Always Working for you - jwemc.coop

Always Working

for you

Milton TaylorVice President

District At-Large

Shirley LivingstonSecretary-Treasurer

District 9

OUR MISSION Joe Wheeler is committed to providing efficient, reliable utility services that enhance the lives and businesses and exceed the expectations of members and customers in Lawrence and Morgan Counties and surrounding communities.

OUR VISION Neighbors serving neighbors committed to improving the quality of life through the services we deliver.

OUR VALUES Integrity Be sincere, honest, and reliable. Respect Treat others as you would like to be treated. Cooperation Work in harmony to achieve results that benefit all. Openness Be open, sensitive, forthright, and timely in all communications. Accountability Take personal responsibility for our actions. Pride Strive for excellence.

District Map

9

87

6

5

4

3

2

1

Sandy FieldsDistrict 6

Board of Trustees

Joseph DuttonDistrict 3

Ray LongDistrict 8

Andrew McCay District 2

Linda OwensDistrict 5

Jimmie HalbrooksDistrict 4

Charles TeagueDistrict 7

Ricky KnouffPresidentDistrict 1

ContentsA message to our members 4

Retirements and Memoriam 5

2020 Projects 5

Financial highlights 6

Auditor’s report 7

Consolidated balance sheets 8

$ 151,557,447 Electric Revenue

$ 214,063,568 Total Assets

$ 3,129,036 Net Margins

35,538 Residential Accounts

8,539 Businesses Accounts

27 Commercial Accounts

1771 Active PrePayGo accounts

44,104 Total Accounts

26,859 Meters in Morgan

17,245 Meters in Lawrence County

4,276 Miles of line

10.31 Meters per mile of line

99.97203% Average reliability

1,354 kWh/mo Average Residential Use

0.10 hrs Yearly Average outage time

393 Outages caused by animals

365 Outages caused by storms

69 Vehicle Pole/Wire Contacts

2020 By the Numbers

4

A Message to Our Members

George KitchensGeneral Manager/CEO

It is always a pleasure to have an opportunity to communicate with our membership. Joe Wheeler EMC has been providing annual reports to you each year since 2002. We do this as a way of being open and honest about the financial condition of your cooperative and as another way to report to you about the activities that we have been engaged in during the past twelve months.

There’s no doubt in my mind that 2020 will be remembered for many years as the year that the CORONAVIRUS invaded the United States and impacted our lives and our businesses. I’ll talk more about that later in this message.

As we began the 2019-2020 fiscal year, Joe Wheeler was engaged in putting the plans together to present the proposal to build a fiber-to-the-home internet system to serve our members in Lawrence and Morgan Counties. The Board of Trustees had approved the Feasibility Study and the Business Plan. The next steps included holding at least three public meetings to inform the membership about the project. Instead of holding three meetings, we had six. With a project as important as this, we wanted to do our best to make it convenient for anyone to attend who wished to do so. The meetings were held at Falkville High School, Lawrence County High School, Priceville Junior High School, Brewer High School, East Lawrence High School, and Hatton High School. The meetings were well attended, and we had a chance to answer questions after each presentation.

The Public Meetings were followed by a Special Meeting of the Membership which was held on November 1, 2019. Turnout for the Special Membership Meeting was high and nearly twice as many people voted as usually participate in an Annual Meeting Election. When the votes were tallied, 94 percent of the ballots were in favor of JWEMC beginning our high-speed internet project. Our Board of Trustees accepted the election results and approved the project as well. In December, we entered a contract with the National Rural Telecommunications Cooperative (NRTC), a cooperatively owned company of which Joe Wheeler EMC is a member, to provide engineering, design, and project management services for us as they have done for other electric cooperatives across the nation. Much work has been done to begin this project including the for-mation of a subsidiary, JWEMC Communications, LLC, to provide retail internet and telephone services to our members. While we have been moving ahead with building a new internet busi-ness, COVID-19 has caused some delays in starting construction. As factories across the world closed in response to the virus, supply times for needed equipment increased. It is still our hope to begin construction before the end of 2020 with customers being served in early 2021.

In March of this year, Governor Ivey issued emergency orders that started to impact our busi-ness and your lives. Utility workers were declared to be “essential workers” in both federal and state declarations. That meant that we had to make every effort to keep our operations as close to normal as possible while doing what we could to stem the spread of the virus. We closed our offices to the public in late March. Our lobbies remained closed until late May when the state loosened restrictions on other businesses. During the time when we were closed, we kept our drive-through windows open and the kiosks at each office were available to use as well. We knew that many of our members were faced with job loss or reduced work hours. With the consent of our Board of Trustees, Joe Wheeler EMC discontinued disconnections for nonpayment for a period during the height of the pandemic shutdowns. The co-op also offered extended payment arrangements and referred our members to Community Action for additional assistance with their power bills.

It was a challenging year financially for Joe Wheeler EMC. The pandemic and moderate weath-er both contributed to lower sales and lower net margins. Sales were $148.9 million in 2020 com-pared to $154.8 million in 2019 – almost $6 million less this year. Expenses for 2020 were about $3 million less than in 2019. Most of the reduction in expenses was attributable to buying less power from TVA. However, some expense categories increased significantly. Our cost to main-tain rights of way went up again. We must maintain our right of ways to keep your electric service reliable. All of this translated to lower net margins in 2020 compared to 2019.

Our Board of Trustees and employees here at Joe Wheeler EMC are proud to work for you each and every day. We always strive to keep your power supply reliable and reasonably priced while working with community leaders to stimulate growth in this region.

Our Board of Trustees and employees here at Joe Wheeler EMC are proud to work for you each and every day.

5

Don Bishop

§ Town Creek Substation was converted from 46-13kV to 161-13kV. This was done to improve reliability and substation capacity.

§ Mt Tabor Substation – Installed a new 13kV breaker to allow for a fifth circuit.

§ Byrd Road – Converted some single phase and reconductored some three phase line to provide a new circuit out of the Mt Tabor Sub. This new circuit relieved loading on one of the other Mt Tabor circuits and provided additional line capacity.

§ Wallace Drive – Converted a single phase line to three phase to relieve line overloading and improve voltage.

§ Forest Chapel Road - Converted a single phase line to three phase to relieve line overloading and improve voltage.

§ Robinson Road – Converted a single phase line to three phase to relieve line overloading and improve voltage.

§ Indian Hills & Bethel Roads – Constructed a new tie line between Mt Tabor and Priceville Substations to allow for better load transfer.

