The Energy Cooperative's 2023 Annual Report

2023

ANNUAL REPORT LICKING RURAL ELECTRIFICATION, DBA THE ENERGY COOPERATIVE

CONTENTS PRESIDENT’S MESSAGE

4

LICKING RURAL ELECTRIFICATION

5

NATIONAL GAS & OIL COOPERATIVE 6 NGO PROPANE COOPERATIVE

7

NGO TRANSMISSION

7

PRODUCERS GAS SALES

7

NGO DEVELOPMENT

7

SAFETY & ADMINISTRATIVE REPORT 8 MARKETING & MEMBER SERVICES

9

TREASURER’S REPORT

11

FINANCIAL STATEMENT

13

COOPERATIVE LEADERSHIP

14

M Y E N E R GYC O O P. C O M

2

O U R S T O RY In 1936, a group of farmers in Licking and Knox counties took advantage of a federal program offered by the Rural Electrification Administration (REA) and formed an electric cooperative known as Licking Rural Electrification (LRE). At inception, five people were employed to serve 410 members and 143 miles of electric line. The George Conrad Farm on Smoketown Road was the first member. For 40 years, the office was located one mile south of Utica on State Route 13 and was built in 1959.

In 1998, LRE moved the headquarters to Newark.

LICKING RURAL ELECTRIFICATION, INC. LRE is a cooperative that distributes safe, reliable electricity to 27,302 meters throughout nine Ohio counties. LRE owns, operates and maintains over 3,000 miles of distribution lines, 40 miles of transmission lines, 20 substations and three switching stations.

NATIONAL GAS & OIL COOPERATIVE

In October of 1998, Licking Rural Electrification, Inc. acquired National Gas & Oil Company and its subsidiaries.

Today, the Cooperative family includes National Gas & Oil Cooperative, Producers Gas Sales, NGO Development Inc., NGO Transmission, Inc., and NGO Propane Cooperative.

The Energy Cooperative is the trade name used by LRE and its subsidiaries which operate as separate corporations.

NGO is a natural gas distribution cooperative that provides natural gas service to more than 39,000 residential and commercial meters within a seven-county area. This service is provided through a network of 1,000 miles of distribution pipelines.

NGO PROPANE COOPERATIVE (NGOP) NGOP is a propane distribution cooperative that serves more than 5,000 accounts in fourteen counties.

NGO TRANSMISSION, INC. (NGOT) NGOT provides natural gas service to both affiliates and non-affiliates through a network of 150 miles of transmission pipelines and three underground gas storage fields.

NGO DEVELOPMENT, INC. (NGOD) NGO Development Corporation owns interest in more than 100 oil and natural gas wells in Central Ohio.

PRODUCERS GAS SALES, INC. Producers Gas Sales was formed in response to deregulation of the natural gas industry.

Producers is a marketer of natural gas and serves high-volume members. The natural gas is provided by interstate supply, local production, and on-system storage fields.

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P R E S I DE N T’S M E S SAG E

By Todd Ware, President & Chief Executive Officer Over 87 years ago, Licking Rural Electrification (LRE) lit up rural central Ohio by supplying electricity to the area. LRE acquired National Gas & Oil and formed The Energy Cooperative. Members are at the heart of everything we do, stretching back to the values we started many years ago. Today, we provide electric, natural gas and propane to more than 71,500+ member accounts.

Todd Ware, While maintaining our values is at President/CEO the top of our list, we also realize the importance of evolving to meet your needs. We hope you share our pride in The Energy Cooperative’s history and growth over the years.

2023 - A YEAR OF GROWTH

The year continued to be a year of change within the cooperative, including plans and efforts to build a solid base for the future. This would include new pipes and electric lines in areas to provide redundancy. We added a new gas tap for additional supply and purchased land to build new substations. We saw a slower increase in our membership than last year. However, many new projects have started, which should lead to robust growth in 2024.

One milestone accomplished in 2023 was moving past 5,000 propane members. This part of our business has continued to grow consistently while working to provide our members with quality service. We are grateful and excited to move into another year full of opportunities.

