2018
SECO Energy 2018 Annual Report
1
Table of Contents
TABLE OF CONTENTS Letter To Members
3
About Us
4
Board of Trustees
6
District Map
7
Executives
8
Auditors’ Report
9
Balance Sheets
10
Statements of Revenues and Patronage Capital
11
Statements of Cash Flows
12
JIM DUNCAN 2
SECO Energy 2018 Annual Report
CEO
LETTER TO MEMBERS Dear Members, SECO Energy is the third largest cooperative in the state and the seventh largest in the nation. At the end of 2018, our not-for-profit cooperative was delivering power to 205,644 service locations, and we continue to grow. The reliability of our $878.7 million electric system remains stellar. In 2018, we invested $3.3 million per month to extend facilities to new members and to improve reliability to existing members. SECO delivered and members consumed 3.4 billion kilowatt hours, representing a purchased power expense of $265.6 million. That consumption growth rate is 5.7 percent and tracks with growth in new services.
JIM DUNCAN
We are proud of the fact that SECO Energy is a fiscally sound utility and that the communities around us are growing. In 2018, our members indicated that SECO serves their energy needs well. Our ACSI (American Customer Satisfaction Index) score rose to 89, showing that our cooperative is a state and national frontrunner. Thank you for your membership. It is our privilege to serve your energy needs.
Sincerely, JERRY HATFIELD JERRY HATFIELD JIM DUNCAN CEO
JERRY HATFIELD
President Board of Trustees
President
Board of Trustees
SECO Energy 2018 Annual Report
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ABOUT US CENTRAL FLORIDA NOT-FOR-PROFIT
COOPERATIVE
3rd
LARGEST IN
FLORIDA
ACSI
400+ EMPLOYEES
205,644 SERVICES
2.01
7th
$878.7
89 31.39% MEMBER EQUITY
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SECO Energy 2018 Annual Report
3.4 BILLION KWH
CONSUMED
LARGEST IN
NATION
TIER LEVEL
MILLION ELECTRIC SYSTEM
ACSI 89% THE COOPERATIVE
DIFFERENCE
In 2018, our members indicated that SECO serves their energy needs well. Our ACSI (American Customer Satisfaction Index) score rose to 89, showing that our cooperative is a state and national frontrunner.
SECO ENERGY
INVESTOR-OWNED
75% 75%
MUNICIPALS
OTHER CO-OPS
77%
Investor-owned and municipal utilities averaged 75. And cooperative utilities’ average score is 77. There is a difference when serving members in a not-for-profit environment – the cooperative difference.
SECO Energy 2018 Annual Report
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6
SECO Energy 2018 Annual Report
JERRY D. HATFIELD District 9 President
RICHARD DENNISON District 4 Vice President
BILL JAMES District 8 Secretary-Treasurer
SCOTT D. BOYATT District 1
DILLARD B. BOYATT District 2
VACANT District 3
RAY F. VICK District 5
EARL MUFFETT District 6
JOSEPH E. KUSIAK District 7
27
LEVY
DISTRICT MAP
41
40
Ocala
200
75
Lake Weir 19
MARION CITRUS
Umatilla
301
44
41
District 1 S. Boyatt District 2 D. Boyatt District 3 Vacant District 4 Dennison District 5 Vick District 6 Muffett District 7 Kusiak District 8 James District 9 Hatfield
Wildwood
Lake Griffin
Lake Eustis
441
Leesburg
Lake Panasoffkee
44
Lake Harris
48
Lake Apopka 301
50
HERNANDO
Clermont
471
LAKE PASCO
SUMTER
33
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SECO Energy 2018 Annual Report
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EXECUTIVE LEADERSHIP
OUR PURPOSE
To provide exceptional service to our members, co-workers and communities.
JIM DUNCAN
Chief Executive Officer
OUR VALUES Commitment to the Cooperative Purpose Honesty & Integrity Safety Strong Work Ethic Teamwork Open Communication
BEN BRICKHOUSE VP of Engineering
NORA BROWN
Sr. Executive Assistant
GENE KANIKOVSKY JOHN LASELVA Chief Financial Officer 8
SECO Energy 2018 Annual Report
VP of Operations
KATHRYN GLORIA VP of Corporate Communications
GREGG MORRELL
VP of Corporate Services & Human Resources
INDEPENDENT AUDITORS’ REPORT
Board of Directors Sumter Electric Cooperative, Inc. Sumterville, Florida Report on the Financial Statements We have audited the accompanying financial statements of Sumter Electric Cooperative, Inc. (the Cooperative), which comprise the balance sheets as of December 31, 2018 and 2017, and the related statements of revenues and patronage capital, 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. Auditors’ 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 auditors’ 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 entity’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 entity’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.