§ Upper River Road – Presently working to reconductor the three phase line along Upper River Road. This project will improve the tie line between the Pence and Priceville Substations.

§ Fiber Make Ready – Presently working on pole change-outs required for Joe Wheeler EMC to install the new fiber optic cables needed to provide fiber to the home.

§ Substation Animal Guards – Started a multi-year project to install animal guards on substation equipment to help prevent animal related substation outages.

2020 Construction Projects

In MemoriamRetiring in 2020

Dewain “Stick” Keel of Hartselle, started working with Joe Wheeler EMC as a lineman in 1974, becoming a line foreman before retiring in 2001. Even after retirement Dewain kept in touch with his friends at JWEMC and regular-ly attended holiday celebrations with his former work family. Dewain was 71. – June 3, 1949 ~ October 31, 2020.

Garland Jones

This year saw the retirement of Garland Jones, Joe Wheeler EMC’s longest-serving employee, and Don Bishop, the IT Director of 17 years.

In May, Don Bishop retired from his post as JWEMC’s Director of IT services. He spent 17 years leading the effort to modernize the cooperative’s computer systems and creating the foundation for the fiber internet project to build upon.

In October, Garland Jones celebrated his retirement just over 53 years from the day he started. After being hired to read meters in October of 1967, Garland later worked as a lineman for JWEMC. He then moved on to be a serviceman in the Moulton office.

Both Don and Garland will be greatly missed, and the JWEMC family wishes them both a happy retirement.

6

153,824,599

157,607,051

208,275,991

211,867,648

5,625,742

6,627,187

3,129,036

214,063,568

151,557,447

60,715,490

111,370,722

108,340,391

112,827,417

109,631,348

114,673,234

116,983,085

64,674,500

61,478,658

2020 Cost Percentage Breakdown

Cost of power - electricity

Cost of sales - natural gas

Distribution - operations

Distribution - maintenance

Consumer Accounts

Administrative and general

Depreciation

Taxes

2020 Financial Highlights

Electric Revenue

Total Assets Cost of Purchased Power

Net Margins

106,362,982

114,441,472

115,732,635

117,418,194

114,965,378

118,785,615

Total Liabilities

Notes Payable & Line of Credit

138,036,046

142,040,029

147,492,542

152,285,602

144,159,162

148,978,952

2012

2012

2012

2012

2012

2012

2013

2013

2013

2013

2013

2013

2014

2014

2014

2014

2014

2014

2015

2015

2015

2015

2015

2015

2016

2016

2016

2016

2016

2016

2017

2017

2017

2017

2017

2017

104,499,069

108,159,067

113,188,047

113,834,515

109,466,046

111,710,798

178,408,908

190,342,334

195,013,967

201,530,810

200,888,124

208,330,195

65,900,456

75,444,139

74,739,349

73,502,575

71,711,461

73,381,150

3,277,132

5,035,616

2,981,295

6,268,768

3,382,332

1,449,307

2018

2019

2020

2020

2020

2020

2020

2020

2018

2019

2018

2019

2018

2019

2018

2019

2018

2019

75.20%49.4%

0.44%2.18%

7.9%

2.97%

2.41%

6%2.89%

Equity, as percentage of total assets

50%

40%

30%

2012

2013

2014

2015

2016

2017

2018

2019

2020

7

1

Independent Auditor’s Report

The Board of Trustees Joe Wheeler Electric Membership Corporation and Subsidiary Trinity, Alabama Report on the Financial Statements We have audited the accompanying consolidated financial statements of Joe Wheeler Electric Membership Corporation and Subsidiary (the Corporation), which comprise the consolidated balance sheets as of June 30, 2019 and 2018 and the related consolidated statements of revenue and equities, cash flows, other comprehensive income, and accumulated other comprehensive income for the years then ended, and the related notes to the consolidated financial statements (collectively, 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. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Wheeler Basin Natural Gas Company, Inc., a wholly-owned subsidiary, which statements reflect total assets constituting 6.11% and 6.09%, respectively, of consolidated total assets at June 30, 2019 and 2018, and revenue constituting 1.79% of consolidated total revenue for both the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to amounts included for Wheeler Basin Natural Gas Company, Inc., is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 auditor’s 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

Independent Auditor’s Report

The Board of Trustees Joe Wheeler Electric Membership Corporation and Subsidiary Trinity, Alabama Report on the Financial Statements We have audited the accompanying consolidated financial statements of Joe Wheeler Electric Membership Corporation and Subsidiary (the Corporation), which comprise the consolidated balance sheets as of June 30, 2019 and 2018 and the related consolidated statements of revenue and equities, cash flows, other comprehensive income, and accumulated other comprehensive income for the years then ended, and the related notes to the consolidated financial statements (collectively, 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. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Wheeler Basin Natural Gas Company, Inc., a wholly-owned subsidiary, which statements reflect total assets constituting 6.11% and 6.09%, respectively, of consolidated total assets at June 30, 2019 and 2018, and revenue constituting 1.79% of consolidated total revenue for both the years then ended. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to amounts included for Wheeler Basin Natural Gas Company, Inc., is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 auditor’s 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

2

Opinion In our opinion, based on our audits and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the financial position of Joe Wheeler Electric Membership Corporation and Subsidiary as of June 30, 2019 and 2018, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Nashville, Tennessee September 19, 2019

T

2

OpinionIn our opinion, based on our audits and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the financial position of Joe Wheeler Electric MembershipCorporation and Subsidiary as of June 30, 2020 and 2019, and the results of their operations and their cashflows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting PrincipleAs discussed in Note 1 to the financial statements, the Corporation adopted new accounting guidance FASB ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Our opinion is not modified with respect to these matters.

Report on Consolidating InformationOur audits were conducted for the purpose of forming an opinion on the financial statements as a whole.

he consolidating information on pages 18 through 20 is presented for purposes of additional analysis of the financial statements rather than to present the financial position, results of operations, and cash flowsof the individual companies, and it is not a required part of the financial statements. Such information isthe responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The consolidating information has been s ubjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated in all material respects in relation to the financial statements as a whole.


T

2

OpinionIn our opinion, based on our audits and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the financial position of Joe Wheeler Electric MembershipCorporation and Subsidiary as of June 30, 2020 and 2019, and the results of their operations and their cashflows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


Report on Consolidating InformationOur audits were conducted for the purpose of forming an opinion on the financial statements as a whole.

he consolidating information on pages 18 through 20 is presented for purposes of additional analysis of the financial statements rather than to present the financial position, results of operations, and cash flowsof the individual companies, and it is not a required part of the financial statements. Such information isthe responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The consolidating information has been s ubjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated in all material respects in relation to the financial statements as a whole.


Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Joe Wheeler Electric Membership Corporation and Subsidiary (the Corporation), which comprise the consolidated balance sheets as of June 30, 2020 and 2019 and the related consolidated statements of revenue and equities, cash flows, other comprehensive income, and accumulated other comprehensive income for the years then ended, and the related notes to the consolidated financial statements (collectively, 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.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. We did not audit the statements of Wheeler Basin Natural Gas Company, Inc., a wholly-owned subsidiary, which statements reflect total assets constituting 6.18% and 6.11%, respectively, of the consolidated total assets at June 30, 2020 and 2019, and revenue constituting 1.72% and 1.79% of consolidated total revenue for the years then ended, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to amounts included for Wheeler Basin Natural Gas Company, Inc., is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 auditor’s 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, based on our audits and the report of the other auditor, the financial statements referred to above present fairly, in all material respects, the financial position of Joe Wheeler Electric Membership Corporation and Subsidiary as of June 30, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.


Report on Consolidating InformationOur audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The consolidating information on pages 18 through 20 is presented for purposes of additional analysis of the financial statements rather than to present the financial position, results of operations, and cash flows of the individual companies, and it is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the consolidating information is fairly stated in all material respects in relation to the financial statements as a whole.

8

2020 2019Utility Plant

Electric plant in service 250,632,673$ 242,610,221$ Natural gas plant in service 18,688,108 18,359,017 Construction work-in-progress 5,867,134 2,847,520

275,187,915 263,816,758 Less accumulated provision for depreciation 114,015,125 108,046,414

Total utility plant 161,172,790 155,770,344

Other Assets and InvestmentsInvestments in associated organizations 7,210,086 7,009,150 Notes receivable

Conservation notes 4,562,246 4,977,402 Other 81,632 104,275

Total other assets and investments 11,853,964 12,090,827

Current AssetsCash and cash equivalents 18,962,135 21,069,124 Accounts receivable

Customers, less provision for doubtful accountsof $220,000 in 2020 and $220,000 in 2019 10,538,537 11,446,915 Other 8,534,353 8,107,883

Materials and supplies 1,393,303 1,155,195 Other current assets 86,347 119,172

Total current assets 39,514,675 41,898,289

Deferred ChargesPrepaid pension 1,423,796 1,993,315 Other 98,343 114,873

Total deferred charges 1,522,139 2,108,188 Total assets 214,063,568$ 211,867,648$

Joe Wheeler Electric Membership Corporation and SubsidiaryConsolidated Balance Sheets

At June 30, 2020 and 2019

Assets

The accompanying notes are an integral part of these financial statements. 3

9

Operating Revenue Electric revenue 157,607,051$ 98.21% 153,824,599$ 98.21%Natural gas revenue 2,869,932 1.79% 2,803,379 1.79%

Total operating revenue 160,476,983 100.00% 156,627,978 100.00%

Operating ExpensesCost of power - electricity 116,983,085 72.90% 114,673,234 73.21%Cost of sales - natural gas 755,408 0.47% 734,939 0.47%Distribution - operations 2,846,557 1.77% 2,620,657 1.67%Distribution - maintenance 9,677,528 6.03% 9,902,427 6.32%Consumer accounts 4,533,630 2.83% 4,533,165 2.89%Administrative and general 3,541,626 2.21% 3,471,726 2.22%Depreciation 8,673,091 5.40% 8,332,443 5.32%Taxes 4,248,009 2.65% 4,083,650 2.61%

Total operating expenses 151,258,934 94.26% 148,352,241 94.71%

Operating Margins BeforeFixed Charges 9,218,049 5.74% 8,275,737 5.29%

Fixed ChargesInterest expense 3,516,598 2.19% 3,581,206 2.29%

Net Operating Margins 5,701,451 3.55% 4,694,531 3.00%

Nonoperating Margins 925,736 0.58% 931,211 0.59%Net Margins for the Year 6,627,187 4.13% 5,625,742 3.59%

4% Utility Tax Refund 155,425 115,997

Equities at Beginning of Year 98,295,403 92,553,664 Equities at End of Year 105,078,015$ 98,295,403$

2018

Joe Wheeler Electric Membership Corporation and SubsidiaryConsolidated Statements of Revenue and Equities

For the Years Ended June 30, 2019 and 2018

2019


2020 2019Equities

Equity 108,419,023$ 105,078,015$ Accumulated other comprehensive income - unrecognized components of net periodicbenefit costs (2,695,846) (2,841,715)

Total equities 105,723,177 102,236,300

Long-Term LiabilitiesNotes payable 57,879,490 61,478,658 Paycheck Protection Program loan 2,836,000 Less current maturities 7,865,281 7,668,875

Total long-term liabilities 52,850,209 53,809,783

Current LiabilitiesCurrent maturities on long-term liabilities 7,865,281 7,668,875 Accounts payable

Purchased power payable 16,603,428 19,461,741 Trade 4,421,102 2,475,357

Customer deposits 4,055,596 4,026,406 Accrued liabilities

Taxes 1,584,910 1,613,725 Interest 121,710 162,626 Other 4,038,287 3,805,584

Total current liabilities 38,690,314 39,214,314

Other Long-Term LiabilitiesPostemployment benefits 12,044,060 11,408,880 Tennessee Valley Authority advances 4,755,808 5,198,371

Total other long-term liabilities 16,799,868 16,607,251 Total equities and liabilities 214,063,568$ 211,867,648$

Equities and Liabilities

4

10











2018



2019


Operating RevenueRevenue from contracts with customers

Electric revenue 148,922,566$ 96.57% 154,882,535$ 96.51%Natural gas revenue 2,653,940 1.72% 2,869,932 1.79%

Other 2,634,881 1.71% 2,724,516 1.70%Total operating revenue 154,211,387 100.00% 160,476,983 100.00%






Nonoperating Margins 342,767 0.22% 925,736 0.58%

Income Taxes 7,649 0.00% 0.00%Net Margins for the Year 3,129,036 2.03% 6,627,187 4.13%



2019



2020


11











2018



2019


2020 2019Cash Flows From (Used For) Operating Activities

Net margins 3,129,036$ 6,627,187$ Adjustments to reconcile net margins to net cash from operating activities

