The first full month of autumn is critical to the utility’s fiscal ledger because it serves as a gateway into the wetter months of winter whose dropping temperatures drive kilowatt-hour consumption, but dramatically lower water usage.
“All three reporting divisions of Cleveland Utilities are reporting positive results for October,” according to Ken Webb, senior vice president and chief financial officer. “This is encouraging news as the month of October often has some fairly significant temperature and rainfall swings. Depending on which direction the swing is, volume can be affected either plus or minus.”
In a crash course that might be labeled Utilities 101, it’s this simple. Colder temps mean increased revenue in the Electric Division because more customers are heating their homes; and a milder mercury level means less revenue because customers don’t need the heat. Wetter conditions, along with the cooler climate, yield to less sales in water volume and that translates to less revenue in the Water Division.
According to Webb’s monthly financial update released during a recent session of the Cleveland Board of Public UIilities, October sales volume in the Electric Division rose 7.7 percent over the same period in 2011; Water Division sales slightly dipped by less than 1 percent; and the Wastewater Division sales volume was up 5.1 percent.
Residential, commercial and industrial customer classifications all recorded increased volume, Webb reported. During the month, CU serviced 29,790 electric customers and the average retail price was 8.4-cents per kilowatt-hour.
Revenue from the sale of electricity was $6,764,188 with purchased power accounting for $5,488,233 of the amount.
“Both were less than budgeted, resulting in a margin of $1,275,955,” Webb said. “This was within approximately $13,000 of the budgeted margin.
Additional division revenue in October tallied $131,891.
Expenses totaled $1,360,751, leaving a net income of $47,096 for the month.
“The budgeted amount was $56,211, so when taking all the results into account the month was very close to the results that were anticipated,” Webb noted.
The year-to-date numbers, which now include four months worth of sales, aren’t so promising.
“The YTD results in electric continue to trail behind both the budgeted amount and the amount shown at this time last year,” he reported. “The bulk of the difference continues to be in the area of purchased power.”
He added, “At this time last year, it was running at 83.3 percent of revenue and this year it is 84.4 percent. The budgeted percentage through October is 83.5 percent. We will continue to monitor these variances.”
The division’s volume for the month was 239,413,500 gallons. This was less than 1 percent smaller than the same month last year.
In October, water service was provided to 30,104 customers at an average retail price of $4.19 per 1,000 gallons of water purchased. Monthly rainfall was only 3.0 inches compared to 3.75 inches in October 2011.
Total revenue for the Water Division was $1,099,483 and expenses were $1,077,419, leaving a net income of $22,064 for the month.
“Although expenses were less than budgeted, [they were] not enough to offset ... the loss in revenue that had been budgeted,” Webb advised.
But the news for water is not all bad.
“... Because the months prior to October produced positive results greater than budgeted, the shortfall this month did not put the YTD position behind [what was] budgeted,” he explained. “The YTD net income is $709,674. I anticipate us seeing some months beginning to reflect negative results as the demand for water becomes smaller as the temperatures fall.”
Division volume was 161,085,750 gallons of water sold, representing a 5.1 percent increase. Sewer service in October was provided to 17,792 customers at an average price of $5.15 per 1,000 gallons.
Total division revenue for the month was $941,815. Expenses tallied $798,630, leaving a net income of $143,185.
“Revenues were greater than the projected total and expenses were less than budgeted, leaving net income in excess of the budgeted amount of $49,482,” Webb said.
In this division, the running year’s total is a little more pleasing to CU’s lead accountant.
“The YTD results in sewer continue to be positive with YTD net income of $529,639, but just as is the case in [the Water Division] we are entering the time of fiscal year when results are not expected to be as favorable as they have been since July,” he pointed out.
Access fees strong
Water and sewer access fees continue to point to a strengthening area economy.
“Once again, I am pleased to report in both water and sewer divisions, access fee totals are in excess of budget and ahead of the same time last year,” Webb said. “This is a good indicator growth is continuing to occur.”
Increased construction is generally accepted to mean a recovering economy.
An “access fee” is the amount a developer, builder or landowner pays to Cleveland Utilities to have a new or enhanced development hooked up to the utility’s existing sewer and water lines. A “meter set,” whose numbers are reported monthly by Craig Mullinax, vice president of the CU Water Division, is the number of physical connections made to existing water lines.
In October, CU crews set 25 water meters, compared to 18 in October 2011, and 24 in the same month two years ago. To date, CU has set 122 meters in the fiscal year’s first four months, compared to 127 for the same period last year, and 90 in 2010.
Mullinax said the October meter sets included 15 single-family units (houses), four 2-unit townhomes, two 4-unit structures and four commercial developments.