Translation: CU’s Electric Division revenue improved in May, but water sales are down; at least for now. But that’s expected to change as the summer sun begins its seasonal sizzle across Bradley County.
In his monthly financial update, CU controller Marshall Stinnett told Cleveland Board of Public Utilities members in a recent session that the local utility’s cost of purchased power as a percentage of retail sales [from TVA] decreased to 82.8 percent compared to 84 percent in April.
In budgetary terms, that’s a good. It means CU paid less to TVA for purchased power. Whereas retail customers pay Cleveland Utilities a monthly bill for electricity, CU pays a wholesale bill to TVA for purchased power each month.
According to a chart presented monthly to the board, Stinnett showed that CU’s Electric Division revenue is slowly rising thanks to an accompanying increase in the number of “degree days.” In the utility industry, a degree day is loosely defined as the increased use of air conditioning required to cool a home or business in the summer (cooling degree day) or the increased use of heating to warm a home or business in the winter (heating degree day).
The number of degree days traditionally jumps during months with temperature extremes like the dog days of summer (July and August) or the dead of winter (January and February). Months like March, April, September and October are often considered transition periods because of moderating temperatures, thereby creating fewer degree days.
In May, CU recorded 310 cooling degree days, compared to 282 in April.
“As we look forward to the month of June, the number of degree days will exceed that of May,” Stinnett said. “This is driven by the increased summer temperatures that we have continued to experience across the area.”
Those rises in the mercury are coming into play more and more now that July has arrived, and that means power customers will be cranking down the thermostats of their cooling units. Although it’s a trend that follows the seasons, it’s one that the utility industry depends on for revenue.
“As we reach these summer months, it is imperative that we continue to track the number of degree days incurred compared to the sales and purchased power margin,” Stinnett told the board. “This will be imperative when looking toward FY 2015.”
In May, CU electric sales revenue totaled $7,582,359, an amount that was offset by the purchased power bill to TVA of $6,277,642. This resulted in an operating margin of $1,304,717. CU’s budgeted forecast was $1,176,955. Other revenue sources in the division contributed $125,616.
For the month, the Electric Division recorded 30,486 customers.
Operating expenses in May were $1,403,530, compared to the budgeted forecast of $1,398,761.
May’s net income was $26,803 which bettered the forecast of a $101,309 net loss.
“This brings the division to a combined net income of $968,689 for the year to date,” Stinnett said. “This is compared to a budgeted net income of $487,532 for the same period ended. We can also compare this to the previous year which recorded a $1,339,441 net income during the same period.”
For May, as is expected to be the case for the rest of the summer, the key is customer demand.
“During the month of May, the Electric Division exceeded budgeted revenues, operating margin and net income,” Stinnett said. “The main driver of this was the increased demand during the month of May.”
He added, “This is related to an increase in the number of degree days for the month of May as compared to April. As we look forward to the month of June, we must be cognizant of the margin received during the summer months. A steady margin will help the division to continue to meet budgeted results for FY 2014.”
Consistent rainfall in May dampened CU’s water sales slightly. For the month, the division sold 227,141,250 gallons of water, compared to 234,102,750 gallons during the same period last year. This resulted in water sales revenue of $1,024,923, compared to the budgeted forecast of $1,035,138.
Other revenue sources added $85,916.
For May, the Water Division recorded 30,576 customers.
Operating expenses in the division were $1,097,158, which is actually lower than the budgeted amount of $1,108,790.
“The division recorded an operating income of $13,681 for the month of May, with an operating income of $483,117 for the year-to-date,” Stinnett cited. “The actual operating income for the month was less than budget by $4,953. The resulting year-to-date numbers are compared to a budgeted operating income of $346,153.”
In May, the division billed for 151,685,250 gallons of wastewater, compared to 146,320,500 gallons during May 2013.
“This resulted in wastewater treatment revenue for the month of $847,784, as compared to a budgeted amount of $818,582,” he explained.
Other revenue sources added $63,331 for the month.
For May, the division recorded 18,149 customers.
Total Wastewater Division expenses were $848,436, compared to the budgeted forecast of $867,323.
“Operating income was $62,679, as compared to a budgeted amount of $10,219,” Stinnett reported. “This was an increase of $52,460 over budget. The Wastewater Division exceeded budgeted revenue numbers and budgeted operating income for the month.”
The division’s year-to-date earnings total $875,290, which far exceeds the budgeted forecast of $345,425 for the same period.