ANNUAL REPORT 2003
A Letter to Our Customers From the General Manager MG&E experienced a year of progress in spite of the contentious world climate in 2003. This climate contributed to volatile energy markets which reached historic high prices for oil and natural gas. The Department was able to offset some of this volatility with managed hedging strategies. In June, we enacted a modest half-cent increase in the electric fuel charge after two years of escalating costs for generation which we could no longer ignore. This successfully stopped the slow loss in cash balances and should meet our fuel costs for some time to come if the market remains steady. By year s end, we dropped the natural gas fuel charge by five cents, returning to a level we had sustained for eight years prior. At these new levels, MG&E typical bill costs remain among the lowest in the state, ranking well below surrounding investor-owned utilities in the most recent survey. Growth has been key to steady rates and to our ability to absorb rising costs for insurance and pension liability. Our service area continued to grow at a rate of four percent. However, due to the relatively mild summer, our peak electric use remained at about 52 megawatts. The severe winter of 2003-2004 also brought us to a one-day record-breaking natural gas send-out of 5,910 million cubic feet (MCF). We continued to gain ground in the reliability of our network of electric and natural gas delivery, avoiding the effects of aging distribution systems and equipment unable to keep up with modern loads as was evident in the regional August blackout. To date, we have completed several critical projects necessary to give us more room to supply our growing customer base. By building a third electric distribution circuit in Lakeville and improving our natural gas take station, which should allow us to double volumes in 2004, we have taken steps that will have a lasting effect for our customers our investment of over $300,000 last year was within budget and without borrowing. But there is always room for more improvement as we learned this winter. A December blizzard taught us the value of tree-trimming and customer communication. We have since invested more than $50,000 to trim trees more aggressively in problem areas and added phone lines and an improved answering system for our customers during outages. In summary, while the reliability of the nationwide electric systems are in question, they are now being closely examined and the potential for needed correction can only improve. Our own reliability improvements have added great value and room for growth to our distribution systems which, combined with steady low rates, give our customers, we hope, peace of mind. James L. Collins General Manager
MG&E is a different kind of utility. We are actually one of a kind, created by the town of Middleborough and serving the unique needs of the communities of Middleborough and neighboring Lakeville. Without investors or out-of-state and even out-of-country owners, everything we do depends upon the priorities of our local ratepayers. What follows is a summary of what we did this year. Rates stayed lower than investor-owned utilities. The market for electric and natural gas supply continued to react to the Middle East conflict and greater demands for natural gas due to newly built generation. Investor-owned utilities (IOUs) that serve towns surrounding us reacted in kind by increasing fuel charges and their customer bills, four to five times throughout the year. At MG&E, we enacted a modest electric fuel charge increase of a half-cent for June the first in ten years which allowed us to recover the previous two years of escalating costs. Our natural gas rates remained steady throughout the harsh winter, in part due to an advantageous contract for gas supplies in effect for the past three years. We were able to drop the natural gas fuel charge by five cents at year s end, making our gas bills lower than most surrounding IOUs. Our customers have told us that a stable known cost is easier to manage than a fluctuating bill and an unknown possibility. Therefore, our goal is to keep fuel charges and rates steady and customer bills stable. Electric Bills* $65 $60 $55 $50 $45 Rate Comparison $53.52 $51.63 $59.83 $65.21 $40 MG&E MG&E National NStar Senior Rate Grid *For a typical residential customer using 500 kilowatt-hours Gas Rates* $1.25 $1.20 $1.15 $1.10 $1.05 $1.00 $0.95 $1.06 MG&E Senior Rate $1.09 $1.21 MG&E Bay State Gas *Cost per therm $1.25 Commonwealth Gas Your public electric and gas utility is a great value. Keeping rates low, we attract tax-paying industry to our communities. We bill town departments at discounted rates. For Middleborough, we keep revenues in town accounts, where the town reaps the interest and avoids short-term borrowing. And by paying for our large projects with depreciation funds, such as the quarter million dollar circuit addition in Lakeville, instead of borrowing the money, that bonding remains available to the town. We also return revenue to Middleborough in the form of an In-Lieu-of-Tax payment. Last year this payment totaled $323,750, an increase of more than 20 percent in three years. This yearly payment is higher than the tax payments of most large industries a highly prized dividend for public ownership. How does your utility measure up? Ask these questions... Are their customers happy? In the most recent customer service survey, when asked what could MG&E do to provide better service, 86 percent responded "nothing," they are satisfied as is. Are they serving their communities specific needs? Are they involved in projects to improve service, enhance a community activity or support town or group events and endeavors? From Middleborough s downtown beautification to the Freetown/Lakeville School District construction to our major system upgrades, MG&E continues to answer community needs. Finally, do their rates reflect the changing needs of their ratepayers? When fuel prices rise, how slowly do they raise their power adjustments for MG&E ratepayers, these adjustments are held steady for years. Our Senior Discount rates answer the needs of our mature customers on fixed incomes and Load Retention rates allow slowing industry to thrive again. Financial Benefits of Municipal Service and Ownership $323,750 Direct cash payment in-lieu-of-taxes (Although MG&E is tax exempt, the Board of Commissioners votes annually to make this payment to the town.) $250,000 Reduced electric expenses for municipal buildings (Both Middleborough and Lakeville town buildings enjoy this lower municipal rate.) $150,000 Interest income from MG&E operating cash and depreciation funds (MG&E funds remain in town accounts and the accumulating interest is paid to the town.) $100,000 MG&E labor not charged for projects in Middleborough and Lakeville (This includes work on the Lakeville Austin intermediate school remodeling.) $25,000 Reduced street lighting rates (MG&E charges a rate for town street lighting far below that of surrounding investor-owned utilities.) The mission of the Middleborough Gas and Electric Department is to provide natural gas and electric energy and any related service in an economic, reliable, safe and environmentally conscious manner in the true spirit of public service to the people and communities we serve.