Opinion 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, 2018 and 2017, 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 13, 2019, 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 and clarified in the Rural Utilities Service policy memorandum dated February 7, 2014 (the regulatory requirements for electric borrowers), we have also issued our report dated February 13, 2019, 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.
February 13, 2019 Ocala, Florida
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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BALANCE SHEETS | DECEMBER 31, 2018 AND 2017 ASSETS
2018
2017
Electric Plant Distribution, Transmission, and General Plant
EQUITIES AND LIABILITIES
2018
Equities Memberships $
Construction Work in Progress Total Electric Plant
828,151,643
$
799,144,449
50,519,318
40,021,942
878,670,961
839,166,391
(Accumulated Provision for Depreciation and Amortization)
(198,127,664)
(187,386,750)
Total Electric Plant - Cost Less Depreciation and Amortization
680,543,297
651,779,641
$
Patronage Capital
257,504,864
887,185
248,116,609
(519,288)
(644,699)
Other Equities
5,216,724
4,568,024
263,113,825
252,927,119
475,610,909
419,171,264
2,806,272
2,580,846
1,555,821
1,658,555
479,973,002
423,410,665
17,333,663
17,081,698
1,032,088
745,278
Total Equities
Long-term Debt Deferred Compensation Liability
Investments in Associated Organizations and Other Special Funds
Total Noncurrent Liabilities 89,955,325
83,970,688
Current Liabilities Long-term Debt - Portion Due Within One Year
Current Assets Cash and Cash Equivalents 2,468,372 3,332,115 Accounts Receivable - Consumers (Less Provision for Doubtful Accounts 2018 - $1,293,251, and 2017 -$1,160,527) 10,808,496 10,960,847
Capital Lease Obligation - Portion Due Within One Year Line of Credit
0 26,926,599
Accounts Payable
20,912,606
18,712,956
Consumer Deposits
Unbilled Electric Revenues
9,937,438
5,422,376
Other Current or Accrued Liabilities
Inventories
17,107,723 15,753,466
Other Receivables
Prepayments and Other Current Assets
164,667
Total Current Assets Deferred Charges
SECO Energy 2018 Annual Report
$
Accumulated Other Comprehensive Income
Capital Lease Obligation
10
911,525
Noncurrent Liabilities
Investments
Total Assets
2017
61,399,302 6,261,486 $
838,159,410 $
137,941 54,319,701 7,353,728 797,423,758
Total Current Liabilities Deferred Credits Total Equities and Liabilities
34,821,115
32,173,934
17,395,843
16,467,174
11,629,114
14,992,199
82,211,823
108,386,882
12,860,760 $
838,159,410 $
12,699,092 797,423,758
STATEMENTS OF REVENUES AND PATRONAGE CAPITAL | DECEMBER 31, 2018 AND 2017
Operating Revenues
$
2018
392,699,934 $
2017 369,375,353
Operating Expenses Cost of Power Transmission Expense
265,587,987
251,742,596
228,289
220,320
5,100,000
Other Capital Credits and Margins
1,793,800 1,798,429 7,514,238
13,582,069
12,748,446
899,223
645,508
Other Nonoperating (Expense) Income 271,937
28,940
28,441,431
Nonoperating Margins
2,185,419
2,075,846
Administrative, General, and Other Expense
16,522,505
14,911,513
Depreciation Expense
25,487,271
24,668,434
Customer Service and Informational Expense
Taxes - Expense Other Expense (Total Operating Expenses) Operating Margins Before Fixed Charges
71,835 68,064
5,715,809
6,893,800
Distribution Expense - Maintenance 29,836,108
11,287,112
$
Total Other Margins Net Operating Margins
12,274,676
2017
G&T Cooperative Capital Credits $
16,648,210
Consumer Accounts Expense
2018
Other Margins
18,352,708
Distribution Expense - Operations
Interest Income Total Nonoperating Margins Net Margins
1,171,160
674,448
14,753,229
13,422,894
Patronage Capital, Beginning of Year 248,116,609 240,133,131
307,823
364,507
(Retirement of Capital Credits)
(370,854,621)
(350,428,033)
Patronage Capital, End of Year
(5,364,974) $
257,504,864
(5,439,416) $
248,116,609
21,845,313 18,947,320
Fixed Charges Interest on Long-term Debt Operating Margins After Fixed Charges
(15,157,044)
(13,713,112)
6,688,269
5,234,208
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STATEMENTS OF COMPREHENSIVE INCOME DECEMBER 31, 2018 AND 2017
STATEMENTS OF CASH FLOWS DECEMBER 31, 2018 AND 2017
2018 2017
Net Margins
$
14,753,229
$
13,422,894
Other Comprehensive Net Margins
2018 2017
Cash Flows from Operating Activities Net Margins
$
