For years eternal, CU — and its public utility brethren — have operated at the mercy of the weather. Wet, cool summers mean less sales volume in water and electricity because customers have less need to irrigate lawns, gardens and landscaping, and air-conditioning thermostats aren’t being overburdened by overheated homeowners.
It’s utility bill paradise for consumers and budget strain for the providers who have bills of their own to pay, and less revenue to pay them.
The summer’s latter weeks did begin to heat up, and some of the rains began to dry, meaning that by August the revenues at Cleveland Utilities were getting a little closer to normal; at least, in the eyes of Ken Webb, senior vice president and CFO who on Tuesday will assume the duties of the utility company’s president and CEO.
The retirement of 43-year utility veteran Tom Wheeler takes effect Nov. 1, but Webb assumed his predecessor’s duties on Oct. 1.
In his monthly financial report during a recent session of the Cleveland Board of Public Utilities, Webb suggested times are getting better but revenue remains down. He gave the details for all three of CU’s primary operations — the Electric, Water and Wastewater divisions.
“Although short of expectations, the month of August brought improved results over the month of July in the Electric Division,” Webb said.
For the month, electricity was provided to 30,216 customers at an average retail price of 9 cents per kilowatt-hour. CU customers purchased 101,752,745 kilowatt-hours.
Revenue from electric sales was $9,089,834, which was offset by purchased power expenses of $7,723,415, leaving a margin of $1,366,419.
“The cost of purchased power, stated as a percentage of retail sales, was 85 percent, which is still slightly higher than the projected 83.8 percent,” Webb explained. “It is however, an improvement over the July percentage of 87.5 percent.”
Other revenue sources added $132,700 to the revenue total.
Operating expenses for August in the Electric Division were $1,353,767. This included depreciation charges of $306,264. Net income for the month was $145,352.
“This was short of the anticipated $302,334, but was enough to get the Electric Division back to positive net income territory for the first two months of Fiscal Year 2014 with year-to-date net income of $10,685.”
“Once again, I believe we continued to see the effects of the weather in August on water results,” Webb stressed. “[Sales] volume in water of 248,789,250 gallons was 93 percent of the August 2012 volume. Once again, irrigation sales led the way in decreased volume representing only 67.5 percent of the August 2012 volume; however, this was an improvement over the July results.”
He said water service was provided to 30,416 customers at an average retail price of $4.34 per 1,000 gallons.
Total division revenue for the month was $1,218,611 with expenses being $1,071,221, resulting in a monthly net income of $147,390, Webb explained.
“Given the weather issue, I believe these results are most acceptable,” he said. “The YTD net income of $279,577 is less than the budgeted $374,309 at this time.”
But, even in the midst of challenging sales, Webb pointed to a silver lining.
“One very encouraging line item in the Water Division so far is access fees,” he said. “This line represents fees paid when customers make new connections to the system. The actual amount billed for these through July and August exceed the budgeted total.”
Growth in access fees means more new construction is growing the Cleveland and Bradley County community. New construction is considered a measure of economic strength within a region or government jurisdiction.
Total division revenue in the Sewer Division for August was $922,023, Webb reported. Sewer service was provided to 18,028 customers at an average retail rate of $5.42 per 1,000 gallons.
Expenses for the month were $831,401, leaving a net income of $90,622.
“This is very welcome news as the YTD net income in sewer is now $206,107 which, although not as good as this time last year, it is better than had been anticipated at this time,” Webb said.
Webb told board members this is the second month of his new income statement format used in the Sewer Division.
“Several line items have been added and several reclassifications made, all in an effort to track sewer costs dealing with the SCOPE 10 project and ongoing efforts to rehabilitate the collection system in sewer,” Webb noted. “‘We will have to work through a full year of the new format in order to have meaningful line-item comparisons between the current and past year in the income statement.”
He added, “The new format was developed as a joint effort between the accounting staff and the wastewater staff.”
SCOPE 10 is an acronym for Strategic Commitment to Protect the Environment, a 10-year sewer rehabilitation initiative whose price tag over a decade has been set at about $30 million.