Depreciation 8,892,218 8,673,091 Amortization of deferred charges 977,166 975,932 Bad debt expense 76,541 174,896 Patronage assigned from associated organizations (543,312) (594,249) Postemployment benefit obligation 781,049 616,740 Decrease (increase) in operating assets andincrease (decrease) in operating liabilities

Accounts receivable 405,367 (28,893) Materials and supplies (238,108) 26,645 Other current assets 32,825 (10,632) Deferred charges 2,455 (14,971) Accounts payable (912,568) (968,982) Consumer deposits 29,190 104,492 Accrued liabilities 374,944 331,116

Net cash from operating activities 13,006,803 15,912,372

Cash Flows From (Used For) Investing ActivitiesPurchase of property and equipment, net of salvage and cost of removal (14,294,664) (10,964,986) Proceeds from investments 342,376 367,798 Decrease (increase) in conservation notes receivable, net 415,156 (52,364) Decrease in other notes receivable, net 22,643 232,910

Net cash used for investing activities (13,514,489) (10,416,642)

Cash Flows From (Used For) Financing ActivitiesPrincipal payments on long-term debt (7,992,740) (7,589,414) Proceeds from long-term debt 4,000,000 4,000,000 Proceeds from Paycheck Protection Program loan 2,836,000 Increase (decrease) in advances for conservation notes, net (442,563) 76,946

Net cash used for financing activities (1,599,303) (3,512,468)

Net Increase (Decrease) in Cash and Cash Equivalents (2,106,989) 1,983,262

Cash and Cash Equivalents at Beginning of Year 21,069,124 19,085,862 Cash and Cash Equivalents at End of Year 18,962,135$ 21,069,124$

Supplemental Cash Flows InformationCash paid for interest 2,969,758$ 3,074,753$

Joe Wheeler Electric Membership Corporation and SubsidiaryConsolidated Statements of Cash Flows

For the Years Ended June 30, 2020 and 2019Increase (Decrease) in Cash and Cash Equivalents


12











2018



2019


2020 2019Net Margins 3,129,036$ 6,627,187$

Other Comprehensive IncomePostemployment benefit obligations

Amortization of unrecognized actuarial loss 145,869 58,652 Net loss on change in actuarial assumptions (53,538)

Other comprehensive income 145,869 5,114 Comprehensive Income 3,274,905$ 6,632,301$

2020 2019Beginning of Year (2,841,715)$ (2,846,829)$

Other Comprehensive Income 145,869 5,114 End of Year (2,695,846)$ (2,841,715)$

Joe Wheeler Electric Membership Corporation and Subsidiary

For the Years Ended June 30, 2020 and 2019Consolidated Statements of Accumulated Other Comprehensive Income

For the Years Ended June 30, 2020 and 2019Consolidated Statements of Comprehensive Income

The accompanying notes are an integral part of these financial statements.7

13











2018



2019


Joe Wheeler Electric Membership Corporation and Subsidiary Notes to Consolidated Financial Statements

June 30, 2020 and 2019

8

Note 1 - Summary of Significant Accounting Policies Principles of consolidation - The consolidated financial statements include the accounts of Joe Wheeler Electric Membership Corporation (JWEMC) and its wholly-owned subsidiary, Wheeler Basin Natural Gas Company, Inc. (WBNG). All references to the Corporation include JWEMC and WBNG. All material intercompany balances and transactions have been eliminated in consolidation. Nature of business and ownership - The operations of JWEMC primarily consist of the sale and distribution of electricity in North Alabama and it is regulated by the Tennessee Valley Authority (TVA). WBNG provides natural gas to customers in the franchise areas of Falkville, Priceville, Somerville, and Trinity, Alabama and is regulated by the Alabama Public Service Commission (APSC). Accounting policies - The accounting records of JWEMC are maintained in accordance with the Uniform System of Accounts prescribed by the Rural Utilities Service (RUS). WBNG maintains its accounting records in accordance with the Federal Energy Regulatory Commission (FERC) Uniform System of Accounts. As a result, the application of accounting principles generally accepted in the United States of America by the Corporation differs in certain respects from the application of those principles by nonregulated enterprises. Such differences primarily concern the recognition of gains and losses on the retirement of assets. The more significant policies of the Corporation are described below. Revenue recognition - As of July 1, 2018, the Corporation adopted FASB Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (ASC 606), using the retrospective method. The new guidance establishes principles to report useful information to users of financial statements about the nature, timing, and uncertainty of revenue from contract with customers. The Corporation evaluated and determined that ASC 606 did not have an effect on the financial statements for the year ended June 30, 2019. The Corporation has contractual agreements with its residential, commercial, and industrial customers for the provision of utility services. Electric revenue and the related cost of power purchased are recognized when electricity is used by the ultimate customer. Revenues are recognized from meters read and billed on a monthly cycle basis through the month. Customers are billed monthly for services. Each billing cycle has a specific due date each month and the bills are mailed to customers fifteen or more days before the due date. Failure to receive a bill will not release the customer from their payment obligation. Bills paid after the due date specified on the bill will be assessed a 5% penalty. The Corporation accrues unbilled electric revenue from the dates of the most recent meter readings to the balance sheet date at June 30. The Corporation has contractual agreements with its residential, commercial, and industrial customers for the provision of natural gas services. WBNG recognizes revenue when gas is used by the ultimate customer. The liability for the purchased gas is based on the most recent meter reading by the supplier, which is at the end of the fiscal year. Natural gas revenues are recognized when meters are read and billed on a monthly cycle basis through the month. Customers are billed monthly for services. Each billing cycle has a specific due date each month and the bills are mailed to customers fifteen or more days before the due date. Failure to receive a bill will not release the customer from their payment obligation. Bills paid after the due date specified on the bill will be assessed a 5% penalty. The Corporation accrues unbilled natural gas revenue from the dates of the most recent meter readings to the balance sheet date at June 30.

