the cooperative’s scholarship committee. He has completed the NRECA Credentialed Cooperative Director and Board Leadership programs. He owns an agricul tural farming operation, and has been involved with the Alabama Cooperative Extension Agency for many years. He is also an active member of Hardaway AME Church. He volunteers many hours and leads fundraising efforts on an annual basis for numerous community organizations includ ing Highway 51 Volunteer Fire Department and the Bullock County Sheriff Department’s Cops for Kids program. He also helps coordinate a quar terly county-wide cookout to instill leadership skills among the youth in the area. He serves on both the renewable and rate committee and the scholarship committee.

JIMMY ELLIS

SECRETARY/TREASURER

DISTRICT 3, SEAT 9

Jimmy Ellis served as an active member of the United States Navy for three years, and continued his military service in reserve status for an additional 19 years as a training instructor. He later earned his State of Alabama Trade Teacher Certification and worked as a career tech instructor for the Alabama Department of Youth Services, eventually retiring with 28 years of service. While working as a career tech instructor, he also began serving as fire chief with the Town of Shorter Alabama Volunteer Fire Department, where he served until his retirement in mid-2022. He has served on Dixie’s board since 2015. He received his Board Leadership Certificate, his Director Gold certification and is a Credentialed Cooperative Director.

Management Team

GARY HARRISON President/CEO

MIKE BARLOW Chief Financial Officer

ERNIE FAULKNER Vice President, Member Services, Marketing & Economic Development

BRANDON JOHNSON Vice President, Engineering & Operations BRENT MOFFETT Vice President, External Affairs & Special Projects

MICHELLE WARD

Vice President, Human Resources & Administrative Services

Emerging From The Pandemic

As we entered 2021, we were still operating under many COVID-19 safety protocols. Our office lobbies remained closed, but our drive thru at both offices remained operational throughout the pandemic. We also made modifications to numerous processes and procedures to better accommodate members who felt more comfortable transacting business online.

Despite the pandemic, we regularly engaged in person-to-person business transactions while assisting members with taking applications for service, signing up for prepaid electric service, making payments, answering questions about their accounts, taking service order requests and directing them to resources for financial assistance.

In the field, crews continued to perform service orders and construct new services. Our right of way crews continued to work maintaining areas around our power lines to improve system reliability. Engineers met with members to create plans for new commercial, industrial and residential projects. COVID-19 may have temporarily slowed the world down, but we are excited to share that 2021 was a year of emergence and growth for your cooperative.

MEMBER SERVICES

Your cooperative currently provides over 20,000 members with electricity to more than 25,000 businesses and homes in portions of eight Alabama counties. As you would imagine, this number of members equates to a significant amount of member interaction throughout the year.

In 2021, your cooperative received a total of 423,630 payments, an increase of more than 45,000 payments over the past five years. Of these payments, over 77,000 payments were processed by our member service representatives. The remainder of the payments were made utilizing one of our many free electronic payment methods or through our lockbox service. Our SmartApp has become the top payment method, with the total number of payments by this method tripling over the past five years to 91,879 payments. This method is followed closely by our automated phone system payments which totaled 85,178 in 2021.

Our member service representatives also received almost 44,000 phone calls during 2021, which is an average of almost 3,700 calls per month. The phone calls coupled with the payments processed

in our offices equates to our representatives having personal one-on-one interaction with approximately 10,000 members each month, or almost one-half of our membership.

While we are constantly looking for alternative payment methods to offer greater convenience to our members, your cooperative is also committed to the communities we serve by continuing to keep our local offices open to maintain that personal touch through member engagement.

MEMBER ASSISTANCE

During 2021, we continued to work with members who were struggling financially as they were beginning to return to work and emerge from the pandemic. We referred members to community programs designed to provide financial assistance with utility bills. Through these resources, we received

a total of 1,043 payment guarantees totaling $397,255.89.

