When sales plummet, so do revenues. And that’s what pays the public utility’s bills.
Although the trend mostly is linked to season, the numbers are showing the anticipated autumn and winter slump in sales may be coming a little early because of cooling temperatures that contrast the summer’s record heat and lengthy drought, according to a monthly fiscal report by Ken Webb, CU senior vice president and chief financial officer.
“Once again the weather has played a significant role in the sales volumes recorded by Cleveland Utilities,” Webb told members of the Cleveland Board of Public Utilities in a recent formal session. “In the Electric Division, kilowatt-hour sales were 99.8 percent of the previous September (2011), but only 89.1 percent of the August 2012 volume.”
At issue, and to blame, are the average temperatures, Webb offered. When the mercury falls, CU customers use less air conditioning, and when the rains fall consistently, less piped-in water is needed for gardens, flowers, lawns and pools.
“The average temperature in August was 78.3 degrees,” Webb said. “It was 71.9 degrees in September. Industrial and commercial volumes were up slightly over September 2011, but those increases were more than offset by the decrease in residential volume.”
Division revenue for the month from the sale of electricity was $8,447,467 with the wholesale cost of power from TVA standing at $7,009,013. This left a margin of $1,438,454 for the month. Webb pointed out the budgeted margin was slightly more than $1.5 million. The actual margin, plus other miscellaneous revenue amounts, totaled $1,560,236 for the month.
Electric Division expenses totaled $1,336,669 for the month, leaving a net income of $223,567.
“This was short of the budgeted total, but still within an acceptable range considering the mild weather we have been experiencing,” Webb said.
In September, CU fed electricity to 29,694 customers. This represents a drop from the 30,000-plus numbers that Webb reported in August.
“This does not mean we have had 300 or so accounts to disappear in September,” Webb clarified. “It is the result of the timing of college and university students signing up for service as school begins. Depending on the revenue cycle any account is in, it is possible for two billings to occur in one month — that being a final bill in the landlord’s name and a new bill in the new tenant’s name.”
He added, “This is what has occurred this year with the September number settling back to 29,694 when not as much turnover was occurring.”
Year-to-date, the Electric Division has recorded net income of $558,896.
“This amount trails both the budgeted total and the same total at this time last year,” Webb said.
CU’s water boys took what Webb described as “a fairly significant decrease in volume.” Overall, the Water Division sold 264,514,500 gallons, but this represented a 10 percent drop from the September 2011 numbers.
One prime example is inside-the-city irrigation (sprinkler systems) whose revenue was down almost 34 percent. This translated into less revenue than was budgeted, Webb cited. The total division revenue was $1,184,174, but the budgeted forecast had expected $1,278,108.
“Fortunately, expenses of $1,010,710 were also less than budgeted, leaving net income of $173,464,” the CFO explained. “Purchased water was approximately $40,000 less than budgeted due to decreased demand. This helped to soften the impact of the reduced sales volume.”
In September, CU pumped water to 30,041 customers, an increase of 299 over the same period a year ago.
Year-to-date, Water Division net income is $687,610.
“This is ahead of budget and just ahead of the amount through September of last year,” Webb noted.
On another positive note, Webb said September was a good billing month for access fees in the Water Division.
“The monthly total in access fees was $31,353 and the YTD amount is $83,750,” he said. “Both of these amounts are greater than budgeted and the YTD total is more than at this time last year.”
Access fees are paid by developers, remodelers and builders to have their new, expanded or enhanced developments connected to the existing CU water system.
Sales volume in the Sewer Division slumped by 3.5 percent from September a year ago.
“This is slightly higher than the YTD results where volume is down about 1.3 percent through September,” Webb said.
The division’s revenue for the month tallied $906,056. Expenses were $800,853, leaving a net income of $105,203.
“Expenses were less than budgeted primarily in the maintenance areas, allowing for the better than budgeted net income,” the chief accountant explained.
Year-to-date, the Wastewater Division’s net income is $386,454. Said Webb, “This is ahead of the budgeted figure and is a good condition to be in going into the fall and winter months.”
The division provided service in September to 17,745 customers.