14


June 30, 2020 and 2019

9

Note 1 - Summary of Significant Accounting Policies (continued) Utility plant - Costs associated with electric plant additions and improvements are capitalized. This includes the capitalization of direct costs such as labor and materials expense and also includes capitalization of indirect costs including labor, material charges, taxes, insurance, transportation, depreciation, pensions, and other related expenses. These costs are accumulated in work-in-process accounts and are capitalized to the proper plant accounts at the completion of the construction activity. Certain special equipment additions, as defined by RUS, are capitalized when purchased along with an estimated installation charge. The cost of depreciable property, when retired, is computed at average unit cost along with removal costs less salvage. The net retirement cost is charged to accumulated depreciation. Maintenance and repairs, including minor items of property, are charged to maintenance expense as incurred. Costs associated with natural gas plant are capitalized when purchased. Cash equivalents - The Corporation considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Accounts receivable - The Corporation extends credit to its customers who are primarily located in North Alabama. Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. The Corporation does not charge interest on past due accounts. Trade receivables are written-off when deemed uncollectible. Recoveries of trade receivables previously written-off are recorded when received. Materials and supplies - Materials and supplies are priced at the lower of cost or market. Cost is determined using the average cost method. Investments - Investments in associated organizations represent cooperative capital credits from the Corporation’s suppliers and debt capital. Investments in associated organizations are recorded at cost plus allocated equities. Amortization - Deferred charges are amortized on a straight-line basis over periods ranging from three to 30 years. Taxes - The Corporation collects gross receipts taxes from its members on behalf of the State of Alabama. Revenue is presented net of taxes collected in the consolidated statements of revenue and equities. Income taxes - JWEMC is exempt from income taxes under Internal Revenue Code Section 501(c)(12). WBNG is subject to federal and state income taxes. Management evaluated the Corporation’s tax positions and concluded that the Corporation had taken no uncertain tax positions that require adjustment to the financial statements. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Reclassification - Certain prior year amounts have been reclassified to conform to the current year presentation.


June 30, 2020 and 2019

10

Recent accounting pronouncements - In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all lease with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years beginning after December 31, 2021. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Corporation is currently evaluating the effect that the standard will have on the financial statements.

Note 2 - Cash and Cash Equivalents The Corporation maintains its cash in several banks located in Alabama, which at times may exceed federally insured limits. The Corporation has approximately $12,623,000 and $19,897,000 in uninsured cash at multiple financial institutions at June 30, 2020 and 2019, respectively. The Corporation has not experienced any losses in such accounts. The Corporation believes it is not exposed to any significant credit risk on cash and cash equivalents.

Note 3 - Contract Balances Receivables and contract assets from contracts with customers for the years ended June 30, 2020 and 2019 were as follows:

2020End of Year End of Year Beginning of Year

ReceivablesCustomers 10,584,870$ 11,521,986$ 11,430,316$

Contract AssetsUnbilled revenue 7,390,757 8,002,964 8,282,320

Totals 17,975,627$ 19,524,950$ 19,712,636$

2019











2018



2019


Joe Wheeler Electric Membership Corporation and Subsidiary Notes to Consolidated Financial Statements June 30, 2020 and 2019

15


June 30, 2020 and 2019

10

Recent accounting pronouncements - In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all lease with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years beginning after December 31, 2021. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Corporation is currently evaluating the effect that the standard will have on the financial statements.

Note 2 - Cash and Cash Equivalents The Corporation maintains its cash in several banks located in Alabama, which at times may exceed federally insured limits. The Corporation has approximately $12,623,000 and $19,897,000 in uninsured cash at multiple financial institutions at June 30, 2020 and 2019, respectively. The Corporation has not experienced any losses in such accounts. The Corporation believes it is not exposed to any significant credit risk on cash and cash equivalents.

Note 3 - Contract Balances Receivables and contract assets from contracts with customers for the years ended June 30, 2020 and 2019 were as follows:

2020End of Year End of Year Beginning of Year

ReceivablesCustomers 10,584,870$ 11,521,986$ 11,430,316$

Contract AssetsUnbilled revenue 7,390,757 8,002,964 8,282,320

Totals 17,975,627$ 19,524,950$ 19,712,636$

2019


June 30, 2020 and 2019

11

Note 4 - Utility Plant and Depreciation Listed below are the major classes of the utility plant as of June 30, 2020 and 2019:

2020 2019 AnnualPlant Plant Depreciation

Electric Plant in Service Balance Balance RateDistribution plant 230,716,694$ 223,899,204$ 2.00% - 5.25%General plant

Land and rights 241,419 170,419 Structures and improvements 5,164,730 4,856,932 2.50%Office furniture and equipment 1,766,424 1,890,259 10.00%Transportation 6,337,122 5,376,851 20.00%Stores, tools, and laboratoryequipment 445,715 438,108 8.00%Power-operated equipment 183,894 182,748 8.00%Communication equipment 3,150,011 3,124,091 10.00%Other miscellaneous equipment 2,626,664 2,671,609 8.00% - 10.00%

Total electric plant in service 250,632,673$ 242,610,221$

Natural Gas Plant in ServiceDistribution plant 17,957,041$ 17,787,027$ 2.50% - 5.75%General plant

Land and rights 7,769 7,769 Structures and improvements 50,431 50,431 6.67%Office furniture and equipment 75,846 75,846 8.00% - 16.67%Office miscellaneous equipment 597,021 437,944 8.00% - 10.00%

Total gas plant in service 18,688,108$ 18,359,017$

All assets are depreciated on a straight-line basis. Depreciation rates for electric plant in service are prescribed by TVA and depreciation rates for natural gas plant in service are prescribed by the Alabama Public Service Commission.











2018



2019


Joe Wheeler Electric Membership Corporation and Subsidiary Notes to Consolidated Financial Statements June 30, 2020 and 2019 Joe Wheeler Electric Membership Corporation and Subsidiary Notes to Consolidated Financial Statements June 30, 2020 and 2019

16


June 30, 2020 and 2019

12

Note 5 - Detail of Equities At June 30, 2020 and 2019 equities consisted of:

RetainedPatronage Earnings

Capital (Deficit) TotalBalance at beginning of year 111,845,467$ (6,767,452)$ 105,078,015$ Net margins 2,810,521 318,515 3,129,036 State utility tax refund 211,972 211,972

Balance at end of year 114,867,960$ (6,448,937)$ 108,419,023$

Balance at beginning of year 105,504,226$ (7,208,823)$ 98,295,403$ Net margins 6,185,816 441,371 6,627,187 State utility tax refund 155,425 155,425


2019

2020

Payments of capital credits are not authorized or permitted under JWEMC’s wholesale power contract with the Tennessee Valley Authority (TVA), a federal corporation having authorization to establish rates, terms, and conditions governing the resale of TVA power pursuant to the Tennessee Valley Authority Act of 1933.