SAFETY

Safety remains, and will always be, one of our top priorities. We work hard to deliver reliable energy while keeping employees and members safe. We continue to participate in national safety review programs for electric and natural gas and are considered leaders within those programs. As a result, our safety metrics continue to be significantly better than both state and national industry averages. Our electric cooperative has gone over twenty-four years without a lost-time injury.

FINANCIALS

Consolidated financial results for the year were slightly below budget, as we reported a positive net margin of over $6 million. This number was below budget due to lower member sales and higher interest costs. The effects of a warm winter and cool summer were the most significant drivers of the lower results. The overall inflationary price increases caused us to review our total expenses. We cut a few operating expenses for 2023 to help keep overall expenses aligned with the budget. Consolidated comprehensive income was $5.5 million, which was also below budget. These results raised our equity position to over 23%.

ELECTRIC

The electric division continued to improve member outage times and reliability during 2023. Our commitment to reliability is evident in the almost $10 million dollars spent on capital improvement projects. These projects focus on rebuilding aging infrastructure and constructing new distribution lines. Our electric division continues to strive toward the lowest outage times possible. To that end, we reduced our outage times to 1.35 hours per member. This was a 15% reduction from 2022. In addition, we reduced our five-year loss line average by 4%.

NATURAL GAS

The natural gas cooperative continues to experience significant new growth, as we added over 600 new residential members. In 2023, the natural gas cooperative spent just over $15 million on capital improvement projects.

We replaced or added over 21 miles of pipe, including upgrading aging infrastructure. The replacement of this aging infrastructure and our focus on leak repairs has reduced our unaccounted-for gas drastically over the past four years. Another result of these projects is that our outstanding leaks are at the lowest level since we started keeping track many years ago.

ADMINISTRATIVE

We continue striving to provide the best service to our members. We use several metrics to evaluate the service we provide you; these include a consumer satisfaction index survey, which provides scores on meeting your expectations and satisfaction. These scores improved or stayed the same in 2023 as compared to 2022. We have also worked hard to improve our communications using multiple methods to inform you about what is happening at your cooperative. As with all businesses today, we devote many resources to cybersecurity and protecting your information. These include an annual audit of our systems against potential cyber-attacks. We continue to look for additional methods of protection for our technology systems.

The future continues to be bright for the cooperative and our communities. Between massive growth opportunities and challenges, 2024 will be another eventful year.

I am honored to work with an outstanding team of employees at the cooperative. We have retained and attracted the brightest, most talented employees who directly impact our bottom line and your service. Their loyalty and dedication to the cooperative and its principles are evident. In addition, I’m grateful for the Board of Directors, who continues to provide excellent leadership and support to The Energy Cooperative family.

L I C K I N G R U R A L E L E C T R I F I CAT I O N

By Josh Filler, Vice President & Chief Operating Officer - Electric Operations Licking Rural Electrification (LRE) brings safe and reliable electricity to members with over 27,300 meters across nine counties in central Ohio. LRE owns, operates and maintains 3,018 miles of distribution lines, 40 miles of transmission lines, 20 substations and 3 switching stations.

27,302 meters

In 2023, LRE added 323 new services to its system.

LRE tries to be proactive in its maintenance programs to mitigate outages and improve reliability.

323

new services added

9

2023 PROJECTS

counties

• Installed and commissioned a second substation transformer at our Smith’s Mill Substation in the New Albany area.

• Worked with fiber companies to bring high speed internet to our service territory by making necessary upgrades to our facilities to accommodate fiber pole attachments. That project alone resulted in replacing around 1,100 poles in 2023.

• Started engineering on several new substations that will support the anticipated growth in our territory from western Licking County to Mount Vernon and the Hebron/Heath areas.

• Performed full sectionalizing reviews in the St. Louisville and Hebron substation areas for improved outage mitigation.

• Rebuilt approximately 26 miles of 12kV overhead distribution lines as part of our aging infrastructure program.

5,537 poles inspected

67

potentially dangerous poles replaced

s ine l n tio u b es ri s lin ist ion n d t o f a i o st iss sm ching n tra swit of & ns o i t ta

es l i 8 me s 1 0 , 3 mil 4 0 subs 20

3

718

underground facilities inspected

504 miles

of trees were cut/trimmed

4,272

314 miles

hazardous trees removed

miles mowed

INSPECTIONS & MAINTENANCE • 5,537 poles were inspected; 67 were identified as deteriorated and potentially dangerous poles that could cause outages or unsafe conditions and were replaced as a result.

