But on a more positive note, CU’s other two divisions — Water and Wastewater — enjoyed a month of increased sales in spite of the winter season whose cool temperatures and wet conditions traditionally dry up a chunk of the utility’s water use.
Of the expected sag in electricity sales, CU controller Marshall Stinnett pointed out this translated into less revenue which meant the local utility’s cost of purchased power from TVA, as a percentage of retail sales, increased from 81.8 percent in January to 84.7 percent a month later.
“This was driven by the decreased number of heating [degree] days during the end of February as compared to January,” he told the board.
A “degree day” is a utility industry term used to describe extreme temperatures for any given day — either “hot” or “cold” — and how much additional heating or cooling will be needed by area residents to keep their homes or businesses comfortable. It is based on a formula whose calculations determine expected peaks in electric demand — whether from increased use of heating in the winter or from air conditioning in the summer.
When winter days are warmer, it causes fewer “heating degree days,” and that allows area residents to use less heating which reduces power sales to CU. The same principal holds true on cooler summer days. This translates into fewer “cooling degree days,” and again reduced sales because people aren’t using their air conditioning as much.
For CU’s Electric Division, the warmer February — barring a few isolated cold days and some snow — meant less sales and that caused the division to fall short of budget projections in revenue, operating margin and net income, Stinnett explained.
“The main driver of this was the decreased demand during the month of February compared to that of projected demand,” he said. “Although the division has regained ground compared to the FY 2014 budget, there are still four months remaining in the current fiscal year.”
He added, “As we look forward to the month of March, we must be cognizant of the margin received during the transition months and the coming summer months. A steady margin will help the division to meet budgeted results for FY 2014.”
But to make it happen, Mother Nature will have to abandon her fickle mood by allowing traditionally cool days to be cool and normally warm days to be warm. When she flip-flops, so do the local utility’s sales.
In looking at degree days, March won’t show any improvements over February, Stinnett cautioned.
“As we look forward to the month of March (in regard to budget and sales), the number of degree days in February will exceed that of March,” Stinnett said. “This is driven by the spring-like temperatures that we have begun to experience across the area.”
He called it the transition season — in this case, when winter slowly slides into spring.
“As we reach these transition months, it is imperative that we continue to monitor the margin received across all electric revenue sales,” he explained.
That’s because heaters will be used less and it will be too early to click on air conditioners — and that means less sales for Cleveland Utilities.
In February, electric sales revenue hit $7,524,866, but this was offset by purchased power expenses to TVA of $6,373,851. This resulted in an operating margin of $1,151,015, which is far less than the budgeted margin of $1,423,887. Other revenue sources contributed $120,358.
The CU Electric Division recorded 30,259 customers in February.
Operating expenses for the month were $1,381,421, compared to budgeted operating expenses of $1,421,989. This left expenses for the division in a favorable mode at $40,568 under budget.
But, the loss in sales cost the utility, resulting in the $110,048 net loss in the Electric Division. Budget projections called for a net income of $135,316.
“This brings the division to a combined net income of $770,700 for the year to date,” Stinnett said. “This is compared to a budgeted net income of $714,648 for the same period.” Last year, net income at this time of the fiscal year was $733,905.
In February, the division sold 227,727,750 gallons of water, compared to 188,220,000 gallons for February 2013. This increase in sales resulted in division revenue for the month of $1,046,343, compared to the budget forecast of $909,044. Other revenue sources added $88,760 for February.
For the month, the Water Division recorded 30,373 customers.
Operating expenses in February were $1,085,180, compared to the budgeted amount of $1,081,426.
The division recorded an operating income of $49,923, with an operating income of $523,372 for the year-to-date, Stinnett explained. Operating income for the month exceeded budget by $131,261.
Stinnett said the Water Division numbers are “slightly ahead” of projections.
Total division revenue was $949,300, compared to a budgeted amount of $881,599. This was the result of wastewater revenue of $882,450 and other revenue of $66,850.
“Total division expenses for the month were $869,895, compared to a budgeted amount of $868,506,” Stinnett pointed out. “The division billed for 152,295,750 gallons of wastewater during the month. This is an increase of 14.4 percent over February 2013.”
The Wastewater Division recorded 18,020 customers in February.
“The Wastewater Division continued to exceed budgeted numbers for FY 2014,” the controller stressed. “For the month of February, operating income was $79,405, compared to a budgeted amount of $13,093. This was an increase of $66,312 over budget.”
February’s numbers bring the year-to-date earnings to $728,963, compared to a budgeted amount of $269,029.