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****PRELIMINARY AND TENTATIVE FINDINGS**** <br />Table 7 <br />Fiscal Year Ended <br />September 30 <br />Gain/(Loss) from Fuel <br />Hedging Activity <br />2003 <br />$(3,844,385) <br />2004 <br />6,211,729 <br />2005 <br />19,254,388 <br />2006 <br />482,038 <br />2007 <br />(32,303,698) <br />2008 <br />11,136,570 <br />2009 <br />(140,564,807) <br />2010 <br />(41,347,894) <br />2011 <br />(23,639,173) <br />2012 <br />(21,899,554) <br />2013 <br />(18,437,623) <br />2014 <br />(2,679,175) <br />Total <br />$(247.631.5841 <br />Source: FMPA Records <br />Due to losses in fuel hedging, on May 15, 2014, the Executive Committee decided not to hedge fuel prices until <br />natural gas prices reach $7 per MMbtu (Million British Thermal Units), although prices during May 2014 were <br />approximately $4.50 per MMbtu. In contrast, general industry practice is to hedge fuel prices at current prices rather <br />than at future predetermined price trading triggers. As a result, the FMPA's natural gas costs were unhedged under <br />this $7 trigger amount, where industry practice suggests that some hedging would be prudent, meaning that the FMPA <br />was accepting more risk in the form of potential natural gas cost volatility. In October 2014, the Executive <br />Committee adopted a one-time seasonal hedging policy providing hedging of up to 25 percent of projected natural gas <br />demand at trigger prices of $3.90 and $4.10 per MMbtu. <br />Recommendation: The FMPA should consider amending its fuel hedging policies to focus on offsetting <br />changes in the cost of natural gas rather than the benefit from upward and downward price volatility. In <br />doing so, the policy should provide for hedging using only derivative instruments necessary to achieve a <br />simple effective fuel hedge at current natural gas prices rather than at preset trigger amounts. <br />Finding No. 2: Natural Gas Supply Agency Participation <br />In November 2004, the FMPA signed an agreement with six other public gas and electric utilities in five different <br />states to form a natural gas supply agency called Public Gas Partners, Inc. (PGP). The PGP was created to secure <br />economical, long-term wholesale natural gas supplies for its members to stabilize and reduce the cost of natural gas. <br />9 <br />11 <br />