Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company’s business operations give rise to market risk exposure due to changes in interest rates and commodity prices. To manage such risks effectively,
the Chief Financial Officer, with support from the Executive Officers, Audit Committee and Board of Directors, evaluates strategies to mitigate these risks by limiting variable rate exposure and by monitoring the effects of market changes in interest
rates. The Company’s financial risk management evaluations are designed to protect against risk arising from extreme adverse market movements on our key exposures.
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The Company is subject to the risk of fluctuating interest rates in the normal course of business. Our policy is to manage interest rates through the use of
fixed rate long-term debt and, to a lesser extent, short-term debt. The Company's exposure to interest rate risk related to existing fixed rate, long-term debt is due to the term of the majority of our First Mortgage Bonds and the term of the
promissory note, which have final maturity dates ranging from 2028 to 2049 and interest rates ranging from 4.24% to 5.96%, which exposes the Company to interest rate risk as interest rates may drop below the existing fixed rate of the long-term debt
prior to such debt’s maturity. In addition, the Company has interest rate exposure on $60 million of variable rate lines of credit, with two banks. As of December 31, 2023 there were not any outstanding balances on the lines of credit. An increase
in the variable interest rates has resulted and is expected to continue to result in an increase in the cost of borrowing on these variable rate lines of credit. Also, changes in SOFR could affect our operating results and liquidity. We are also
exposed to market risk associated with changes in commodity prices. Our risks associated with price increases in chemicals, electricity and other commodities are mitigated by our ability to recover our costs through rate increases to our customers.
We have also sought to mitigate future significant electric price increases by signing multi-year supply contracts at fixed prices.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.