1 SECO Energy 2022 Annual Report 2022
ANNUAL REPORT
SECO Energy 2022 Annual Report 1
LETTER TO MEMBERS
DEAR MEMBERS,
With approval of our Board of Trustees, the executive leadership team and I have developed a plan to take SECO Energy into the future. Our comprehensive, multi-year strategy summarized through the SECO Energy Strategy Map which was unveiled in January 2023 SECO News and SECOEnergy.com.
The energy industry is changing. In the past, power was distributed from centralized bulk generation and sold as energy to consumers. This was a one-direction transaction.
In the future, consumers and businesses have the potential to be both users and creators of energy. This could be in the form of electric vehicles (EV), roof-top solar, variable sustainable resources, homes that are more energy efficient driven by consumer choice and an electric grid that is self-healing, self-optimizing and secure.
The future is here. Member-owned solar arrays and battery storage are examples of how the energy industry has already changed. Protecting and securing the electric grid and reducing outage times through selfhealing measures is paramount for member satisfaction. Members want to be as efficient as possible.
A new buzz word in the industry is beneficial electrification which means replacing fossil fuels with electricity in a way that reduces carbon emissions and cost. An example of this would be EVs. We recently installed EV charging stations at our Sumterville headquarters for our employees’ use.
For SECO Energy’s strategy to take us into the future, we will focus on our core business; continue to meet the demands of increasing homes and businesses in our area and overcome the labor and supply chain shortages that have plagued the industry. SECO Energy must also maintain competitive rates and member satisfaction while gaining efficiencies and reducing operating expenses. We aim to modernize the distribution
system and are committed to reducing wholesale power costs, which in turn reduces costs for the entire membership.
Our strategy encompasses a new Mission, Vision and Core Values. Mission: As a not-for-profit cooperative, SECO Energy provides reliable and innovative energy services to our members and communities. Vision: SECO Energy will lead the industry in member satisfaction and engagement and be the preferred employer in our region. Values: Safety, Member Commitment, Honesty & Integrity, Strong Work Ethic, Inclusive Culture, Accountability and Teamwork.
As we execute our strategy and implement our Mission, Vision and Values, we want you to know that SECO Energy is reliable and a good value. SECO Energy helps you manage your energy usage. And finally, SECO Energy is your trusted source for energy solutions. Visit our website to read the full Strategy Map to see our future plans from 2023 to 2025, at SECOEnergy.com > Your Co-Op > Strategy Map.
Sincerely,
Curtis Wynn Chief Executive Officer
2 SECO Energy 2022 Annual Report
OUR YEAR BY THE NUMBERS
89
TIER 2.49 MEMBER EQUITY 30.5%
3rd LARGEST CO-OP IN FLORIDA
7th LARGEST IN THE
NATION
3.83 BILLION KWH SOLD
TOTAL PLANT INVESTMENT OVER $1.1 BILLION
SECO Energy 2022 Annual Report 3
In 2022, SECO Energy members who were surveyed rated SECO Energy a leader in customer satisfaction. Our 2022 American Customer Satisfaction Index (ACSI) score is an impressive 89.
SECO Energy’s ACSI score of 89 soars among the top utilities surveyed in the energy industry. Nationally, cooperative utilities averaged 73 in 2022. Investor-owned utilities averaged 72 and municipal utilities averaged 73.
Thank you, members, for recognizing the efforts of our employees to provide reliable service, unmatched customer satisfaction and our commitment to serving our local communities.
4 SECO Energy 2022 Annual Report 89 73 73 72 INVESTOR-OWNED MUNICIPALS OTHERS CO-OPS SECO ENERGY
BOARD OF TRUSTEES
SECO Energy’s Board of Trustees are members who live in SECO’s service territory. They are elected to oversee the governance of the cooperative. Each Trustee on the Board is elected by the members who reside in his/her District. Collectively, the Trustees are responsible for establishing, reviewing and revising corporate policies to ensure that SECO continues to preserve reliable, affordable service for all members.
