Usage volume for the month was down in the Electric, Water and Wastewater divisions, according to a report by Ken Webb, manager of CU’s Accounting Division.
Compared to October 2010, volume in the Electric and Water divisions was down 7.9 percent, and in the Wastewater Division it dropped 5.9 percent, Webb reported. However, the fiscal damage was minimal because of offsetting revenue increases and lower expenses.
“Combinations of some revenues being higher than projected and some expenses lower produced the good results,” Webb told members of the Cleveland Board of Public Utilities in a recent monthly session held in the CU Training Center auditorium.
Electric Division
In the Electric Division, revenue from the sale of electricity for October was $6,514,917 and the wholesale cost of power from TVA was $5,204,415, leaving a positive margin of $1,310,502. Total net revenue in the division was $1,438,277 after adding in miscellaneous revenue amounts. Webb reminded board members the monthly Electric Division ledgers are now being prepared on a full accrual basis for revenue.
TVA is currently billing its public utility partners on a wholesale basis using the new time-of-use peak demand rates; however, individual utilities have not yet made the time-of-use billing transition — based on retail rates — to their customers. Cleveland Utilities is expected to make the billing conversion sometime in the future, but will publicly announce the change in advance for the convenience of its electric customers.
In the Electric Division, operating expenses for October were $1,244,912, leaving a positive change in net assets of $193,365, Webb reported. Expenses were $34,607 less than projected in the budget.
Year-to-date results in the Electric Division reflect a positive change in net assets of $1,438,665 after the first four months of fiscal year 2012.
“It is interesting to note volume is down slightly over 5 percent compared to the same four-month period in fiscal year 2011,” Webb pointed out. “At the same time, the customer count has grown by 233 to 29,495.”
The October slowdown isn’t expected to get any better in November.
“Looking ahead to the November results, the budget reflects sales in November to be the lowest month out of the year,” Webb said. “This can obviously change with the weather we happen to experience, but if the projection holds true the November electric results will not be as positive as we have experienced so far in fiscal year 2012.”
Water Division
Revenue for the month was $1,000,071 based on the sale of 240,870,750 gallons of water. For the month, the average retail price was $4.15 per 1,000 gallons. The division reported 29,829 customers in October, an increase of 173 from the same period in 2010. Total division revenue was $1,086,926. Expenses for the month were $1,011,330, leaving a positive change in net assets of $75,596.
“The projected change in the budget was slightly over $57,000,” Webb said.
Year-to-date, the Water Division shows a positive change in net assets of $749,462.
“This is the position we need to be in at this time because as the weather changes and the demand for water decreases, we will have months with a negative net asset change,” Webb explained. “The budget for fiscal year 2012 actually shows negative months beginning in November and continuing through May before taking a positive turn in June 2012.”
He added, “Although some variable costs do decrease as demand decreases, fixed costs such as depreciation and interest continue at the same rate.”
Wastewater Division
Monthly revenue in Wastewater was $886,987. Service was provided to 17,569 customers at an average price of $5.14 per 1,000 gallons. Expenses were $794,201, leaving a $92,786 positive change to net assets.
“The [Wastewater] Division continues to track very close to the budgeted numbers on a year-to-date basis,” the CU accountant cited.
Webb pointed out through four months of fiscal year 2012, the change in net assets is a positive $405,193. The budgeted amount for the same period is $388,996.
On a positive note
Although sales volume declined in October in all three major CU divisions, an uptick to the monthly financial report is that the utility’s access fees continue to climb. An access fee is the amount paid by a builder, contractor or new CU customer to hook up meters to the utility’s existing water or wastewater distribution systems.
Increased access fee revenue generally signals new construction or remodeling. Consistent construction activity points to growth in the building industry and this is frequently used as a gauge for economic conditions locally, regionally and nationally.
Generally accepted economic principals link growth in the construction industry to a strengthening economy, whether locally or beyond.
“I want to again report that in both water and sewer, access fees are greater than they were at this time last year and exceed budget expectations,” Webb said.