• 718 underground facilities were inspected for possible hazards, repairs or replacements.

• Regulators, capacitors and reclosers were inspected to ensure proper operation.

• Inspections of each of our substations and switch stations were completed monthly, as well as oil testing each station transformer and infrared scanning for potential hot connections.

• 504 miles of right-of-ways along our lines were cut and trimmed, 314 miles were mowed and 4,272 trees were removed from under or near power lines that were identified as a danger or hazard trees.

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N AT I O N A L G A S & O I L C O O P E R AT I V E

By Dan McVey, Vice President & Chief Operating Officer — Gas Operations National Gas & Oil Cooperative provides natural gas service to more than 39,000 residential and commercial accounts within a seven-county area. Members of the cooperative consumed over three billion cubic feet of natural gas last year. This gas service is provided through a network of over 1,000 miles of distribution pipelines.

In addition, our infrastructure replacement initiative included over 12 miles of distribution mains and associated service lines. We continue efforts to reduce the cost of natural gas by utilizing underground storage and bringing in supply from the shale drilling areas in Ohio, West Virginia and Pennsylvania. Having access to these recently developed resources lowers the transportation cost and provides more market competition for gas pricing. The Energy Cooperative has also partnered with IGS Energy, an experienced natural gas supplier based in Columbus, Ohio, which is supplying carbon-neutral natural gas at a fixed price to eligible consumers who want price certainty.

We are committed to providing our members with safe and reliable natural gas service.

In 2023, we connected over 600 new members and installed 10 miles of distribution mains for new growth.

Most of the new mains were installed in western Licking County in conjunction with development in that area.

10 miles

39,000+ accounts

7

1,000 miles

distribution mains added

distribution pipelines

counties

12 miles

distribution mains replaced

600+

3 billion cf

new services added

of natural gas consumed last year

6

N G O P R O PA N E C O O P E R AT I V E

By Dan McVey, Vice President & Chief Operating Officer — Gas Operations NGO Propane Cooperative provides propane service to over 5,000 accounts within a fourteen-county area.

Members of the cooperative consumed over 3.5 million gallons of propane last year. The propane delivery trucks traveled more than 75,000 miles and drivers made more than 10,000 deliveries in all kinds of weather conditions, proving our commitment to providing our members with safe and reliable propane service.

This also allows members to pay for only the propane they use each month and avoid a costly bulk tank refill.

We continue to focus on providing affordable fixed-price propane with metered service. Our metering option helps members budget for their energy needs and avoid price increases that sometimes occur during the winter season.

5,076

14

counties

meters

10k+

propane deliveries

As part of our commitment to the community, we have five themed delivery trucks with special colors and decals.

Our pink and lavender trucks promote cancer research and awareness. We recognize local veterans with our red, white and blue trucks. The cooperative is proud to recognize and support these organizations. We also have a green and blue truck promoting propane as a clean energy fuel. The cooperative supports charitable organizations based on propane deliveries from our themed trucks.

75K miles

traveled by delivery trucks

NGO TRANSMISSION

NGO DEVELOPMENT PRODUCERS GAS SALES

The primary role of NGO Transmission is to provide firm gas delivery service to the consumers of National Gas & Oil Cooperative and Producers Gas Sales. Transportation opportunities are also available for any qualifying gas shippers within Ohio. NGO Transmission provides natural gas service to both affiliates and non-affiliates through a network of over 150 miles of pipeline and three underground gas storage fields. These gas storage fields help balance the pipeline system and can provide up to half the daily supply needs of the pipeline system.

NGO Development Corporation owns interest in more than 100 oil and natural gas wells in Central Ohio. Many of these wells provide natural gas supply to the cooperative’s pipeline system. Oil and natural gas reserves total over 80,000 barrels and one billion cubic feet. Monthly production averages 650 barrels of oil and 8,000 Mcf of natural gas. Currently we have more than 40,000 acres of land under lease for future oil and natural gas development. Most of the acreage is in the wet gas and oil producing region of the Utica shale.

Producers Gas Sales operates as an affiliated on-system marketing company for large commercial and industrial members.

