The numbers are low enough that they are being closely monitored within CU and with TVA.
Ken Webb, senior vice president and CFO, delivered the monthly update during the most recent formal session of the Cleveland Board of Public Utilities held earlier this month.
The board will reconvene for financial updates Thursday in the regularly scheduled gathering for April.
In the gathering, he acknowledged electric sales revenue in February exceeded equivalent numbers from a year earlier, but that income still came in $220,000 less than projected in the current fiscal year budget.
By the same token, sales revenue in water and wastewater maintained their surprising momentum for the month. Traditionally, the winter season shows dips in water and wastewater use, but electric sales are normally on the rise. In the current fiscal year, at least during the colder months, the numbers have seemingly flip-flopped.
Volume in the Electric Division for February totaled 92,840,664 kilowatt-hours.
“Although this was more than in February 2012, it was 4 percent less than was budgeted for the month,” Webb reported. “After a negative adjustment to the month-end accrued revenue account, sales revenue of $7,311,012 was recorded.”
Power purchased from TVA for the month cost CU $6,068,565, leaving a margin of $1,242,447.
“This was about $220,000 less than projected and can be traced to the sales revenue being less than budgeted,” Webb said. “This month (February) the purchased power percentage was in line with projections at 83 percent. This was the same percentage as in January and is hopefully the sign of a positive trend.”
Regardless, the CFO told board members, “We continue to monitor this closely both internally and with TVA.”
The utility company watches trends in customer use, and incoming revenue, carefully — especially in the Electric Division — because this is a primary source of income. Like any Cleveland household budget, CU must maintain a consistent stream of revenue in order to pay its bills like purchased power, capital improvement projects, new construction, debt service and others.
When revenue sags, but expenses don’t, the utility’s financial ledgers begin to tilt in the wrong direction.
Miscellaneous revenue for February in Electric added another $133,048. But expenses, which include $296,078 in depreciation, totaled $1,360,489. This left a net income of only $15,006 for February.
“This was again about $220,000 less than expected and can be traced directly to the shortfall in sales for the month,” Webb said.
The news in Electric gets no better from a year-to-date perspective.
“The YTD results in Electric continue to trail behind both the projected results and the same amount at this time last year,” Webb noted. “The improved purchased power percentages in January and February have helped, but not to the extent needed to offset the higher percentages experienced earlier in the fiscal year.”
With four months remaining in the current fiscal year (March-June), the YTD percentage for purchased power costs is hovering at 84 percent which is one-half to 1 percent higher than projected, Webb said.
“If the percentage had been as expected, another $361,000 would have flowed through to the net results,” the longtime accountant explained. “Additionally, another $606,000 would have been added to the net results if sales projections had been met. This would have put the YTD net income ahead of expectations since YTD expenses have been less than projected.”
The news is better in the Water Division which routinely struggles in February.
Sales volume in Water for the month was 188,220,000 gallons. Service was provided to 30,204 customers at an average price of $4.62 per 1,000 gallons. Seven of 10 customer classes recorded increased water use for the month, Webb cited.
Monthly revenue was $962,924 which exceeded projections by more than $12,000.
“This is an improvement as the actual YTD total revenue lags behind the projected amount by about $193,000,” he stressed.
Monthly expenses in water totaled $1,009,105, leaving a net loss for the month of $46,181. Yet, Webb hinted at a silver lining.
“Although this is a loss and a significant amount, it is less than the projected loss of $90,757,” he said.
But net income is another story.
“YTD net income results in Water continue to be positive,” Webb offered. “The YTD net income is $530,788. This is slightly ahead of the results at this time last year and continues to be ahead of the projected results through February.”
He added, “I am hopeful this same level of net income continues through June 30. The net income projection for all of FY 2013 was revised to $484,769 during the FY 2014 budget process which has just been completed.”
While Electric sales drooped and Water held its own in a traditionally trying month, the Wastewater Division showed encouraging numbers, relatively speaking.
“Sewer continues to produce actual net income results that track the projected results,” Webb said. In other words, Wastewater sales are following accepted — and expected — trends.
Webb said sewer service was provided to 17,903 customers in February. Customers were billed for 133,162,500 gallons of sewer treatment at an average retail price of $5.63 per 1,000 gallons.
Total division revenue for the month was $813,207 which was about $16,000 more than projected. However, expenses of $828,812 were $18,000 more than anticipated. The end result was a $15,605 net loss. Webb’s budget had projected a loss of $13,214 for the month.
“These results did little to change the YTD net income in sewer,” he noted. “As a result of the monthly loss, the YTD net income dropped to $530,495. This was still better than ... at the same time last year and the projected current YTD amount.”
The revised FY 2013 net income projection in sewer is $707,548 as determined in the FY 2014 budget process.
“We will have to have positive months beginning with March, and continue through June, in order to achieve this amount,” Webb said.