March 16, 2007
MLGW GAS DIVISION MISTAKES THAT YOU WILL BE PAYING FOR NEXT WINTER, AFTER THE ELECTION ON OCTOBER 4th
A statement to the MLGW board by Joe Saino on Thursday, March 15, 2007
I finally got a copy of the November 2006 financial statement after waiting several months for my open records request. I got it not from the MLGW but from a friend.
As expected, the electric division increased its net assets by $74 million and the water division increased theirs by $10 million. However there is something very strange going on in the gas division. They show a loss of almost $18 million, a $29 million dollar swing from last year. In looking through the document I find the following items that need explanation.
• On page 22 (Gas Division Statistics) there is an item called Risk Management Cost/(Benefit) and this shows a $14 million dollar loss.
• On page 31 Operating Revenue by Rate Schedules Spot Gas) under the Note at the bottom it shows PGA Adjustment to Revenue ($27.7 million loss)
• On page 1 Report: BUL625 Statement of Income and Expenses-Gas Division under heading 2-400-0150 (Gas-PGA-Sales Revenue) it shows $33.7 million deducted from sales revenue
Now under the MLGW pricing formula there is a customer charge (currently $7.00), a MLGW margin block, a base gas cost and finally a PGA component. The PGA is where they adjust for what they paid for the gas. Apparently a decision was made not to pass this along to the customers during the winter of 2006, probably for political reasons. Possibly they have another explanation for these entries and the public is entitled to know.
Last night on TV, Dana Jeanes from the MLGW stated that this loss was due to a decrease in gas sales. Page 21 shows a 4% decrease in gas sales but strangely the income from gas sales on the same page for Residential, Commercial and Industrial shows an increase in billing for the 4% less gas than the year before. Clearly that is not the answer. Here is what I think happened ... if the numbers aren't simply an "accounting error". Hurricane Katrina came in August 2005 and after that disaster it looked like gas and energy prices were going to go through the ceiling. I think they then decided in the fall of 2005 to make some huge future purchase commitments at very high prices for natural gas thinking that gas prices were going to go higher but they did not hedge those bets and as it turned out prices went the other way and they have been paying very high prices, under those contracts, since the fall of 2005. Then starting in November 2005 through the heating season they tried to recoup their decision through high PGA figures but were unable to recoup the whole amount because there was such a huge outcry from gas customers concerning high gas bills. Therefore a political decision was made not to charge the full PGA and that is showing up now on this statement. Since no one pays much attention to this interim statement they thought it would slip by unnoticed but then the Edmund Ford affair happened and the spotlight was turned on the MLGW. I asked for the statement on January 8, 2007 but still have not gotten it from MLGW but received it from a friend
There is a further problem in that the City Charter states the following concerning PILOT (payment in lieu of taxes) from the MLGW to the City.
“Provided that in no event shall the aforesaid payment to the municipality for any year exceed one-half of the net profits realized by the gas division during that year, unless the board of light, gas and water commissioners shall, by resolution, consent thereto.”
Their November 2006 statement shows a payment in lieu of taxes for the gas division of $15.7 million and it should be zero unless the board here, by resolution, consented thereto. I am not sure if you did or not as you do not publish your minutes on the website as suggested recently by Commissioner Clark but I am sure you can check. It is also interesting that the same overpayment occurred in 2001 and 2004 although not to this huge amount.
All of the recent incidents and issues with the MLGW need a thorough and complete investigation including all correspondence, email, gas price contracts, trades and everything else concerned with this matter. If you ever hope to regain the trust and confidence of the public, you need to open up your operations to the sunshine of full disclosure including salaries, benefits, pensions, RFP’s, contract results, contract awards and all related correspondence. Public confidence and trust comes from full disclosure.
Click here to see the mistakes that cost you, the ratepayers, $27 million dollars which you will have to make up for in higher rates next winter
MLGW GAS DIVISION MISTAKES THAT YOU WILL BE PAYING FOR NEXT WINTER, AFTER THE ELECTION ON OCTOBER 4th
A statement to the MLGW board by Joe Saino on Thursday, March 15, 2007
I finally got a copy of the November 2006 financial statement after waiting several months for my open records request. I got it not from the MLGW but from a friend.
As expected, the electric division increased its net assets by $74 million and the water division increased theirs by $10 million. However there is something very strange going on in the gas division. They show a loss of almost $18 million, a $29 million dollar swing from last year. In looking through the document I find the following items that need explanation.
• On page 22 (Gas Division Statistics) there is an item called Risk Management Cost/(Benefit) and this shows a $14 million dollar loss.
• On page 31 Operating Revenue by Rate Schedules Spot Gas) under the Note at the bottom it shows PGA Adjustment to Revenue ($27.7 million loss)
• On page 1 Report: BUL625 Statement of Income and Expenses-Gas Division under heading 2-400-0150 (Gas-PGA-Sales Revenue) it shows $33.7 million deducted from sales revenue
Now under the MLGW pricing formula there is a customer charge (currently $7.00), a MLGW margin block, a base gas cost and finally a PGA component. The PGA is where they adjust for what they paid for the gas. Apparently a decision was made not to pass this along to the customers during the winter of 2006, probably for political reasons. Possibly they have another explanation for these entries and the public is entitled to know.
Last night on TV, Dana Jeanes from the MLGW stated that this loss was due to a decrease in gas sales. Page 21 shows a 4% decrease in gas sales but strangely the income from gas sales on the same page for Residential, Commercial and Industrial shows an increase in billing for the 4% less gas than the year before. Clearly that is not the answer. Here is what I think happened ... if the numbers aren't simply an "accounting error". Hurricane Katrina came in August 2005 and after that disaster it looked like gas and energy prices were going to go through the ceiling. I think they then decided in the fall of 2005 to make some huge future purchase commitments at very high prices for natural gas thinking that gas prices were going to go higher but they did not hedge those bets and as it turned out prices went the other way and they have been paying very high prices, under those contracts, since the fall of 2005. Then starting in November 2005 through the heating season they tried to recoup their decision through high PGA figures but were unable to recoup the whole amount because there was such a huge outcry from gas customers concerning high gas bills. Therefore a political decision was made not to charge the full PGA and that is showing up now on this statement. Since no one pays much attention to this interim statement they thought it would slip by unnoticed but then the Edmund Ford affair happened and the spotlight was turned on the MLGW. I asked for the statement on January 8, 2007 but still have not gotten it from MLGW but received it from a friend
There is a further problem in that the City Charter states the following concerning PILOT (payment in lieu of taxes) from the MLGW to the City.
“Provided that in no event shall the aforesaid payment to the municipality for any year exceed one-half of the net profits realized by the gas division during that year, unless the board of light, gas and water commissioners shall, by resolution, consent thereto.”
Their November 2006 statement shows a payment in lieu of taxes for the gas division of $15.7 million and it should be zero unless the board here, by resolution, consented thereto. I am not sure if you did or not as you do not publish your minutes on the website as suggested recently by Commissioner Clark but I am sure you can check. It is also interesting that the same overpayment occurred in 2001 and 2004 although not to this huge amount.
All of the recent incidents and issues with the MLGW need a thorough and complete investigation including all correspondence, email, gas price contracts, trades and everything else concerned with this matter. If you ever hope to regain the trust and confidence of the public, you need to open up your operations to the sunshine of full disclosure including salaries, benefits, pensions, RFP’s, contract results, contract awards and all related correspondence. Public confidence and trust comes from full disclosure.
Click here to see the mistakes that cost you, the ratepayers, $27 million dollars which you will have to make up for in higher rates next winter
posted by watchdog at
10:07 AM
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