Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 September 30, 2025, there was approximately $0.3 million outstanding on the lines
of credit. Increases in variable
interest rates result in an increase in the cost of borrowing on these variable
rate lines of credit. 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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