FAIRHOPE, Ala. — Some city employees were besieged this week when Fairhope public utility customers got their gas bills in the mail.

“I’ve been on the phone all day and explaining why that was,” said General Superintendent James Gillespie at a Financial Advisory Committee this week, regarding why gas rates jumped 50 cents to $2.03 per hundred cubic feet (CCF) in March.

But the same employees didn’t get many pats on the back when the rates dove more than 50 cents late last year from $1.94 to $1.36 per CCF.

It was that downward rate change last year that put the city in a financial bind this year, FAC chairman Chuck Zunk said Monday.

“If you look at February year-to-date financial numbers, our budget for gas revenue was $4.4 million but the actual revenue was $3.8 million,” Zunk said. “In addition, the expense budget was $1.6 million but actual expenses were $2 million. So, we’re considerably under budget at this point. In fact, we’re a million in the hole that we need to dig out of.”

The rate change last year was ordered by Mayor Tim Kant based on advice from a long-time Florida-based consultant to the city on utility rates, Gillespie said.

“That’s the rate our consultant Bob Pender came up with,” Gillespie said. “We went back up 24 percent in March. That will offset some of the loss in revenue, but we’ll still probably be $500,000 to $700,000 short by the end of the (fiscal) year. The consultant said to go up 80 cents to catch up, but we didn’t think we could do that.”

City Council President Lonnie Mixon, who also serves as chair of the council’s finance committee, said Kant told him Monday “that he had just miscalculated” regarding the gas rates. After the council meeting Monday, Kant said that “hindsight was 20-20,” but that the city now needed to address the current financial issues facing the gas department.

The council-appointed Financial Advisory Committee voted unanimously Monday to recommend to the council that a gas rate study be conducted and that the way gas rates are set be changed, similar to the way the council recently changed how electric rates are set.

“That would mean that changes in rates could only be made by the council and that there would no longer be a ‘fuel adjustment rate’ that could be used as a revenue-enhancement measure,” Zunk said.

The council recently shifted the authority for setting electric rates from the mayor to the council and eliminated that “fuel adjustment” category on utility bills, to the degree that it included costs not related to actual increases in the costs of electricity.

Prior to that change in city law, the so-called “fuel adjustment” was actually used to raise revenue for the operations of city government unrelated to the costs of electricity, several FAC members had explained during past meetings, which led to the new rate-setting ordinance for electric rates in the city.

Although the FAC did vote to recommend a change in how gas rates are set and for a rate study to be conducted, several members also stated that the committee should review all proposed gas rate changes before the new rate-setting structure was set in place by ordinance.

“If we had left rates where they were in the fall, we would be fine now,” Gillespie said Thursday. “However, with increased gas sales this month, I don’t think we’ll be in as bad a shape as we discussed Monday. As I said then, we’ll know better where we stand by April’s (FAC) meeting.”