Producers Gas Sales arranges for acquisition and transportation of natural gas through the pipeline system for our large consumers. The volume of gas transported to large commercial and industrial members totaled over three billion cubic feet and represents more than half of the total gas sold or transported through the transmission and distribution systems.

SA F E T Y & A D M I N I S T R AT I O N

By Connie Hogue, Vice President of Human Resources & Safety Safety continues to be a core value of the cooperative.

We strive to continuously improve our safety culture for the well-being of our employees, members and the public. We set annual safety goals and expectations while encouraging each employee to practice safe work habits to ensure everyone goes home safely at the end of the day.

Shannon Roberts, Lineman, was the honored recipient for 2023 for his efforts in going above and beyond. Shannon was on his way to a job site when he saw a man take a bad fall while walking. Shannon immediately stopped to assist and stayed with him until paramedics arrived. Actions like this are why Shannon was more than deserving of this award.

SAFETY RECORD

MOTOR VEHICLES

One statistic that we use to measure our safety record is the incident rate which measures the incident frequency per 100 employees. In 2023, our overall company incident rate was 1.11 due to incurring two OSHA-recordable incidents. Incident rates for Ohio electric cooperatives and various natural gas companies throughout the U.S. reported incident rates of 2.02 and 2.16, respectively. Our five-year incident rate came in at .93 which is significantly lower than the five-year average for other Ohio electric cooperatives and various natural gas companies as represented by incident rates of 2.17 and 2.19, respectively.

Our employees drove over 1.6 million miles in 2023. We incurred a total of one preventable accident, which was down one from the prior year. We monitor our vehicle accident statistics by a measurement known as an accident rate. The accident rate represents the number of motor vehicle accidents for every one million miles driven. For the 2023 year, our at-fault accident rate was .62 which is much lower than the industry average for 2023 which came in at 2.14.

SAFETY COMMITTEE Our safety committee comprises of employees from all business lines within the cooperative. The committee meets regularly to discuss ways to improve safety awareness, decrease complacency and improve safe work practices.

Our “Caught in the Act” program continues to be a big part of employee recognition when it comes to safety. This program allows employees to recognize fellow employees who take extraordinary measures to improve workplace safety, minimize potential hazards, or just go above and beyond in an exemplary way of what is expected of them.

In 2023, we had eight employees receive a “Caught in the Act” of safety award for their efforts toward safety. In addition, at the end of each year the committee votes on the one “Caught in the Act” award that stands out above all others. This person is then recognized at our All Employee Meeting each year.

1.11

incident rate compared to 2.02 & 2.16

M Y E N E R GYC O O P. C O M

.93

five-year incident rate compared to 2.17 & 2.19

HEALTHCARE

Healthcare expenses for 2023 experienced minimal change from the prior year. Overall healthcare and pharmacy costs continue to rise throughout the United States, and the cooperative continues to watch these expenses very closely to ensure they remain at a reasonable and affordable level.

We continue to evaluate and implement various cost control measures, such as adjusting plan design and contribution levels continue to be reviewed on an annual basis.

SUCCESSION PLANNING

In 2023, the cooperative congratulated two employees who retired. Both employees gave countless years of dedication and commitment to their job and the cooperative. As we continue to look at our aging workforce, we anticipate several more retirements in the years ahead. Our succession planning initiatives continue to be an important part of ensuring we have the necessary talent to lead the cooperative into the future.

1.6 miLLION

miles driven by employees

8

.62

at-fault accident rate compared to 2.14

2

employees retired

M A R K E T I NG & M E M B E R S E RV IC E S

By Heather Juzenas, Vice President of Marketing & Member Services Our Marketing and Member Services Department works to simplify things for our members and make their experience as smooth as possible. We manage our cooperative’s communications, public relations, front-line member communications and member account functions. The team also handles member communications, digital media, advertising, call handling, billing, payments, disconnections and collections.

MEMBER CENTER

Our member service representatives speak with hundreds of members each day. They welcome new cooperative members when they move into our service territory, help members understand how their energy use relates to their bills, and teach them how to manage all aspects of their account in SmartHub. Our member center had the following interactions with members during 2023:Answered 46,200 member calls • Rated 94% satisfaction on call surveys • Answered 92% of phone calls within 90 seconds • Welcomed 4,400 cooperative members

MEMBER ACCOUNTS

This team greets members at our Granville Road drive-thru, generates more than 71,000+ energy bills monthly, and processes all member payments.

