By contrast, the atypical month increased sales volume in the utility’s Water and Wastewater divisions, according to a report filed by Ken Webb, chief financial officer and assistant general manager of the public utility. Webb’s monthly update came during a recent formal session of the Cleveland Board of Public Utilities.
“I believe everyone is aware February was an unusually warm month and that has continued into March,” Webb told the board. “The absence of cold weather has played a role in the results we are reporting today for February.”
It’s a logical chain of events. Late-winter warmth outside means utility customers inside aren’t cranking up their thermostats. Subsequently, fewer kilowatt-hours are being burned which translates into less revenue for the Electric Division.
Some might smirk at the thought, but — like any business, organization or household — Cleveland Utilities also has bills to pay. When sales are down, it creates revenue shortfalls — the same revenues that pay the bills, one of which is debt service.
Electric Division
“The overall volume in Electric was down 2 percent from last February (2011), but residential usage was down almost 15 percent,” Webb told the board.
That’s a revenue hit as the average CU residential customer used 1,591 kilowatt-hours last February compared to 1,351 for the same month this year, Webb explained. The average residential bill last February — when it was predictably cold outside — was $145.51, and in 2012 the average February residential bill was only $123.94 when temperatures were unpredictably warm.
“We did see an increase in sales in industrial customers (those with demand over 50 kw) or the decrease in overall volume would have been greater,” Webb said.
As a result of the decreased volume and a credit in the meter reading cycle adjustment (a reference to when meters are read during any given month), the sales revenue in Electric was $7,066,136.
“This was significantly short of the projected $8,349,000,” Webb cited. “Projected numbers are based on historical averages and this February was just not average.”
Purchased power from TVA cost $5,947,529, leaving a margin of $1,118,607.
“This fell short of the budgeted margin by approximately $140,000 and set the stage for less than positive results financially for Electric in February,” Webb noted.
After adding revenue from other division sources of $138,469, the total margin and miscellaneous revenue tallied $1,257,076. Expenses of $1,293,416 were subtracted from the margin, creating a negative change in net assets of $36,340.
“We had expected a positive $101,180; however, the year-to-date numbers remain in positive territory at $1,891,116,” Webb said.
In spite of dropped volume in sales, the Electric Division continues to show growth in its total number of customers. In February, CU recorded 29,600 electric patrons which represents an increase of 296 since February 2011.
Webb believes the freakish February warmth may have a bright side as it slides into March.
“Looking ahead to March, the continued warm weather is now creating some additional load from air conditioning not usually associated with March sales,” the accountant cited. “This may offset the heating requirements we usually experience in March.”
In other words, instead of interior warmth customers generally still need in March, many are turning to the “Cool” dial on their thermostats.
Water Division
Just as the weather had a negative impact on electric sales, it had just the opposite effect on water sales, Webb explained. The 197,865,000 gallons of water sold were up 8.6 percent from last February. The year-to-date volume in water is running at 99.3 percent of the YTD volume at this time last year. The average retail price was $4.47 per 1,000 gallons of water sold.
The division revenue for February was $971,804 which exceeded the budgeted amount by some $60,000. Expenses were $1,003,094, creating a negative change in net assets of $31,290 for the month.
“Although this was negative, it was better than the $102,352 loss which had been projected,” Webb said. During the mid-winter period, water sales traditionally drop due to low demand by customers.
Like the Electric Division, the Water operation continues to grow in customers. In February, CU recorded 29,877 customers, up from 29,604 in February last year. The YTD results in Water reflect a positive change in net assets of $522,780.
“I continue to be optimistic about this year’s results in the Water Division,” Webb said. “Access fees (revenue from new-customer hookups to the existing CU water network) continue to perform well.”
He added, “We have picked up some significant new revenue from fire sprinkler systems as a result of new industrial and commercial facilities. We are also entering the time of year when demand for water usually increases as a result of spring and summer activities.”
Wastewater Division
The Wastewater Division joined Water in increased sales. For the month, sales were up 9.7 percent from last February with sales volume of 133,086,000 gallons. Residential sales led the way with a 21.2 percent increase.
Total division revenue for the month was $806,907. Expenses totaled $797,806 and this created a positive change in net assets of $9,101.
“This was only slightly less than projected,” Webb noted. “Had we not experienced some slightly higher than projected operating expenses, the results would have most likely been better than expected.”
YTD results in the division continue to be slightly less than budgeted, “... but are still in the positive category,” Webb advised.
“The same optimism I have for Water also exists for Sewer,” Webb said. “Access fees in Sewer are doing better than projected and we are entering the time of year [when] building will hopefully pick up which will help the trend to continue.”
Good energy cost
news for customers
As is his tradition in the monthly financial report, Webb pointed to the announced cost for April of kilowatt hours for residential retail electric customers.
The residential cost for the month will be 8.457-cents per kwh, compared to the price of 8.541-cents in March. Webb put it in perspective. In April 2012, a residential customer using 1,012 kwh will pay $93.67. In April 2011, the same residential customer burning the same amount of kwh would have paid $94.28.
