The seasonal “click” of the HVAC programmers — from “heat” to “cool” — is generally a certainty by sometime in May. But April is always the “Twilight Zone” of inside temps because homeowners sometimes don’t need either.
April’s numbers got the attention of the Cleveland Board of Public Utilities during a recent session when controller Marshall Stinnett reported the Electric Division suffered a net loss for the month of $249,508. This didn’t compare well to the month’s expected loss of only $83,076.
Although the month was a downer for revenue, the division’s year-to-date combined income was $941,881 which far exceeds budget expectations of $588,841.
One of April’s telling differences came with CU’s cost of purchased power from TVA. As a percentage of retail sales, CU’s expense increased to 84 percent, as compared to only 79.5 percent in March.
“This increase was driven solely by a negative unbilled adjustment that was recorded for the month of April,” Stinnett said. “This is supported by the number of recorded degree days during the month of April as compared to that of March.”
A heating or cooling “degree day” refers to the amount of energy utility customers must burn in order to keep their homes or businesses warm in the winter or cool in the summer. Cold winters translate into increased “heating degree days.” Hot summers mean more “cooling degree days.”
In transition months like April when outside temperatures are more moderate and consistent, it sometimes throws the “degree day” mix into a tailspin. It’s good news for the consumer and bad news for utility companies that lose revenue when neither heating nor cooling systems are in high demand.
While April saw fewer “degree days,” May’s numbers should reflect the transition to the hotter summer season, Stinnett forecast. He said that for the month of May, the number of degree days will exceed the April total.
“This is driven by the increased summer temperatures that we have begun to experience across the area,” he said.
He added a budgetary caution.
“As we reach these summer months, it is imperative that we continue to track the number of degree days incurred compared to the sales to purchased power margin,” Stinnett cited. “This will be imperative when looking toward Fiscal Year 2015.”
In other words, slumping electric sales could haunt CU because of the amount of money it spends at TVA for purchased power; but if sales remain consistent, the local utility should be able to pay its bills — such as the monthly whopper to TVA — without problems.
In April, CU’s electric sales revenue totaled $6,655,499 which was offset by purchased power from TVA of $5,592,615, Stinnett reported. This resulted in an operating margin of $1,062,884. This compares to a budgeted margin of $1,194,025.
Other revenue sources in the Electric Division contributed $139,420.
In April, the division recorded 30,479 customers.
Operating expenses for the month were $1,451,812, compared to a budgeted amount of $1,398,490.
The Electric Division’s net loss in April was $249,508, compared to forecasts of only $83,076.
“This brings the division to a combined net income of $941,881 for the year to date,” the controller said. “This is compared to a budgeted net income of $588,841 for the same period ended. We can also compare this to the previous year which recorded a $998,338 net income during the same period.”
Stinnett then brought the Electric Division numbers into perspective.
“During the month, the Electric Division missed budgeted revenues, operating margin and net income,” he reported. “The main driver of this was the decreased demand. This is related to a large decrease in the number of degree days for the month of April as compared to March.”
He added, “As we look forward to [warmer temperature] 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.”
In April, the Water Division sold 205,193,250 gallons of water, compared to 200,996,250 gallons for the same month last year. This resulted in water sales revenue of $960,704, compared to forecasts of $952,183. Other revenue sources added $92,215.
For the month, the Water Division recorded 30,517 customers.
Operating expenses in April were $1,063,044, compared to budgeted projections of $1,084,209.
“The division recorded an operating loss of $10,125 for the month, with an operating income of $469,434 for the year to date,” Stinnett noted. “The actual operating loss for the month was less than budget by $37,011. The resulting year-to-date numbers are compared to a budgeted operating income of $327,519.”
Total division revenue for the month was $877,875, as compared to a budgeted amount of $909,282. This was the result of wastewater revenue of $810,726 and other revenue of $67,149, he said.
Total division expenses for the month were $819,442, compared to a budgeted amount of $873,814.
The division billed for 140,671,500 gallons of wastewater in April. This is an increase of .3 percent, he noted.
In April, the Wastewater Division recorded 18,144 customers.
“The Wastewater Division missed budgeted revenue numbers, but beat budgeted expense numbers for the month,” Stinnett said. “For the month of April, operating income was $58,433 compared to a budgeted amount of $35,468. This was an increase of $22,965 over budget.”
He pointed out this brings the year-to-date earnings to a total of $812,614, compared to a budgeted forecast of $355,206 for the same period.