They also oversee disconnects for non-pay and the cooperative’s collections efforts. During 2023 this team: • Expanded internal collection efforts, collecting $360,500.17 from past due accounts • Billed 30,583,047 ccfs to natural gas members • Billed 407,726,278 kwhs to electric members • Billed 3,454,886 gallons to propane members • Increased paperless billing to 9% of total bills

MARKETING & COMMUNICATIONS

Our Marketing and Communications team manages the cooperative’s communication efforts. This includes advertising, social media and myenergycoop.com. They handle sponsorships, events and community relations.

In 2023, the marketing and communications team: • Produced four issues of The Energy Cooperative’s Times magazine • Hosted Kids Day at the Works in June • Increased members signed up for outage text and messaging by 70% • Launched a new website

Our department’s top priority is to serve cooperative members. We have an excellent team and look forward to continuing our efforts in 2024.

Please contact us if you have questions or concerns about your account. We are always here to help! You can reach our member services by calling 740-344-2102 or sending a message from our website at myenergycoop.com/contact.

94%

satisfaction on call surveys

46,200 member calls

9

92%

calls answered within 90 secs.

4,400

new cooperative members

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I N V E S T I N G I N O U R YO U T H Children of Members Scholarship Recipients Investing in our future means investing in our youth. Today’s children will become future homeowners, business owners and the leaders of our communities. As a cooperative, it is important to instill in our youth an understanding of what it means to be a cooperative owner and to show them the cooperative difference. That is why we proudly provided $12,000 in scholarships to high school seniors in 2023.

KYLEIGH ROSE CLARK

EVAN FEE

Lakewood High School

Licking Valley High School

Children of members scholarship recipients KENNEDY FIRTH

HANS WALTER HOLMES

Newark High School

Tri-Valley High School

NICHOLAS RICHARDS

ELIZABETH SANTA

Newark Catholic High School M Y E N E R GYC O O P. C O M

Homeschooled/ Northridge High School 10

TREASURER’S REPORT

By John Klauder, District 6 Director, CCD, BL, DCG For the year ended December 31, 2023, the Board of Directors engaged bhm cpa group, inc. to perform an audit of the cooperatives’ books and records. The bhm group has extensive experience auditing both utilities and cooperatives. On March 21, 2024, bhm issued the audit report for the year ended December 31, 2023. The audit report contained an unmodified opinion, which in accounting terms is a clean opinion from the auditor.

In 2023, total revenues for the cooperatives were approximately $130.5 million. Total operating expenses for the year were $127.7 million of which $63 million was for purchased energy. Patronage capital received from other cooperatives was $3.1 million. The net margin for the consolidated group was $6 million.

Consolidated comprehensive income for 2023 was $5.5 million.

Comprehensive income is calculated by adding net margin and unrealized gains/losses on post-retirement benefit plans.

Comprehensive income by entity for the year are as follows: • Licking Rural Electric - $2,985,000 • National Gas & Oil - $2,309,000 • NGO Transmission - $409,000 • NGO Development – ($593,000) • NGO Propane - $430,000 As of December 31, 2023, your cooperative had total assets of $372 million, which includes $298 million in net plant assets. The cooperatives invested $27.9 million in new plant assets throughout the year. The company had $42 million of patronage capital in other cooperatives, including Buckeye Power and Cooperative Finance Corporation (CFC). Included in total assets was over $2 million in cash and short-term investments. Total liabilities were $285 million as of year-end.

The cooperative has equity of $86.6 million as of December 31, 2023. Equity as a percentage of assets for the combined entities has grown to 23.3 percent.

The Energy Cooperative serves approximately 71,300 meters.

During 2023, we paid out approximately $8.5 million in taxes.

The cooperative retired $830,000 in patronage capital credits to estates and $640,000 in general retirements to electric members. If you have additional questions about this financial report, please contact the office at 740-344-2102.