SECO Energy 2022 Annual Report 5
> SHANNON WRIGHT District 5
> RICHARD DENNISON District 4
< GERALD ANDERSON President District 3
< SCOTT BOYATT Vice President District 1
< JOSEPH KUSIAK District 7
< BILL JAMES District 8
> MIKE MUFFETT District 6
< JOYCE ANDERSON Secretary/Treasurer District 2
< MORGAN HATFIELD District 9
6 SECO Energy 2022 Annual Report Ocala Wildwood Umatilla Lake Apopka Clermont Lake Panasoffkee Lake Weir Lake Griffin Lake Eustis Lake Harris Leesburg 50 19 44 33 471 40 44 27 27 41 41 441 301 301 75 48 200
2
District
J Anderson District 3 G Anderson District 4 Dennison District 5 Wright District 6 Muffett District 7 Kusiak District 8 James
CITRUS LEVY MARION Lake SUMTER HERNANDO PASCO Umatilla Clermont Ocala LAKE
District 1 Boyatt District 9 Hatfield
DISTRICT MAP
OUR VALUES
Safety, Member Commitment, Honesty & Integrity, Strong Work Ethic, Inclusive Culture, Accountability, Teamwork
SECO Energy 2022 Annual Report 7
< CURTIS WYNN Chief Executive Officer > GENE KANIKOVSKY Chief Financial Officer
> KATHRYN GLORIA VP of Corporate Communications
< NORA BROWN Executive Administrator for the CEO & Board
< JOHN LASELVA VP of Operations
As a not-for-profit cooperative, SECO Energy provides reliable and innovative energy services to our members and communities. OUR
< GREGG MORRELL VP of Corporate Services & Human Resources
MISSION
< Tracy de Lemos Deputy General Counsel
> Ben Dawson VP of Growth, Smart Grid and Operational Technology
Board of Directors
Sumter Electric Cooperative, Inc.
Sumterville, Florida
OPINION
We have audited the accompanying financial statements of Sumter Electric Cooperative, Inc. (the Cooperative), which comprise the balance sheets as of December 31, 2022 and 2021, and the related statements of revenues and patronage capital, comprehensive income, changes in comprehensive income, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Cooperative, as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States.
BASIS FOR OPINION
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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Cooperative and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
RESPONSIBILITIES OF MANAGEMENT FOR THE FINANCIAL STATEMENTS
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Cooperative’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements, including omissions, are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Cooperative’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Cooperative’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated February 21, 2023, on our consideration of the 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 the 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.
OTHER REPORTING REQUIRED BY 7 CFR PART 1773
In accordance with 7 CFR Part 1773, Policy on Audits of Rural Utilities Service Borrowers, §1773.33, we have also issued our report dated February 21, 2023, on our consideration of the Cooperative’s compliance with the terms, covenants, provisions, or conditions of their loan, grant, and security instruments as set forth in the regulatory requirements for electric borrowers, insofar as they relate to accounting matters enumerated therein. The purpose of that report is to describe the scope of our testing of the Cooperative’s compliance with the regulatory requirements for electric borrowers and the results of that testing, and not to provide an opinion on the Cooperative’s compliance with the regulatory requirements for electric borrowers. That report is an integral part of an audit in considering the Cooperative’s internal control over financial reporting and compliance.
