When it rains it pours ... and right on top of Cleveland Utilities’ sales volumes.
Random thundershowers and cooler daytime temperatures in August took the sizzle out of what had become a profitable summer for the local utility with all three divisions — Electric, Water and Wastewater — reporting heavy demand for their products; at least, during the worst periods of heat and drought.
But that all changed in August, according to Ken Webb, CU senior vice president and chief financial officer, whose books showed less demand by customers across the board and it translated into reduced revenue. The Electric Division was down 4.1 percent, Water dropped 13.8 percent and Wastewater dipped by almost 6 percent, Webb reported during Thursday’s formal session of the Cleveland Board of Public Utilities.
No one’s pushing the panic button, but some of the numbers bear watching, the CU accountant explained. As Webb has reported in past board sessions, responsible utility companies pay their bills on time and within schedule, and they do it using revenue from electric, water and wastewater sales.
He gave a detailed account of each division’s financial performance in August.
Kilowatt hours sold during the month totaled 106,594,077 which was a drop of 4.1 percent from August 2011. The primary reason was the temperature. Overall, the month’s mercury didn’t rise as high, on average, as is the normal seasonal trend during the long dog days of summer.
The average Cleveland temperature in August was 75.4 degrees, he said, compared to 80.1 in August of last year. And the average retail rate for a kilowatt-hour was only 8.6 cents.
“This is another example of how the weather has a direct influence on our [sales] volume from month to month,” Webb pointed out.
During the month, electric sales revenue tallied $9,156,013 after a credit adjustment to month-end accrued revenue.
“It stands to reason the adjustment for August would be a credit with the average temperature for August also being less than in July,” Webb said in his detailed monthly financial update. “The July 2012 average temperature was 80.5 degrees, making the August reading of 75.4 more than 6 percent less.”
Purchased power [from TVA] cost totaled $7,965,105, leaving the division’s margin at $1,190,908.
“This was less than anticipated and is an issue to be followed closely in the upcoming months,” Webb said. Miscellaneous revenues for the month in Electric were on target at $135,100.
Operating expenses, including depreciation, for August came in at $1,312,571, leaving a net income of $13,437 for the month. The YTD (year-to-date) net income is $335,329.
“It is interesting to note that at this time last year wholesale power was running 85 percent of revenue and this year the percentage has increased to 86.2 percent,” Webb explained. “This is an issue we will continue to monitor [because] the 1.2 percent change in the percentage equates to approximately a $230,000 change in the margin between retail sales and wholesale power cost.”
The Electric Division accounted for 30,017 customers in August which was one piece of positive news for the category.
“This is an important milestone in the Electric Division [because] this is the first time the count has exceeded 30,000,” he stated. “The customer count for the month is the total number of accounts billed during the month. Final bills are counted only if the final bill was the only bill for that account for the month. New customers are not counted until their account actually reaches a billing date.”
Although the division exceeded 30,000 in August, Webb said future reports could dip back under the milestone or continue to grow.
The month’s generally wet and cooler conditions dealt their biggest blow on the Water Division. Water usage in August totaled 266,991,750 gallons which Webb called a “significant decrease percentage wise” by about 13.8 percent.
“Rainfall last August (2011) was less than one-third of an inch and almost 6 1/2 inches this August,” he pointed out. “Irrigation volume (watering systems) was down 28 percent. Overall, two months into Fiscal Year 2013, volume is down just over 1 percent.”
The Water Division reported revenue in August of $1,192,535, with expenses totaling $1,010,864. This left a net income of $181,671.
“The shortfall in revenue due to the decrease in volume was offset by expenses also being less than budgeted,” he said.
Webb also stressed, “The YTD net income in water is $514,145 which is better than projected at this time. I remind you though that we will soon be going into the season when the demand for water decreases as the temperatures fall and the fixed costs in the system continue at the same pace.”
During August, the Water Division accounted for 30,280 customers. This is an increase of 372 over the same month last year. Most of the increase has been recorded in the residential classification, Webb noted.
Volume in sewer is based on usage in water which means the division also saw a significant reduction in sales volume — to the tune of about 6 percent.
Total division revenue hit $908,212 with expenses being $801,166, leaving a net income of $107,046.
“Revenues were slightly over the budgeted amount and expenses under budget, making the best combination in those two areas,” Webb said.
He pointed out the YTD results in sewer reflect a positive net income of $281,251 with the same combination of revenues slightly over budget and expenses under budget.
In August, the Wastewater Division served 17,946 customers, an increase of 291 from August 2011.
“Once again, the bulk of the increase is in the residential classification,” Webb said.