In late 2020, the moratorium on collection and disconnection of utilities was lifted and the cooperative returned to normal business practices with some modifications to assist our members who were struggling financially due to the pandemic. In October 2020, we modified our monthly billing process to allow members more time to submit their payments each month without incurring a late charge and to avoid potential disconnection of service. We also established our CARE Agreements which allowed members to make monthly payments towards past due balances on their accounts. These payments were spread over a 12-month period and finalized in late 2021.

As a result of our member referrals for assistance and our CARE Agreements, we saw a $58,000 reduction in write-offs between

2020 and 2021. In 2021, our total write-offs were $56,565.51, which represented 250 accounts.

Our energy auditor was also busy assisting members who had questions about any fluctuations in their energy use. Utilizing our automated meter reading system, we were able to pull usage data to help members pinpoint high usage periods throughout the day and narrow down the cause of their fluctuations. During 2021, we performed a total of 116 residential and five commercial inperson energy audits. This involved using our infrared camera to take temperature readings throughout the business or home and evaluating HVAC systems and insulation quality to make energy efficiency recommendations. Members were also referred to our free online usage monitoring service to receive daily usage alerts to help them quickly make adjustments when their usage escalated.

SYSTEM GROWTH

The residential housing market made a strong comeback beginning in 2021. We worked with developers in five residential subdivisions with installation of services to a total of 315 new lots. In addition, we met with numerous developers who were in the planning stages of new subdivisions scheduled to launch in 2022.

The year 2021 also brought commercial project growth to our area with the addition of three commercial businesses in EastChase including an insurance business office, a restaurant, and a retail establishment. Plans call for additional commercial growth in this area during 2022.

Finally, this past year also showed growth in the industrial sector with the expansion of several

existing industrial members. Three automotive suppliers – Arkal Automotive USA and Shinhwa Auto USA Corp located in Auburn Technology Park West, and Daehan Solutions, located in Lowndes County Industrial Park – completed expansion projects in 2021. Industrial Partners Rental Building located in the Montgomery Industrial Park also expanded their operations last year.

SYSTEM MAINTENANCE & RELIABILITY

System integrity is crucial in maintaining the level of reliability you expect to receive from your cooperative.

A significant amount of time is spent planning for your future electric needs by evaluating our current system, anticipating future growth and working with PowerSouth Energy Cooperative, our power supplier, to ensure they have adequate generation capacity to meet the future electric load demand on our system.

Our engineering team and members of PowerSouth’s planning team work together to regularly develop both a four-year and longrange work plan for your cooperative. In 2021, crews completed two major system upgrades to our electric system. The first project involved upgrading 1.8 miles of three-phase lines serving areas off of our Union Springs substation. The second project included the conversion and upgrade of two miles of singlephase line to three-phase lines in the Old Pike Road area.

In addition to addressing our future needs, our team performs regularly scheduled inspections of our system to develop plans for maintenance of our existing facilities. In 2021,

our crews inspected 6,254 poles and replaced a total of 985 poles. They also inspected 2,617 meters and 432 padmount transformers.

Our extensive vegetation management program includes the use of heavy-duty clearing and trimming equipment to remove large trees and growth that can potentially jeopardize power lines, paired with a herbicide application process to improve the aesthetics of the right of way. Through this program, crews cleared and trimmed 397 miles of right of way in 2021 and applied herbicide along 868 miles of right of way to promote the growth of green plants and eliminate wood stems and thick undergrowth.

While we would prefer that you have electricity 100 percent of the time, outages are unfortunately something that all utilities experience at some point in time. We analyze our outage data annually to improve any

Figures

areas we can by maintaining and upgrading equipment; however, there are just some causes that are completely beyond our control. In those instances, our crews work diligently to safely restore power as quickly as possible. In 2021, our overall system reliability for the year was 99.94 percent.