INDEPENDENT AUDITOR’S REPORT CERTIFIED PUBLIC ACCOUNTANTS Gainesville | Ocala | Tallahassee | Sarasota | Orlando | Lakeland |Tampa purvisgray.com Members of American and Florida Institutes of Certified Public Accountants An Independent Member of the BDO Alliance USA
BALANCE SHEETS | DECEMBER 31, 2022 AND 2021
SECO Energy 2022 Annual Report 9 ASSETS 2022 2021 Electric Plant Distribution, Transmission, and General Plant $ 1,003,101,972 $ 951,885,716 Construction Work in Progress 100,007,328 66,676,784 Total Electric Plant 1,103,109,300 1,018,562,500 (Accumulated Provision for Depreciation and Amortization) (238,113,341) (230,900,496) Total Electric Plant - Cost Less Depreciation and Amortization 864,995,959 787,662,004 Investments Investments in Associated Organizations and Other Special Funds 119,751,729 110,235,579 Current Assets Cash and Cash Equivalents 2,311,450 1,936,442 Accounts Receivable - Consumers (Less Provision for Doubtful Accounts 2019 - $922,007, and 2018 - $1,293,251) 14,822,196 10,793,402 Other Receivables 8,984,862 3,027,273 Unbilled Electric Revenues 24,976,209 15,112,201 Under Collection of Power Cost 22,042,410 457,640 Inventories 65,544,818 30,158,476 Prepayments and Other Current Assets 1,594,245 556,339 Total Current Assets 140,276,190 62,041,773 Deferred Charges 419,210 1,767,206 Total Assets 1,125,443,088 961,706,562 EQUITIES AND LIABILITIES 2022 2021 Equities Memberships $ 1,027,705 $ 993,100 Patronage Capital 334,972,077 314,375,193 Accumulated Other Comprehensive Income (1,217,557) (597,935) Other Equities 8,340,919 7,481,232 Total Equities 343,123,144 322,251,590 Non-Current Liabilities Long-Term Debt 598,523,182 549,934,567 Finance Lease Obligation 2,746,722 2,971,968 Deferred Compensation Liability 3,528,598 2,826,473 Total Non-Current Liabilities 604,798,502 555,733,008 Current Liabilities Long-Term Debt - Portion Due Within One Year 21,854,051 20,060,564 Capital Lease Obligation - Portion Due Within One Year 1,800,339 1,352,269 Line of Credit 13,484,074Accounts Payable 83,346,406 18,652,084 Consumer Deposits 21,070,497 19,437,220 Other Current or Accrued Liabilities 15,281,726 9,921,020 Total Current Liabilities 156,837,093 69,423,157 Deferred Credits 20,684,349 14,298,807 Total Equities and Liabilities $ 1,125,443,088 $ 961,706,562
STATEMENTS OF REVENUES AND PATRONAGE CAPITAL |
DECEMBER 31, 2022 AND 2021
10 SECO Energy 2022 Annual Report 2022 2021 Operating Revenues $ 535,723,188 $ 430,075,641 Operating Expenses Cost of Power 362,879,347 270,608,332 Transmission Expense 287,763 301,586 Distribution Expense - Operations 20,018,536 19,068,513 Distribution Expense - Maintenance 51,874,697 46,890,387 Consumer Accounts Expense 15,305,997 13,781,276 Customer Service and Informational Expense 2,244,633 2,383,345 Administrative, General, and Other Expense 19,962,491 18,867,675 Depreciation Expense 30,716,920 29,475,322 Taxes - Expense 111,121 120,528 Other Expense 299,602 342,335 (Total Operating Expenses) (503,701,107) (401,839,299) Operating Margins Before Fixed Charges 32,022,081 28,236,342 Fixed Charges Interest on Long-Term (17,430,729) (16,085,020) Operating Margins After Fixed Charges 14,591,352 12,151,322 2022 2021 Other Margins G&T Cooperative Capital Credits $ 6,006,770 $ 5,340,490 Other Capital Credits and Margins 4,028,178 1,736,497 Total Other Margins 10,034,948 7,076,987 Net Operating Margins 24,626,300 19,228,309 Non-Operating Margins Interest Income 248,279 370,435 Other Non-Operating (Expense) Income 170,015 4,742,517 Total Non-Operating Margins 418,294 5,112,952 Net Margins 25,044,594 24,341,261 314,375,193 295,776,013 Reallocation of Unclaimed 597,828 760,472 (Retirement of Capital Credits) (5,045,538) (6,502,553) Patronage Capital, End of Year $ 334,972,077 $ 314,375,193 and Short-Term Debt Patronage Capital Patronage Capital, Beginning of Year
