The Newport Plain Talk

Jefferson-Cocke County Utility District gained another in a long line of excellent audits despite a challenging market, including falling sales and prices during 2009.

At least two major things had a large impact on the financial statement of the gas district, said JCCUD General Manager Tommy Bible. Industry was using less gas during the recession; and interest revenue declined steeply reflecting the weak economy and lower interest rates.

David Carr of certified public accountants WLC presented the audit and highlights during the August board of commissioners meeting in Newport, and he noted no findings or problems to report.

"The entire staff played a tremendous roll in the audit," said Bible, noting the good results have "not come overnight" but took years of improvements and work from the board level to every employee.

"We are dependent of a small number of customers for a large amount of sales," said Bible referring to industrial use. While operating revenues increased to $33 million, a 13.6% increase, net income was about $480,000. Income the prior year was about $870,000.

"We are getting squeezed," said Bible, pointing to lower rates and higher costs. Local rates have only been raised once since 1990. For example, last year JCCUD earned almost $300,000 on funds invested pending gas purchases. The fiscal year ended March 31 year, JCCUD earned about $130,000; and this will continue to decline.

Bible said that interest income is only expected to be $60,000 to $80,000. It would have been much lower had not management moved funds to get the best interest rates.

The district's total assets increased by $276,000 to $36.9 million. Of this amount, $6.6 million was cash that is kept in reserve to buy gas for resale. "You need between $7 to $7.9 million in cash to operate," said Bible.

Although last winter was six percent colder, sales to industrial customers dropped by more than 7 percent to 1.5 million mcf (thousand cubic feet), because of the recession.

A new item covered in the audit is post employment benefits for retirees to cover their health insurance. This amount was $120,561.

"We are reviewing all our costs," said Bible. One of those that has been increasing is the cost of mailing bills. The utility is looking at e-billing as a way to reduce costs further.

During the audited year including 2008-2009, $26,885,416 went for the purchase of natural gas and total expenses were $32,653,062. Expenses increased by more than $4.1 million of which $3.7 million was from the higher cost of gas.

Although gas costs increased the past fiscal year, current prices have been declining. Bible said it has been more than seven years since the price of natural gas fell below $3 per mcf. Last week the spot price for NG fell to below $2.70 but rebounded to about $3.50 mcf.

Bible said there is so much natural gas in storage prices could continue to drop, especially if there are no hurricanes in the Gulf, or winter is mild.

Carr note: "The District has not changed the local distribution charge for interruptible customers since November 1990 and has focused on operating more efficiently to maintain a strong financial position and allow local industry to compete in their respective markets."

Of more than $33 million in revenue, residential users accounted for only $7,975,443 and interruptible industrial was more than $16.4 million. Appliance sales were about $405,000.

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