I N C O M E S TAT E M E N T INCOME STATEMENT

YEAR ENDING DECEMBER 31, 2023 REVENUES Residential and Commercial Sales

$109,814,215

Industrial Gas Sales

16,522,117

Oil and Gas Production

862,641

Interest and Non-Operating, Net

3,339,212 Total Revenues

$130,538,185 EXPENSES

Purchased Energy

$63,020,660

Operations and Maintenance

16,138,300

Administrative and General

15,995,055

Depreciation and Depletion

13,405,450

General Taxes

8,453,930

Interest

10,642,150 Total Expenses

$127,655,545

Patronage Capital Credits

$3,114,178

Income Tax (Benefit) Expense

(27,773)

Other Comprehensive Income (Loss)

(484,589)

Comprehensive Income

$5,540,002

PATRONAGE CAPITAL Capital Credits Refunded Prior to 2013

$8,113,749

2014

98,402

2015

88,465

2016

91,437

2017

79,573

2018

61,395

2019

63,917

2020

84,166

2021

75,223

2022

827,173

2023

396,618

Total Refunded M Y E N E R GYC O O P. C O M

$9,980,118 12

BALANCE SHEET BALANCE SHEET

YEAR ENDING DECEMBER 31, 2023 ASSETS Property, Plant and Equipment, Net

$298,122,896

Investments

$41,847,688

Current Assets Cash and Cash Equivalents

$2,008,748

Accounts Receivable, Net

18,725,518

Gas in Underground Storage

3,889,784

Materials and Supplies

4,923,314

Recoverable Energy Costs

1,107,105

Prepaids and Other

748,573 Total Current Assets

$31,403,042

Other Assets Long-Term Receivables

$105,393 Total Other Assets

$105,393 $371,479,019

Total Assets LIABILITIES & EQUITIES Current Liabilities Accounts Payable

$10,383,646

Accrued Property and Other Taxes

6,729,284

Current Maturities of Long-Term Debt

12,299,896

Note Payable - Line of Credit

10,000,000

Other

6,867,925 Total Current Liabilities

$46,280,751

Long-Term Liabilities & Equity Long-Term Debt, Net of Current Portion

$223,648,001

Other Accrued Liabilities

14,995,470

Member & Patron’s Equities

86,554,797

Total Long-Term Liabilities & Equity

$325,198,268

Total Liabilities & Equity

$371,479,019 13

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B OA R D O F D I R E C T O R S

5

Wayne Zollars, District 5

Donald Hawk, District 1 CCD, BL, DGC

1

Brad Patton, District 3, CCD

Dustin Buckingham, District 7 CCD, BL, DGC

3

Nelson Smith, District 2 CCD, BL, DGC

7

2 John Klauder, District 6 CCD, BL, DGC

Tom Graham, District 9 CCD, BL, DGC

9

6 Joanne Little, District 8 CCD, BL, DGC

8 Roy Van Atta, District 4

4

The designations Credentialed Cooperative Director (CCD), Board Leadership Certification (BL), and Director Gold Certificates (DGC) are earned by Directors upon their completion of a series of certification classes provided by the National Rural Electric Cooperative Association (NRECA).

C O O P E R AT I V E L E A D E R S H I P

Todd Ware, President/CEO

Dan McVey, VP/COO Gas Operations

M Y E N E R GYC O O P. C O M

Josh Filler, VP/COO Electric Operations

Pat McGonagle, VP/CFO

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Connie Hogue, VP/HR & Safety

Heather Juzenas, VP/Marketing & Member Services

Scott Stitts, VP/CIO

Brianna Stone, Executive Assistant to President/CEO

Energy 740-344-2102

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FOR WHAT MATTERS MOST

myenergycoop.com

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THE ENERGY COOPERATIVE’S VISION IS THAT OUR MEMBERS TRULY BENEFIT FROM RECEIVING SAFE AND RELIABLE ENERGY WITH HIGHLY RESPONSIVE SERVICE AT FAIR AND REASONABLE PRICES SO THAT THE COMMUNITIES WE SERVE ARE ENHANCED DUE TO OUR PRESENCE.

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THE ENERGY COOPERATIVE 1500 GRANVILLE ROAD NEWARK, OH MYENERGYCOOP.COM 740-344-2102 M Y E N E R GYC O O P. C O M

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