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YEAR END NARRATIVE <br />These financial statements are year-end unaudited amounts, and so are preliminary and should be <br />viewed as such. The summary statements include adjustments for year-end accruals of payables, <br />receivables, and capitalized items, as well as some items that are estimated at this time, but not <br />finalized yet. The detailed statements do not reflect all of the estimated adjustments that are <br />presented in the summary statements. The auditors will be here March 3rd through March 5th to <br />review our 2009 year. They may recommend adjustments or corrections, but the majority of the <br />items should be accounted for. <br />Electric <br />The electric operating revenues preliminary numbers ended up under budget by $181,996, and <br />total revenues down by $237,811. As the year progressed, we identified that we would probably <br />end the year under budget with the economy down. Realizing the decline in revenue, the capital <br />projects for the year were managed carefully. Significant cost savings were realized of over <br />$300,000 compared to what was budgeted for the projects. On another positive note, Security <br />Sales have done very well this year. This is probably partially related to the economy, but <br />another significant factor is the low monitoring fees we offer -and having that word out there for <br />when the contracts expire on the systems that were in the new homes when purchased. <br />Expenses in total are under budget by $84,000. Purchased power composes 71% of the Operating <br />Revenue, very close to budget. Other expense categories of the preliminary numbers that are <br />under budget are: <br />' Operating and Maintenance -engine maintenance was down, as well as fuel oil and <br />natural gas prices that were budgeted at the higher costs of a year ago. <br />Maintenance -this was a big focus in 2008 that carried over to 2009. This is a line item <br />that may increase the final numbers as work orders are closed out in the year end process. We <br />continued to have success in containing costs in this category. <br />Security -Sales are up and expenses are down, that's great! The number of customers <br />has grown on the monitoring side, and since these customers have come with their own systems <br />already installed this keeps the expense down. <br />Services to the City is down due to the revenues being down -the 3% that is paid to the <br />City for the Electricity sold in Elk River. <br />Items that are over budget are: <br />Landfill Gas expenses - we had a lot of additional engine maintenance expense with the <br />high sulfur content in the gas coming out of the landfill, $110,000 this year. The bonus payment <br />related to output is approximately $15,000. The Landfill Gas plant continues to net positive <br />results, $348,000 in 2009. <br />Distribution expense -there was more focus here which is offset by some of the under <br />projection in the maintenance category. <br />Other Operating Expense - up from the disposition of inventory that has been managed <br />this year. There was also the offsetting salvage/scrap revenue that was received to help mitigate <br />this expense. <br />Administration and General -the year end accrual for payroll is included in this line item <br />and some will be redistributed as the year end process is completed. Legal expenses were <br />significantly over budget by $20,000+. They were out of the ordinary legal costs, but necessary <br />for this year. <br />12 <br />