Stevenson explains

revenue spike in

Public Utilities' budget

Net income exceeds 2001 budget total

by $974,020

By RON LARSEN

Journal Staff Writer

NEW ULM -- While memories of a harsh winter and its accompanying natural gas price explosion still linger in the minds of New Ulmites, the city's natural gas division has emerged as New Ulm Public Utilities' "cash cow" for 2001.

For a division that has had a year-end positive cash flow only once in the last five years, it is a truly remarkable performance.

Through September, its year-to-date revenues totaled $7,827,188, exceeding the budgeted revenue by $2.2 million. Net income exceeds the 2001 budget total by $974,020.

The department's 2002 preliminary utilities budget projects total 2001 net income at $1,295,114 which would be $982,268 more than projected in the 2001 budget.

Last year, the division posted a net income of $104,599. Then it's negative numbers back to 1996 when the division had a positive cash flow of $41,157.

"There are two or three things that could go into creating that kind of revenue spike," Utilities Director Robert Stevenson said.

One reason for it, according to Stevenson, is an accounting matter.

"We're dealing with a situation in which for any given month we're using revenue figures from previous month applied against 'real month' expenditures," Stevenson explained. "During the low-usage months, we'll gain on revenues while during the high-usage months expenditures will out-distance 'last-month' revenue."

Another factor could be a failure in the formula used for figuring adjustments for rising fuel costs.

"Last winter was a time of outlandish price increases and a difficult time for fuel cost adjustors," Stevenson said. "We refined the way in which they are figured, but we discovered the new formula we had doesn't work well when prices get way out of whack. We've contacted our rate study guys asking them, 'what's up with the new formula,' but they haven't gotten back to us yet. We may end up re-inventing fuel cost adjustors in the future."

The first signals that the 2000-2001 winter was going to be unusual in terms of gas prices came in May of last year. Then, in September gas prices started rising as the heating season began. As the season wore on prices began 'spiking' sharply, triggering for budget-plan customers two increases in their payment schedules during the course of the winter.

But, according to Stevenson, the large surplus that was building up was unforeseen.

"We're surprised by it, too," Stevenson said, "but right now I'm of the mind that it isn't going to be anywhere near the amount that it appears headed toward."

He also notes the division is cash-starved, as far as necessary reserves are concerned, and has been for some years.

"If we do end up with more money than we need, I can assure you that something will be done about it," Stevenson said. "But before we talk about cash rebates, we have to be pretty careful before we do anything that needs are being met."