When conditions take an unseasonal tilt, so do the public utility’s sales.
In the Southeast, late spring and early summer — based on historic trends — are supposed to be hot and relatively dry. Neither is happening in Bradley County in 2013, and Cleveland Utilities is bearing the brunt of its impact in sales declines.
In CU’s Electric Division, the year-to-date kilowatt-hour sales volume is running at only 97.6 percent of budgeted projections and in the Water Division for the month of May sales volume is lagging behind totals for the same month last year by 6.4 percent, according to a monthly report by Ken Webb, senior vice president and chief financial officer.
While electric and water sales remain unseasonably sluggish for the month of May, the Wastewater Division is holding its own thanks in part to a higher-than-budgeted miscellaneous revenue. This gain, however, was effectively offset by higher chemical costs for sludge disposal during the installation and launch of CU’s new centrifuge at the wastewater treatment plant, according to Webb’s report.
The CFO won’t be making many more monthly financial reports to the Cleveland Board of Public Utilities.
Earlier this month, Webb was named CU’s incoming president and chief executive officer. He will succeed 42-year CU veteran Tom Wheeler whose previously announced retirement becomes effective Nov. 1. Wheeler has served in CU’s top leadership spot for 24 years.
Webb will begin the process of naming a new chief accountant to fill his former duties once Wheeler’s retirement takes effect.
Revenue in May from the sale of electricity was $7,317,665. Cost of purchased power from TVA was $5,792,599, leaving a margin of $1,525,066. Additional revenues were $133,306, making $1,658,372 available to cover all other expenses including depreciation on fixed assets, Webb said.
The division’s expenses were $1,317,267, leaving net income of $341,105.
“This is better than expected and is the result of purchased power cost being 79.2 percent of sales revenue, compared to the budgeted 83.5 percent,” Webb explained. “The actual YTD percentage is 83.1 percent with one month left to go in the fiscal year.”
Although electric sales aren’t exactly sizzling, they have improved over the course of the fiscal year.
“The YTD net income results in electric have shown improvement as the year has progressed,” Webb noted. “The actual margin between electric sales and purchased power has improved, and total YTD expenses continue to run slightly under the budget. YTD kilowatt-hour volume in electric is running at 97.6 percent of where it was anticipated to be at this time.”
Combined, these factors have created YTD net income in the Electric Division of $1,339,443, compared to a budgeted amount of $1,721,992, Webb cited.
It’s this simple, according to the CFO’s bookkeeping.
“The Water Division continues to feel the impact of the high amount of rainfall experienced so far this fiscal year,” Webb said. “Volume in May was 93.6 percent of what it was last May. Irrigation volume (a reference to sprinklers and watering systems) was only 20 percent of its recorded volume last May.”
He said the 20 percent “... refers only to those accounts with separate irrigation meters and would also contribute to residential volume being only 85.6 percent of its total last May.”
The Water Division revenue for May was $1,062,251 with expenses of $1,035,096, leaving a monthly net income of $27,155. A loss of $8,603 had been projected.
YTD results in the division showed revenue of $11,770,789, expenses of $11,294,569 and net income of $476,220.
“Although this is less than at the same time last year, it is better than what was projected at this point in fiscal year 2013,” Webb said. “This is in spite of reduced overall volume.”
YTD Water Division volume is 96.3 percent of its expected total through May.
“I anticipate June results will be less than originally budgeted due to the rainfall we continue to experience,” he projected.
Total division revenue for the month was $878,725 and expenses were $859,172, leaving a net income of $19,553.
“The combination of higher-than-budgeted miscellaneous revenue and higher-than-budgeted chemical cost for sludge disposal offset each other to keep the net income in line with the projected total,” Webb said.
The YTD sewer net income of $607,710 exceeds both the budgeted total and the same number from this time last year.
Some good news
In spite of some of the sagging sales volume, CU’s customer numbers are blossoming. For the second time, the Electric Division exceeded 30,000 customers for the month of May, Webb said. The Water Division did as well, and the Wastewater Division surpassed 18,000 customers for the first time.
“I recall electric exceeding 30,000 customers one month in the past and water consistently stays over 30,000, but I do not find where sewer has exceeded 18,000 before now,” the CFO explained.
He added, “The numbers will likely drop below those benchmarks in the future since May is a fairly active month for transfers. August is another active month and both are school-related. I do think, though, it is a sign we continue to move forward in the community.”
Webb pinpointed certain factors that influence CU’s number of customers in the Electric and Water divisions.
“The most obvious is new construction when new meters are activated and a permanent new location is established,” he said. “Another activity that can impact the count of the number of customers served during the month is the timing of moves by existing customers. It is entirely possible one location can have two customers counted depending on meter reading dates, and turn-ons and turn-offs at that location.”