Note 6 - Investments in Associated Organizations Investments in associated organizations consisted of the following at June 30, 2020 and 2019:

2020 2019Patronage capital from associated organizations 5,797,187$ 5,590,046$ Investment in NRUCFC capital term certificates and patronage 1,412,899 1,419,104

Total investments in associated organizations 7,210,086$ 7,009,150$

Note 7 - Paycheck Protection Program Loan On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which established the Paycheck Protection Program (the Program). The Program was created to assist small businesses in paying their employees and certain other expenses during the COVID-19 crisis. The Corporation applied for a loan under this Program and received from its bank a loan in the amount of $2,836,000 on April 20, 2020. The loan is forgivable if the Corporation meets certain criteria as established under the Program. The Corporation will seek loan forgiveness in fiscal year 2021. The Corporation anticipates there may be further guidance issued by the Small Business Administration (SBA), the U.S. Department of the Treasury, the bank, and other regulators related to the Program which could impact the loan and loan forgiveness. Any of the loan amount not forgiven under the Program will be due April 2, 2022 with interest at 1.0%. The loan is unsecured.


June 30, 2020 and 2019

13

Note 8 - Long-Term Liabilities and Lines of Credit Long-term debt consists of the following notes due in quarterly or monthly installments.

2020 2019

20,974,482$ 22,263,324$

37,692,152 40,396,050

(787,144) (1,180,716) Total long-term liabilities 57,879,490$ 61,478,658$

Mortgage notes payable - NRUCFC; interest ratesfrom 3.15% to 7.65%; notes due at various times toSeptember 2033.

Mortgage notes payable - CoBank; interest ratesfrom 2.91% to 4.76%; notes due at various times toJuly 2029.

Description

Less debt refinance fees

All mortgage notes payable are secured by the assets of JWEMC. As of June 30, 2020, JWEMC had approved but unadvanced loan funds of $16,000,000 to finance capital expenditures and projects, and $95,000,000 to finance fiber-to-home projects and related smart grid technologies, with CoBank.

The Corporation has financial covenants with its lenders relating to certain financial ratios.

Estimated maturities on long-term liabilities for the next five years are as follows:

For the Years Ending AmountJune 30, 2021 7,865,281$ June 30, 2022 8,127,982 June 30, 2023 7,257,138 June 30, 2024 6,563,385 June 30, 2025 6,380,611

Lines of credit - JWEMC has a line of credit with CoBank on which it may borrow up to $7,000,000. As of June 30, 2020 and 2019, the amount drawn on the line of credit was $0.

JWEMC has a line of credit with NRUCFC on which it may borrow up to $15,000,000. As of June 30, 2020 and 2019, the amount drawn on the line of credit was $0.

WBNG has a line of credit with a local bank on which it may borrow up to $500,000. As of June 30, 2020 and 2019, the amount drawn on the line of credit was $0.


June 30, 2020 and 2019

12

Note 5 - Detail of Equities At June 30, 2020 and 2019 equities consisted of:

RetainedPatronage Earnings

Capital (Deficit) TotalBalance at beginning of year 111,845,467$ (6,767,452)$ 105,078,015$ Net margins 2,810,521 318,515 3,129,036 State utility tax refund 211,972 211,972


Balance at beginning of year 105,504,226$ (7,208,823)$ 98,295,403$ Net margins 6,185,816 441,371 6,627,187 State utility tax refund 155,425 155,425


2019

2020

Payments of capital credits are not authorized or permitted under JWEMC’s wholesale power contract with the Tennessee Valley Authority (TVA), a federal corporation having authorization to establish rates, terms, and conditions governing the resale of TVA power pursuant to the Tennessee Valley Authority Act of 1933.

Note 6 - Investments in Associated Organizations Investments in associated organizations consisted of the following at June 30, 2020 and 2019:

2020 2019Patronage capital from associated organizations 5,797,187$ 5,590,046$ Investment in NRUCFC capital term certificates and patronage 1,412,899 1,419,104

Total investments in associated organizations 7,210,086$ 7,009,150$

Note 7 - Paycheck Protection Program Loan On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which established the Paycheck Protection Program (the Program). The Program was created to assist small businesses in paying their employees and certain other expenses during the COVID-19 crisis. The Corporation applied for a loan under this Program and received from its bank a loan in the amount of $2,836,000 on April 20, 2020. The loan is forgivable if the Corporation meets certain criteria as established under the Program. The Corporation will seek loan forgiveness in fiscal year 2021. The Corporation anticipates there may be further guidance issued by the Small Business Administration (SBA), the U.S. Department of the Treasury, the bank, and other regulators related to the Program which could impact the loan and loan forgiveness. Any of the loan amount not forgiven under the Program will be due April 2, 2022 with interest at 1.0%. The loan is unsecured.











2018



2019



17


June 30, 2020 and 2019

14

Note 9 - Accounting for Pensions and Other Postemployment Benefits Defined benefit pension plan - The Corporation is a participating employer in the National Rural Electric Cooperative Association (NRECA) Retirement Security Plan (RS Plan) is a defined benefit pension plan qualified under Section 401 and tax-exempt under Section 501(a) of the Internal Revenue Code. It is a multi-employer plan under the accounting standards. The RS Plan Sponsor’s Employer Identification Number is 53-0116145 and the RS Plan Number is 333. A unique characteristic of a multi-employer plan compared to a single employer plan is that all plan assets are available to pay benefits of any plan participant. Separate asset accounts are not maintained for participating employers. This means that assets contributed by one employer may be used to provide benefits to employees of other participating employers. The Corporation’s contributions to the RS Plan in 2020 and 2019 represented less than 5% of the total contributions made to the RS Plan by all participating employers. The Corporation made contributions to the plan of $2,308,684 and $2,422,021 for 2020 and 2019, respectively. There have been no significant changes that affect the comparability of the 2020 and 2019 contributions. At the December 2012 meeting of the I&FS Committee of the NRECA Board of Directors, the Committee approved an option to allow participating cooperatives in the RS Plan to make a contribution prepayment and reduce future contributions. During 2013, the Corporation made an advanced funding payment of $5,695,185 to the RS Plan. This amount will be amortized to expense over a period of 10 years. Amortization expense related to this deferred asset was $569,519 for the years ended June 30, 2020 and 2019. The prepayment amount was calculated by NRECA as the Corporation’s share, as of January 1, 2013, of future contributions required to fund the RS Plan’s unfunded value of benefits earned to date using RS Plan actuarial valuation assumptions. The Corporation estimates that the prepayment will reduce RS Plan billings by 25% for 15 years from the date of the prepayment. However, changes in interest rates, asset returns, other RS Plan experiences different from expectations, plan assumption changes, and other factors may have an impact on the differential in billings and the 15-year period. In the RS Plan, a zone status determination is not required, and therefore, not determined under the Pension Protection Act (PPA) of 2006. In addition, the accumulated benefit obligations and plan assets are not determined or allocated separately by individual employer. In total, the Retirement Security Plan was over 80% funded at July 1, 2020 and July 1, 2019 based on the PPA funding target and PPA actuarial value of assets on those dates. Because the provisions of the PPA do not apply to the RS Plan, funding improvement plans and surcharges are not applicable. Future contribution requirements are determined each year as part of the actuarial valuation of the plan and may change as a result of plan experience. The benefit provided under this pension plan is calculated as a percentage, based on the number of years of service times a benefit factor, multiplied by the average of the five highest years of compensation. 401(k) plan - The Corporation sponsors a 401(k) plan which covers substantially all of the employees of the Corporation. The Corporation contributes 5% of employees' base salaries to this Plan. Expense related to this Plan was $435,642 and $409,066 for 2020 and 2019, respectively. Postemployment benefit plan - The Corporation sponsors a postemployment benefit plan that offers postemployment medical and dental benefits. The Plan provides that current retired employees and long-term disabled employees prior to January 1991 will continue to receive medical and dental coverage until age 65. Upon reaching age 65, the Corporation will pay the cost of supplemental insurance.