14,753,229
13,422,894
Adjustments to Reconcile Net Margins to Net Cash Provided by (Used in) Operations:
Amortization of Unrecognized Prior Service Costs and Unrecognized Actuarial (Loss) Gain
125,411 (81,254)
Capital Credits and Patronage Dividend Certificates Assigned
(6,893,800)
(7,514,238)
26,722,224
26,010,147
Depreciation Comprehensive Net Margins
$
$14,878,640 $13,341,640
Provision for Uncollectible Accounts Amortization of Prepaid Pension
227,150
277,200
1,148,029
1,148,029
Changes in Assets - Decrease (Increase) and Liabilities - Increase (Decrease):
STATEMENTS OF CHANGES IN COMPREHENSIVE INCOME DECEMBER 31, 2018 AND 2017
2018 2017
Accumulated Other Comprehensive Income (Loss)–Beginning of the Year $
(644,699)
Initial Unrecognized Prior Service Costs Amortization of Unrecognized Prior Service Costs and Unrecognized Actuarial (Loss) Gain Accumulated Other Comprehensive Income (Loss)–End of the Year
$
$
0
0
(563,445)
Accounts Receivable
(4,589,861)
(4,101,771)
Other Receivables
(2,199,650)
(15,834,417)
Prepayments and Other Current Assets
(26,726)
66,585
Deferred Charges
(55,787)
(611,041)
Accounts Payable
2,647,181
8,985,994
Consumer Deposits
928,669
849,497
(3,475,567)
(630,157)
Other Current Liabilities
Deferred Compensation Liability
9,748
840,235
161,668
2,636,942
Total Adjustments
14,603,278
12,123,005
Net Cash Provided by (Used in) Operating Activities
29,356,507
25,545,899
Change in Inventory - Net of Salvage (1,354,257)
342,956
Contributions in Aid of Construction Received 13,216,548 Proceeds from Disposition of Property 405,570
9,543,785 253,615
Deferred Credits 125,411
(519,288)
(81,254)
$
(644,699)
Cash Flows from Investing Activities
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SECO Energy 2018 Annual Report
STATEMENTS OF CASH FLOWS | DECEMBER 31, 2018 AND 2017
2018 2017
Proceeds from Redemption of Patronage Capital Certificate
684,927
426,675
Proceeds from Redemption of Other Investments
370,732
62,849
(146,496)
(43,984)
Extension and Replacement of Plant
(63,186,735)
(58,520,730)
Plant Removal Cost
(4,490,820)
(3,954,522)
(54,500,531)
(51,889,356)
Purchase of Other Investments
Net Cash Provided by (Used in) Investing Activities Cash Flows from Financing Activities Line of Credit (Net)
1,526,830
26,926,599
Proceeds on Long-term Debt
72,000,000
20,000,000
Payments on Long-term Debt
(18,647,399)
(16,999,227)
Payment to Cushion of Credit
(25,114,420)
2,194,787
(918,207)
(565,768)
774,111
183,850
24,340
17,350
(5,364,974)
(5,377,422)
2018 2017
Supplemental Disclosures of Cash Flow Information Cash Paid During the Year for: Interest
$
16,778,074
$
13,672,315
Supplemental Schedule of Noncash Investing and Financing Activities The Cooperative Retired Certain Assets from its Plant Records as Follows: Cost of Assets Retired Plant Removal Costs Material Salvaged Net Reduction in Accumulated Depreciation
$
14,701,232 4,490,820 (1,732,170)
$
10,559,432 3,954,522 (1,168,946)
$
17,459,882 $
13,345,008
The Cooperative Financed Certain Equipment Using a Capital Lease:
Payments on Capital Lease Obligation Other Equities Membership Fees Retirement of Capital Credits Net Cash Provided by (Used in) Financing Activities
Amounts not Included in Proceeds from Capital Lease Obligation $
1,430,443
$
1,841,620
Amounts not Included in Extension and Replacement of Plant $
1,430,443
$
1,841,620
24,280,281 26,380,169
Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Year Cash and Cash Equivalents, End of Year
$
(863,743)
36,712
3,332,115
3,295,403
2,468,372
$
3,332,115 SECO Energy 2018 Annual Report
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SECO Energy 2018 Annual Report
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SECO Energy 2018 Annual Report
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“Highest in Customer Satisfaction among Cooperatives (2017 & 2016) and among South Midsize Utilities (2015)”
“
Highest in Customer Satisfaction among Cooperatives (2017 & 2016) and among South Midsize Utilities (2015) To learn more about SECO Energy visit us at secoenergy.com.
”
For J.D. Power award information, visit jdpower.com.
For J.D. Power award information, visit jdpower.com. | To learn more about SECO Energy visit secoenergy.com.
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SECO Energy 2018 Annual Report