STATEMENTS OF COMPREHENSIVE INCOME DECEMBER 31, 2022 AND 2021
STATEMENTS OF CASH FLOWS DECEMBER 31, 2022 AND 2021
SECO Energy 2022 Annual Report 11
2022 2021 Cash Flows from Operating Activities Net Margins $ 25,044,594 $ 24,341,261 Adjustments to Reconcile Net Margins to Net Cash Provided by (Used in) Operations: Capital Credits and Patronage Dividend Certificates Assigned (10,034,948) (7,076,987) Depreciation 31,681,662 30,440,782 Provision for Uncollectible Accounts 318,000 300,000 Amortization of Prepaid Pension 1,148,029 1,148,029 Changes in Assets - Decrease (Increase) and Liabilities - Increase (Decrease): Accounts Receivable (35,795,572) 837,271 Other Receivables (5,957,589) (1,019,116) Prepayments and Other Current Assets 32,969 (323,248) Deferred Charges (870,908) (80,008) Accounts Payable 64,694,322 (7,579,534) Consumer Deposits 1,633,277 709,062 Other Current Liabilities 4,959,121 (1,019,300) Deferred Compensation Liability 1,103,710 116,410 Deferred Credits 6,385,542 2,826.050 Total Adjustments 59,297,575 19,279,411 Net Cash Provided by (Used in) Operating Activities 84,342,169 43,620,672 Cash Flows from Investing Activities Change in Inventory - Net of Salvage (35,386,342) (11,942,193) 2022 2021 Net Margins Other Comprehensive Net Margins Amortization of Unrecognized Prior Service Costs and Unrecognized Actuarial (Loss) Gain (619,622) 287,343 Comprehensive Net Margins Accumulated Other Comprehensive Income (Loss)–Beginning of the Year $ (597,935) $ (885,278) Amortization of Unrecognized Prior Service Costs and Unrecognized Actuarial (Loss) Gain (619,622) 287,343 Accumulated Other Comprehensive Income (Loss)–End of the Year $ (1,217,557) $ (597,935) STATEMENTS OF CHANGES IN COMPREHENSIVE INCOME DECEMBER 31, 2022 AND 2021 2022 2021 $ 25,044,594 $ 24,341,261 $ 24,628,604 $ 24,424,972 Contributions in Aid of Construction Received 32,945,824 24,730,115 Proceeds from Disposition of Property 182,836 1,158,446
STATEMENTS OF CASH FLOWS | DECEMBER 31, 2022 AND 2021
12 SECO Energy 2022 Annual Report 2022 2021 Cash and Cash Equivalents, End of Year $ 2,311,450 $ 1,936,442 Supplemental Disclosures of Cash Flow Information Cash Paid During the Year for: Interest $ 14,124,687 $ 15,703,071 Supplemental Schedule of Non-Cash Investing and Financing Activities
Cooperative Retired Certain Assets from its Plant Records as Follows: Cost of Assets Retired $ 18,159,642 $ 10,971,807 Plant Removal Costs 9,691,831 5,458,817 Material Salvaged (1,798,365) (1,826,120) Net Reduction in Accumulated Depreciation $ 26,053,108 $ 14,604,504
Cooperative Financed Certain Equipment Related to Finance Leases: $ 2,092,881 $ 1,496,798 Amounts not Included in Proceeds from Finance Leases Amounts not Included in Extension and Replacement of Plant 2,092,881 1,496,798 2022 2021 Proceeds from Redemption of Patronage Capital Certificate 242,484 274,849 Proceeds from Redemption of Other Investments 350,995 81,683 Purchase of Other Investments (74,681) (189,296) Extension and Replacement of Plant (130,359,525) (94,786,694) Plant Removal Cost (9,691,831) (5,458,817) Net Cash Provided by (Used in) Investing Activities (141,790,240) (86,131,907) Cash Flows from Financing Activities 16,916,427 (9,877,601) 59,550,672 86,470,000 (17,214,324) (28,033,791) 4,613,401 (136,331) (1,870,057) (2,004,734) 240,065 1,125,234 34,605 28,580 597,828 760,472 (5,045,538) (6,502,553) Net Cash Provided by (Used in) Financing Activities 57,823,079 41,829,276 Net Increase (Decrease) in Cash and Cash Equivalents 375,008 (681,959) Cash and Cash Equivalents, Beginning of Year 1,936,442 2,618,401 Line of Credit (Net) Proceeds from Long-Term Debt Payments on Long-Term Debt Utilization of Cushion of Credit Payments on Lease Obligation Other Equities Membership Fees Reallocation of Unclaimed Patronage Capital Retirement of Capital Credits
The
The
15 SECO Energy 2022 Annual Report