Our financial relationships with our member distribution cooperatives are based primarily on our contractual arrangements for the supply of power and related transmission and ancillary services. These arrangements are set forth in our wholesale power contracts with our member distribution cooperatives that are effective until January 1, 2054, and beyond this date unless either party gives the other at least three years notice of termination. The wholesale power contracts are all-requirements contracts. Each contract obligates us to sell and deliver to a member distribution cooperative, and obligates that member distribution cooperative to purchase and receive from us, all power that it requires for the operation of its system, with some exceptions, to the extent that we have the power and facilities available to do so.

An exception to the all-requirements obligations of our member distribution cooperatives relates to the ability of our eight mainland Virginia member distribution cooperatives to purchase hydroelectric power allocated to them from SEPA, a federal power marketing administration. Purchases under this exception constituted less than 2% of our member distribution cooperatives’ total energy requirements in 2023.

There are two additional exceptions to the all-requirements nature of our wholesale power contracts.

One exception permits each of our member distribution cooperatives, with 180 days prior written notice, to receive up to the greater of 5% of its demand and associated energy or 5 MW of demand and associated energy from its owned generation or other suppliers. The member distribution cooperative may return this load with proper notice. If all of our member distribution cooperatives elected to fully utilize this exception, we estimate the current impact on our load requirements would be a reduction of approximately 182 MW of demand and associated energy. As of December 31, 2023, approximately 129 MW of demand and associated energy had been removed under this provision. In 2024, approximately 110 MW of this load will return to us. We do not anticipate that the current or potential full utilization of this exception or the return of all removed load by our member distribution cooperatives would have a material impact on our results of operations, financial condition, or cash flows.

The second exception permits a member distribution cooperative to purchase additional power from other suppliers following approval by our board of directors. In this case, if an opportunity is presented to a member distribution cooperative to purchase a component of its all-requirements service from another supplier in excess of the first exception described above, the member distribution cooperative must offer that opportunity to us. If we decline the opportunity or we are otherwise unable to agree on an acceptable contract with the supplier, then the member distribution cooperative may purchase that component of service from the other supplier, subject to our ability to eliminate other purchases and a determination by our board of directors that use of the exception will not materially adversely affect us or our other member distribution cooperatives. In January 2024, for the first time, an opportunity to purchase the power requirements to serve a potential future significantly larger load was presented to us, and we declined the opportunity.

Each member distribution cooperative is required to pay us monthly for the power we furnish under its wholesale power contract in accordance with our formula rate or under a market-based rate that a member distribution cooperative may elect in lieu of the formula rate for certain new and expanding loads. The formula rate, which has been filed with and accepted by FERC, is designed to recover our total cost of service and create a firm equity base. See Note 1—Summary of Significant Accounting Policies—Formula Rate.

More specifically, the formula rate is intended to meet all of our costs, expenses, and financial obligations associated with our ownership, operation, maintenance, repair, replacement, improvement, modification, retirement, and decommissioning of our generating plants, transmission system, or related facilities; services provided to the member distribution cooperatives; and the acquisition and transmission of power or related services, including:

The rates established under the wholesale power contracts are designed to enable us to comply with financing, regulatory, and governmental requirements that apply to us from time to time.

In accordance with the wholesale power contracts, our board of directors will review our formula rate at least every three years to determine if it reflects and recovers all costs and expenses indicated above, and if it represents the best way to allocate these costs and expenses among our member distribution cooperatives. In making this review, our board of directors will consider if the formula rate results in the proper price signals to our member distribution cooperatives. Due to changes in the energy sector generally and PJM specifically, the review of our formula rate often identifies new or changing bases for the costs we incur. We will not modify our formula rate in any manner that would result in a failure to recover all of our costs and other amounts described above.

Revenues from our member distribution cooperatives for the past three years were as follows:


	Year Ended December 31,
	2023		2022		2021
	(in millions)
Rappahannock Electric Cooperative	$	312.4	$	288.6	$	223.3
Shenandoah Valley Electric Cooperative		192.1		180.9		138.2
Delaware Electric Cooperative, Inc.		148.1		140.0		109.1
Choptank Electric Cooperative, Inc.		95.7		92.3		72.1
Southside Electric Cooperative		74.5		67.5		51.8
Mecklenburg Electric Cooperative		71.0		54.3		32.6
A&N Electric Cooperative		56.7		55.1		44.0
Prince George Electric Cooperative		27.0		25.8		20.2
Northern Neck Electric Cooperative		21.7		21.5		16.9
Community Electric Cooperative		13.9		13.9		10.5
BARC Electric Cooperative		11.2		11.2		8.2
Total	$	1,024.3	$	951.1	$	726.9