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PROFIT AND LOSS NARRATIVE <br />The Cash Flow Detail worksheet is included with the financials this month. Please <br />remember that this is a working document, as it will be updated each month with the <br />actual detail replacing the projected detail. Much of the projection detail is based on last <br />year's data, modified with the "known detail" for 2006 (for example, bond payments and <br />some capital projects.) At budgeting time there was intention to build up our reserves <br />this year, however, given the abundance of capital projects that are springing up, the <br />projections are very conservative at this time with a modest amount of approximately <br />$58,000 for electric and $89,000 for water. The best case scenario right now is to make <br />up the $100,000 that we had projected to put in last year and didn't. <br />Electric P&L <br />The revenue for the electric is up over last year and part of that relates to warmer than <br />normal weather, but we also have to factor in the growth in the commercial area of <br />Otsego. The commercial revenue for Otsego is almost four times what it was last year in <br />this same three month period. The rural Big Lake area we serve also has an increase, as it <br />now has a demand customer for the first time. <br />Expenses for electric are up in the areas of purchased power (which follows from the <br />increase in power usage on the revenue side), operations and distribution (due to tools <br />and equipment purchases following below the capitalization threshold and, therefore, <br />being expensed), maintenance (due to increased concentration earlier in the 2006 year for <br />tree trimming, and increased fuel costs), and interest (the annual costs are being spread <br />out over the twelve months instead of being such large hits twice a year.) Depreciation is <br />more in the current year than the prior year (due to increased capital additions last year) <br />and this will continue to be apparent when comparing year to date numbers. Under <br />administrative expenses, medical insurance is more (we knew the cost was going to <br />increase and it is in line with the budget), and PERA is more (if you remember from last <br />year we had some catch-up expenses mid year with this account due to the integration of <br />payroll with the general ledger and some initial incorrect postings. This difference should <br />even out in a few months.) Miscellaneous expense is down as we had the IRS penalties <br />and interest issue last year. Just as a side note, the regular insurance expense (for <br />property, boiler, etc.) and workers' compensation is being spread over the twelve months <br />equally rather than various larger hits throughout the year. <br />When year to date income is compared from 2005 to 2006, we are behind approximately <br />$100,000 from last year. The depreciation expense is more than the prior year by <br />$90,000 and so that is the bulk of the difference. For 2006, we have less expense in <br />administration and general, and more expense in operating maintenance and regular <br />maintenance pretty much offset each other. <br />