That’s the power of a drought and the significance of what meteorologists have billed the most scorching July in U.S. history.
Rebounding from Fiscal Year 2012, and what CU Senior Vice President and Chief Financial Officer Ken Webb called just a “good” year,” the local utility launched its new fiscal year like a firecracker with sales increases in all three major divisions — Electric, Water and Wastewater.
All are directly attributable to the hot and dry conditions that baked the Cleveland and Bradley County mid-summer landscape.
“You have heard me say over the years just how much the weather can drive our electric and water sales,” Webb told members of the Cleveland Board of Public Utilities recently. “I think the July results, particularly in water, make that point.”
In short, the Electric Division realized a sales gain of only one-half of 1 percentage point over July 2011; however, Water Division volume flowed over at a 12.5 percent clip for the month and the Wastewater Division’s increase hit 6 percent.
Webb furnished details for each division in his first official report for the new 2012-13 fiscal year.
Volume in July was 104,206,314 kilowatt-hours which was one-half of 1 percent greater than July of last year. Some of the financial strength of electric sales won’t come until another meter-reading cycle.
“Some consequences of the July heat (customers’ bills) will not show up on electric until the August readings because of the way meter-reading cycles are scheduled,” Webb explained. “This was evident when we calculated the adjustment for the meter-reading cycle for August and it turned out to be a positive $408,475, as shown in the statements.”
He added, “With that in mind, I believe we will see fairly high kilowatt-hour volume in August as well.”
Revenue from electric sales in August was $10,049,351. Purchased power cost (from TVA) was $8,589,466, leaving a margin of $1,459,885.
“This was actually just shy of the budgeted amount,” Webb said. “After adding revenues other than electric sales, the amount available for operating expenses was $1,574,727.”
Operating expenses totaled $1,252,835, leaving a net income for July of $321,892. The budgeted net income was $269,290.
For the month, CU recorded 29,729 electric customers. The average retail price of electricity in July was 9.7-cents per kilowatt-hour.
Water volume in July was 312,847,500 gallons, a whopping increase of 12.5 percent from July 2011. The water usage hike was evident not only in the total numbers, but in the cartegories of customers. Webb pointed out eight of CU’s nine customer classes recorded increased water use. The only exception was commercial customers, but this might have been explained partially because many major industries schedule weeklong production shutdowns in July each year.
For the month, the average retail price to customers for water was $3.98 per 1,000 gallons purchased. The Water Division provided services to 29,979 customers.
Revenue in July totaled $1,334,299. Expenses were $1,001,825, leaving a net operating income of $332,474.
“The combination of higher-than-budgeted sales and lower-than-budgeted expenses provided the net income amount that exceeded the budgeted amount,” Webb noted.
Sewer volume is tied directly to water usage so this division incurred a major increase as well. The Wastewater Division recorded volume use of 179,417,250 gallons, representing a 6 percent increase over July 2011.
“The numbers are never the same since the customer mix is different in sewer than water, and irrigation meters in water do not carry a sewer billing,” Webb explained.
Revenue in the Wastewater Division for July was $920,522 and expenses were $746,318, leaving a net operating income of $174,204.
“As in water, the higher-than-budgeted revenue and lower-than-budgeted expense provided the net income that was in excess of the budgeted net operating income,” Webb noted.
A good start
for FY 2012-13
The positive numbers in all three divisions for July were good news for Cleveland Utilities on the heels of what Webb termed a “good” year for FY 2012. However, even in the promising year, CU’s sales volume was up in only the Water and Wastewater divisions.
Water sales for the year were up by 1 percent and sewer saw a slight hike of four-tenths of 1 percent. However, the Electric Division was down 4.1 percent.
Although overall the numbers were “good” for the year, Webb pointed out the utility must continue to record positive results in order to operate in a “sound fiscal manner.”
Strong sales are especially crucial because Cleveland Utilities currently carries almost $60 million in debt due to past and present improvement projects that have involved all three divisions. CU must continue to update, and to expand, its operations in order to keep pace with community growth that has defined the Cleveland and Bradley County community for the past few years.
“It is from the positive difference between revenue and expense that funds for debt service and funds for capital improvements are generated,” Webb said.
Like anybody else, whether it’s a household or a business, Cleveland Utilities also has monthly bills to pay. And that’s the importance of strong sales volumes.