News from the Tennessee Valley State, Local and National news

DU reports '07 net income up by 33%

By Catherine Godbey 340-2441

Interest rates are a foe of the housing market but an ally for Decatur Utilities.

Steve Pirkle, DU's finance manager, presented the company's budget from fiscal 2007 to the Municipal Utilities Board on Friday. The budget compiled the company's sales, expenses and income for each of the utility divisions: gas, water, wastewater and electric. It also included the impact of interest rates on net income.

Pirkle informed the board that from 2006 to 2007, operating revenue was flat and total operating expenses increased by 1 percent. Even with static operating revenue and increased expenses, he said, the company experienced a net income increase of 33 percent for 2007.

Compared to 2006, when DU netted $4.48 million, DU's net income for fiscal 2007, which ran from Oct. 2006 to Sept. 2007, was $5.98 million.

"In relation to last year, overall we had a good budget year financially," DU Interim General Manager Stan Keenum said.

Pirkle attributes the good budget year to the interest rate, drought conditions and decreased cost of natural gas.

Investment income totaled $1.98 million and accounted for one-third of the company's net income increase.

"We made more money with money this year than we made through any other action," said Neal Holland, Jr., board chairman.

The impact of the interest rates came from the rate increase, which was from 4.93 percent in 2006 to 5.64 percent in 2007.

Increased electrical and water usage also contributed to the net income hike.

Residents who battled the drought by running their air conditions and watering their yards increased the amount of electrical kilowatt-hours sold by 4 percent and the number of gallons of water sold by 6 percent.

While DU customers spent more on electric power and water, they saved more on their gas intake. According to Pirkle, total gas sales decreased by $4.25 million.

"The decrease in sales revenues was mainly caused by the low cost of natural gas," Pirkle explained. "The cost of natural gas also affected the lower amount that DU spent on gas."

As gas sales decreased, so did DU's gas purchases, which totaled $27.29 million in 2007, $5.03 million less than in 2006. The amount spent on gas purchased, combined with the amount of gas sold resulted, in a 28 percent increase in the gas division's gross margin.

Finances derived from the company's interest, consumer's water and electric usage, and natural gas costs balanced the expenses associated with addressing the wastewater treatment plant's odor situation.

Expenses focused on plant operations and maintenance at the wastewater treatment plant increased from $2.2 million last year to $3.03 this year. Pirkle said the expenses resulted from recommendations made by ADL Engineering Services Inc., a consultant DU hired to formulate a plan to combat the odor.

DU projects that expenses associated with the wastewater treatment plant will continue to rise as DU replaces deteriorating equipment and continues to increase chemical levels.

Save $84.50 a year off our newsstand price:
Subscribe today for only 38 cents a day!

Leave feedback
on this or

Email This Page