2018



2019



18


June 30, 2020 and 2019

15

Note 9 - Accounting for Pensions and Other Postemployment Benefits (continued) Current employees and employees who retired after January 1991 receive medical and dental coverage, not to exceed $875 per month, for a period of three years or until the employee reaches age 65, whichever occurs first. At age 65 the primary coverage is Medicare. The Corporation pays 100% of the premium for a Medicare supplemental insurance. Medical and dental coverage for long-term disabled employees, who were disabled after January 1991, ceases two years after their eligibility for long-term disability. If the long-term disability becomes a permanent disability, the employee may remain in the medical insurance plan by reimbursing the Corporation for the monthly premium until age 65. At age 65, the Corporation will provide supplemental insurance to both the employee and his or her spouse for life.

The Corporation’s postemployment plan is not funded. In general, retiree benefits are paid as covered expenses are incurred.

2020 2019Accumulated postemployment benefit obligations 12,044,060$ 11,408,880$

Components of net periodic benefit cots to be recognized for the years ended June 30, 2020 and 2019:

2020 2019Service cost 443,011$ 370,369$ Interest cost 395,778 404,285 Amortization of unrecognized actuarial loss 145,869 58,652

Totals 984,658$ 833,306$

The components of net periodic benefit cost other than the service cost component are included in the line item “Nonoperating margins” on the consolidated statements of revenues and equities.

The following sets forth the components of the accumulated postemployment benefit obligation at June 30, 2020 and 2019:

Weighted-average Assumptions as of June 30 2020 20193.50% 4.25%5.40% 5.50%

3.94% 3.84%

Discount rateHealthcare cost trend rate assumed for next year Rate to which the cost trend rate is assumedto decline, ultimate trend rateYear that the rate reaches the ultimate trend rate 2075 2075

Benefit Cost $ 984,658 $ 833,306Benefits Paid by the Corporation 176,803 168,506


June 30, 2020 and 2019

15






Totals 984,658$ 833,306$




3.94% 3.84%




June 30, 2020 and 2019

16

Amounts in accumulated other comprehensive income not yet recognized as a component of net periodic benefit cost:

2020 2019Net loss 2,695,846$ 2,841,715$

Totals 2,695,846$ 2,841,715$

Components of net periodic benefit cost expected to be recognized for the year ended June 30, 2021:

Service cost 409,630$ Interest cost 421,542 Amortization of unrecognized actuarial loss 136,454

Totals 967,626$

Estimated future benefit payments, which reflect expected future service as appropriate, are expected as follows:

2021 236,909$ 2022 253,189 2023 331,946 2024 319,342 2025 337,225 2026 - 2030 1,896,581

Note 10 - Commitments TVA contract - Under its wholesale power agreement, JWEMC is committed to purchase its electric power and energy requirements from TVA. The rates paid for such purchases are subject to periodic review. The contract requires a five-year notice of cancellation to terminate the contract.

WBNG has committed to provide natural gas to the franchise areas of Falkville, Priceville, Trinity, and Somerville for a period of 20 years through 2037.

Note 11 - Income Taxes WBNG has a deferred tax asset for the expected tax benefit from the realization of net operating losses. A valuation allowance was recorded against the deferred tax asset. For income tax purposes, WBNG has net operating loss carryforwards of $3,350,684 and $4,407,172 for 2020 and 2019, respectively. These carryforwards will expire in the years 2019 to 2037.

2020 2019Deferred tax asset 703,644$ 925,506$ Valuation allowance (703,644) (925,506)

Net deferred tax asset -$ -$

WBNG is no longer subject to income tax examinations for the years prior to 2017.











2018



2019



19


June 30, 2020 and 2019

15






Totals 984,658$ 833,306$




3.94% 3.84%




June 30, 2020 and 2019

16

Amounts in accumulated other comprehensive income not yet recognized as a component of net periodic benefit cost:

2020 2019Net loss 2,695,846$ 2,841,715$

Totals 2,695,846$ 2,841,715$

Components of net periodic benefit cost expected to be recognized for the year ended June 30, 2021:

Service cost 409,630$ Interest cost 421,542 Amortization of unrecognized actuarial loss 136,454

Totals 967,626$

Estimated future benefit payments, which reflect expected future service as appropriate, are expected as follows:

2021 236,909$ 2022 253,189 2023 331,946 2024 319,342 2025 337,225 2026 - 2030 1,896,581

Note 10 - Commitments TVA contract - Under its wholesale power agreement, JWEMC is committed to purchase its electric power and energy requirements from TVA. The rates paid for such purchases are subject to periodic review. The contract requires a five-year notice of cancellation to terminate the contract.

WBNG has committed to provide natural gas to the franchise areas of Falkville, Priceville, Trinity, and Somerville for a period of 20 years through 2037.

Note 11 - Income Taxes WBNG has a deferred tax asset for the expected tax benefit from the realization of net operating losses. A valuation allowance was recorded against the deferred tax asset. For income tax purposes, WBNG has net operating loss carryforwards of $3,350,684 and $4,407,172 for 2020 and 2019, respectively. These carryforwards will expire in the years 2019 to 2037.