BALANCE SHEET

As of December 31, 2021

ASSETS 2021

Utility Plant

Electric plant in service, at cost $ 149,555,846

Construction work in progress 488,201

Total utility plant 150,044,047

Less: Accumulated provision for depreciation 35,308,838

Net utility plant 114,735,209

Other Assets and Investments

Investments in associated organizations 25,855,881

Investments in Cooperative Utility Services 1,725,617

Other investments 6,991

Non-utility property 1,365

Total other assets & investments 27,589,854

Current Assets

Cash 7,304,447

Accounts receivable 5,299,614 Materials and supplies 1,214,768

Other current assets 70,126

Total current assets 13,888,955

Deferred Charges 224,439

Total Assets $ 156,438,457

LIABILITIES AND OTHER CREDITS 2021

Equities

Memberships

$ 108,452

Patronage capital 64,787,975

Other equities 1,370,719

Total equities 66,267,146

Long-Term Debt

Mortgage notes payable 69,085,374

Less: Current maturities 2,900,747

Total long-term debt 66,184,627

Current Liabilities

Current maturities on long-term debt 2,900,747

Accounts payable 3,605,311

Consumer deposits 4,855,281

Accrued liabilities 5,293,952

Total current liabilities 16,655,291

Deferred Credits 1,254,841 Other Liabilities 6,076,552

Total Liabilities and Other Credits $ 156,438,457

NOTICE:

The financial information provided is part of the financial statements for the year ended December 31, 2021, which contained an unmodified auditor’s opinion. A copy of the financial statements is retained at the Cooperative’s office.

Distribution of Expense Dollar By Percentage

This graph provides a breakdown of our expenses by category and percentage. As you can see, the greatest expense incurred by your cooperative is purchased power. Power cost accounts for 63 percent of our expenses.

Report of the Secretary-Treasurer

The board of trustees of Dixie Electric Cooperative has examined the balance sheet and financial statements for Dixie Electric Cooperative for the fiscal year ending December 31, 2021. All subsidiary records and accounting procedures of the cooperative are kept in accordance with the Uniform System of Accounts as prescribed by the Rural Utilities Service. Your board of trustees reviews monthly statements. In turn, an independent audit has been performed by Gruenloh Hardy and Associates, P.C., Certified Public Accountants, on all cooperative financial records on a fiscal year basis as of December 31 for the preceding 12 months. Additional reviews are made periodically by the Rural Utilities Service for assuring compliance with required accounting procedures and mortgage requirements.

Jimmy Ellis Secretary-Treasurer

Statement of Operations

Revenue 2021

Electric Revenue $63,915,608

Other Operating Revenue 739,439

Total Revenue 64,655,047

Expenses

Cost of Purchased Power 39,822,852

Operations & Maintenance Expense 7,333,500

Consumer Accounts & Sales Expense 3,702,928

Administrative & General 3,493,732

Depreciation 4,364,535

Tax Expense 2,549,428

Interest Expense 2,343,956

Total Cost of Electric Service 63,610,931

Operating Margins 1,044,116

Non Operating Margins 618,001

Generation & Transmission Capital Credits 806,628

Other Capital Credits 212,047

Patronage Capital $ 2,680,792

Financial Report

Monies invested in system improvements and routine construction during the past year resulted in an increase in net utility plant of 1.6 percent. Kilowatt-hour sales increased 4.3 percent from 2020, while annual growth in consumers was slightly higher in 2021, increasing by 2.0 percent. The increase in kilowatt-hour sales can be attributed to changes in weather patterns, growth in the number of member owners served, as well as restrictions being lifted on businesses due to the Covid-19 pandemic.

Purchased power, or wholesale power, is the single largest component of our rate. This expense comprises the cost of generating the electricity we provide to our member-owners (including generating fuel, capital expenses associated with constructing and operating power plants, and transmission costs to deliver energy from the power plants to our lines).

Power cost per kilowatt-hour sold increased 6.2 percent in 2021, with wholesale power accounting for 63 percent of our total cost of service – an uncontrollable yet essential expense.

NOTICE: The financial information provided is part of the financial statements for the year ended December 31, 2021, which contained an unmodified auditor’s opinion. A copy of the financial statements is retained at the Cooperative’s office.

Total revenue for 2021 was $64,655,047. Operating margins were $1,044,116, or 1.6 percent of total revenue.