Service is our priority. We serve customers in Middleborough and Lakeville and only these two communities. All of our service trucks, all of our pipes and wires, lights and poles, meter-readers, clerks and linemen all of our resources and all of us are focused only on our ratepayers in this 100 square mile area. As you might imagine, that makes it easier to provide personal attention, a fast response when it s needed and goals in line with our customers priorities. In the most recent survey, 89% of responding customers gave our service a positive rating. When customers had called or visited our office, that rating increased to 95%. We also serve our community at large. Because we are part of the community we serve, we feel a duty to do what we can when other municipal departments and community groups need our help. Each year we support events and public activities that help make Middleborough and Lakeville vibrant hometowns. We raise banners, sponsor ads in programs, install power for events and help inform our customers whenever we can. This year we helped install the power systems to the renovated George R. Austin Intermediate school in Lakeville, saving labor and equipment costs. Recent Community Work Provided labor and equipment to... Complete the installation of underground wiring of circuitry for the Austin Intermediate School in Lakeville. Assist Middleborough Water Department installing two new services under Route 28 without tearing up pavement. Remove and discard decayed asphalt at the Burkland and Mary K. Good schools in preparation for pavement of their entrances. How to participate in our decisions MG&E s Board of Commissioners typically meet the second Tuesday of each month at 7:30 p.m. in the Administrative Offices at 32 South Main St., Middleborough. These meetings are open to the public, and all customers are encouraged to attend. Please call our office at 508-947-1371 to confirm meeting dates and times. Ongoing improvements keep our systems reliable. We invest a significant amount of revenue into maintaining and upgrading our distribution systems to keep natural gas flowing and the power on. This work can be as simple as tree-trimming on our rural streets one third of our service area is completed each year. In many cases, we carefully plan expensive upgrades in stages over decades and in some cases, we push these plans up due to customer growth. Last year we completed a new circuit serving east Lakeville, ensuring a more level load in that growing area. Major improvements to the natural gas take station in South Middleborough will be completed this year, allowing for more capacity as well. We are also focusing on new technologies in the areas of meter reading and customer communications to improve our accessibility and accuracy as our customer base continues to grow. In the past three years, we have invested a total exceeding three million dollars in system upgrades, all paid from existing revenues and savings without the need for rate increases. In General... Peak Electric Demand 50.9MW* 51.9MW* Kilowatt-Hours Used 234,223,735 220,926,737 Total Customers 13,386 13,088 Natural Gas Peak Use 5,000 4,061 Million Cubic Feet Used 578,402 488,578 Total Customers 4,161 3,951 *megawatts CONDENSED FINANCIAL STATEMENTS For more information BALANCE SHEETS Utility Plant @ Cost $ 33,248,000 $ 31,608,200 Less Accumulated Depreciation (22,054,700) (20,530,600) Net Plant in Service 11,193,300 11,077,600 Cash & Equivalents 17,271,000 13,613,800 Other Assets 4,087,200 3,873,100 December 31 OPERATING STATEMENT Years Ended December 31 OPERATING REVENUES $ 30,446,700 $ 27,032,200 Total Operating Expenses (28,683,100) (25,599,500) OPERATING INCOME 1,763,600 1,432,700 Net Other Income 9,400 140,900 Watch for your newsletter, the Messenger, that is mailed every other month with your bill. Look for messages on your monthly bill to guide or remind you about your utility services. Ask us for a copy of our Customer Handbook for a handy summary of information about your utility services. Attend Commission meetings or watch them on local cable access television. Call our office at 508-947-1371 for meeting dates and times. TOTAL ASSETS $ 32,551,500 $ 28,564,500 Retained Earnings $ 22,665,800 $ 21,216,500 Current Liabilities 3,687,700 3,027,400 Other Liabilities 6,198,000 4,320,600 RETAINED EARNINGS & LIABILITIES $ 32,551,500 $ 28,564,500 Payment In Lieu Of Taxes (323,700) (323,600) NET INCOME $ 1,449,300 $ 1,250,000 Drop by for a visit at our publicly owned offices. We work in the restored antique Philander Washburn house, 32 South Main St., Middleborough, which is on the National Historic Register. Invite us to speak at your function or meeting to hear about timely energy-related topics. Call our Public Communications office at 508-946-3702. Business Customers interested in more information about commercial energy use and rates can call 508-946-3702 and request the MG&E Business Report 2004.
MG&E Board of Commissioners Walter A. Burrell Daniel E. Farley Chair Roger H. Parent Edward W. Parks Donald R. Triner Your Board, Your Voice in Our Work MG&E is governed by an elected board of commissioners. These are elected officials who live locally and are directly impacted by their utilities service. This board usually meets once each month and addresses all current issues in a public meeting including such things as setting rates, changing service policies and procedures, awarding bids for equipment and discussing issues brought up by any ratepayers and citizens. The meetings are held in Middleborough, not in a boardroom in another state or in a hearing room in Boston. Citizens can attend the meetings in person and, in most cases, watch the meetings on local cable television. If you would like MG&E's complete Annual Report audited by Nelson, Adam & Dickson, please call John Granahan at 508-947-1371. Middleborough Gas & Electric Department 32 South Main Street, Middleborough, MA www.mgande.online.com 508-947-1371