2020 2019Deferred tax asset 703,644$ 925,506$ Valuation allowance (703,644) (925,506)

Net deferred tax asset -$ -$

WBNG is no longer subject to income tax examinations for the years prior to 2017.


June 30, 2020 and 2019

17

Note 12 - Significant Customer and Supplier WBNG buys its gas supply from CenterPoint Energy Services, Inc. During the years ended June 30, 2020 and 2019, WBNG purchased gas in the amounts of $621,830 and $878,628, respectively, and accounts payable to CenterPoint Energy Services, Inc. were $23,015 and $25,835, respectively.

During the fiscal years ended June 30, 2020 and 2019, WBNG did not serve any customers whose sales accounted for more than 10% of its revenue.

Note 13 - Regulatory Matters WBNG is regulated by the Alabama Public Service Commission. WBNG’s last rate adjustment was approved by the Commission, effective September 1, 2017 and provides for a change in the monthly Customer Charge.

Note 14 - Subsequent Events The Corporation has evaluated subsequent events through September 14, 2020, which is the date these consolidated financial statements were available to be issued. In July 2020, the Corporation received a CoBank loan advance in the amount of $4,000,000 with a fixed interest rate of 2.43% and a repayment term of 10 years. All other subsequent events requiring recognition as of June 30, 2020 have been incorporated into these financial statements.











2018



2019



20

Elimination ConsolidatedJWEMC WBNG Entries Balances

Utility PlantElectric plant in service 250,632,673$ 250,632,673$ Natural gas plant in service 18,688,108$ 18,688,108 Construction work-in-progress 5,867,134 5,867,134

256,499,807 18,688,108 275,187,915 Less accumulated provision fordepreciation and amortization 102,497,116 11,518,009 114,015,125

Total utility plant 154,002,691 7,170,099 161,172,790

Other Assets and InvestmentsInvestments in associated organizations 7,210,086 7,210,086 Investment in subsidiaries 12,744,720 (12,744,720)$ Notes receivable

Conservation notes 4,562,246 4,562,246 Other 81,632 81,632

Total other assets and investments 24,598,684 (12,744,720) 11,853,964

Current AssetsCash and cash equivalents 13,468,106 5,494,029 18,962,135 Accounts receivable

Customers, less provision fordoubtful accounts of $220,000 10,364,869 173,668 10,538,537 Other 8,534,353 8,534,353

Materials and supplies 1,165,731 227,572 1,393,303 Other current assets 50,929 35,418 86,347

Total current assets 33,583,988 5,930,687 39,514,675

Deferred ChargesPrepaid pension 1,348,274 75,522 1,423,796 Other 54,059 44,284 98,343

Total deferred charges 1,402,333 119,806 1,522,139 Total assets 213,587,696$ 13,220,592$ (12,744,720)$ 214,063,568$

Joe Wheeler Electric Membership Corporation and Subsidiary

At June 30, 2020

Assets

Consolidating Balance Sheet

See Independent Auditor's Report.

18

21


EquitiesEquity 108,419,023$ 12,744,720$ (12,744,720)$ 108,419,023$ Accumulated other comprehensive income - unrecognized componentsof net periodic benefit costs (2,695,846) (2,695,846)

Total equities 105,723,177 12,744,720 (12,744,720) 105,723,177

Long-Term LiabilitiesNotes payable 57,879,490 57,879,490 Paycheck Protection Program loan 2,836,000 2,836,000 Less current maturities 7,865,281 7,865,281

Total long-term liabilities 52,850,209 52,850,209

Current LiabilitiesCurrent maturities on long-term liabilities 7,865,281 7,865,281 Accounts payable

Purchased power payable 16,603,428 16,603,428 Trade 4,113,844 307,258 4,421,102

Customer deposits 4,055,596 4,055,596 Accrued liabilities

Taxes 1,485,201 99,709 1,584,910 Interest 121,710 121,710 Other 3,969,382 68,905 4,038,287

Total current liabilities 38,214,442 475,872 38,690,314

Other Long-Term LiabilitiesPostemployment benefits 12,044,060 12,044,060 Tennessee Valley Authority advances 4,755,808 4,755,808

Total other long-term liabilities 16,799,868 16,799,868 Total equities and liabilities 213,587,696$ 13,220,592$ (12,744,720)$ 214,063,568$

Equities and Liabilities

19


Operating RevenueRevenues from contracts with customers

Electric revenue 148,922,566$ 148,922,566$ Natural gas revenue 2,653,940$ 2,653,940

Other 2,634,881 2,634,881 Total operating revenue 151,557,447 2,653,940 154,211,387

Operating ExpensesCost of power - electricity 111,370,722 111,370,722 Cost of sales - natural gas 647,465 647,465 Distribution - operations 2,897,401 326,107 3,223,508 Distribution - maintenance 11,696,843 5,429 11,702,272 Consumer accounts 4,248,413 146,001 4,394,414 Administrative and general 3,015,079 559,426 3,574,505 Depreciation 8,412,417 479,801 8,892,218 Taxes 4,102,868 183,179 4,286,047 Loss on investment in subsidiary (318,515) $ 318,515

Total operating expenses 145,425,228 2,347,408 318,515 148,091,151

Operating Margins BeforeFixed Charges 6,132,219 306,532 (318,515) 6,120,236

Fixed ChargesInterest expense 3,326,318 3,326,318

2,805,901 306,532 (318,515) 2,793,918

323,135 19,632 342,767

7,649 7,649 3,129,036 318,515 (318,515) 3,129,036

211,972 211,972

105,078,015 (6,767,452) 6,767,452 105,078,015 108,419,023$ (6,448,937)$ 6,448,937$ 108,419,023$

Joe Wheeler Electric Membership Corporation and SubsidiaryConsolidating Statement of Revenue and Equities

For the Year Ended June 30, 2020

Net Operating Margins

Nonoperating Margins

Income Tax ExpenseNet Margins for the Year

4% Utility Tax Refund

Equities at Beginning of Year Equities at End of Year

See Independent Auditor's Report.20

23

Headquarters:25700 Ala. Hwy 24

Trinity, AL 35673

256-552-2300

Moulton:641 Big Nance St.

Moulton, AL 35650

Hartselle:700 Sparkman St.

Hartselle, AL 35640

District Offices:

Documents

Always Working for you - jwemc.coop