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CPW commissioners trying to prevent 'Sticker Shock' for customers

$369,000 loss reported for October

By Jim Fair, Editor
Published on Tuesday, November 26, 2013

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'I am very concerned where we might be ending up. “I don’t think we can continue to lose money on three out of four utilities.'
CPW Commissioner Jeff Howell

'I am very concerned where we might be ending up. “I don’t think we can continue to lose money on three out of four utilities.'

CPW Commissioner Jeff Howell



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". . . it indicates something has to be done with rates so that a surplus can be expected as opposed to operating in the red."

CPW Commission Chairman Eugene Gibson



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"One expense I’m having trouble with is the two-three percent pay increase. I would like commissioners to look into a year-end type bonus."

Commissioner Perry Williams

Greer CPW Commissioner Jeff Howell warned commissioners and the Greer utility the spiral decline in its profitability must stop. The utility reported a net loss of $484,362 for October operations.

“I am very concerned where we might be ending up,” Howell said at Monday’s monthly meeting. “I don’t think we can continue to lose money on three out of four utilities. I am asking if these increases are enough.”

“Sticker shock” is commissioner Eugene Gibson’s description how CPW customers could react if the losses are not proportionately made up with a profit for future growth.

Commissioners and CPW executives were proposing these percentage increases for fiscal year 2014 coming into Monday’s meeting:

• Water 5 percent

• Sewer 5 percent

• Electric 4 percent

That won’t cut it, according to Howell, if CPW expects to maintain profitability.

Howell said the 2014 budget, as proposed, reflects a $578,000 net profit or three-quarters of one percent.

After last week’s budget workshop, Howell asked Chuck Reynolds, CPW finance manager, to provide the utility’s financial history back to 2008. Some of Howell’s findings:

• 2013: $1.81 million was the projected profit. However it will be $216,000 if November and December trend out.

• 2012: $1.4 million was the projected profit. The utility lost $1.884 million.

“That’s a difference of a $2 million swing in 2013 and $3 million swing in 2012,” Howell said.

“When you put our electric rate to others we are at the very bottom of the 21 cities in South Carolina offering basic services," Gibson said. "We are the lowest in what the PMPA (Piedmont Municipal Power Association) charges. So that indicates our customers have benefitted for a long period of time on our efforts to make it as easy as we possibly can on them relating to what they have to pay for the necessities for their utilities.

"We also have the fiduciary responsibility not only to provide for reliable utilities, but we have to maintain a financially sound utility so that we can continue to do that. It indicates something has to be done with rates so that a surplus can be expected as opposed to operating in the red.” 

The numbers Reynolds presented Monday showed only sewer operations with net revenue  – $6,190. Here is how the other utilities fared in October with projections and net losses:

• Water: Projected net loss, $52,596, actual net loss of $27,234.

• Electric: Projected net loss $5,927, actual net loss of $345,742.

• Natural gas: Projected net loss $203,254, actual net loss of $117,576.

PMPA has charged CPW 38 percent more for electricity since 2008, said Howell, while the Greer utility has passed on only 10 percent of it to customers. That is mostly because CPW sets its budget one quarter before PMPA announces its rates, often substantially higher. Commissioners can make fee adjustments during the fiscal year but have been reluctant to do so.

Commissioners have counted on its other utilities to make up the deficit.

Since the budget workshop Reynolds and Howell told commissioners:

• 7.25 percent increase will only give the utility a breakeven point on electricity, before PMPA’s rates are announced. The 4 percent proposed increase for 1,000-kilowatt hours is $4.27.

• $2.09 per customer is the breakeven point on water. The 5 percent proposed increase on 100 gallons of water used would produce 97 cents.

"Since 2008 we have had two years of raises on the water side and three years of no increases and every year we are losing money," Howell said. "We have got to start making money. I am concerned the longer we wait the harder it will be to get it back.”

Reynolds also stated cash on hand, 119 days, although good, fell two days in October.

CPW has 127 employees, 11 less than in 2008.

Commissioners claim they have only several million dollars remaining for discretionary expenditures from the $74 million budget once operation expenditures are distributed.

Commissioner Perry Williams vigorously fought against any rate or fee increase as part of his 2012 election campaign and voted against the 2013 rate increases. “A lean budget is a good budget,” Williams said.

He suggested commissioners revisit employee raises. “One expense I’m having trouble with is the two-three percent pay increase,” Williams said. “I would like to ask commissioners to look into a year-end type bonus.”

Commissioners agree adjusting the minimum charge on water meters may be appropriate in the 2014 budget.  “We’re boxed in with the electrical provider (PMPA) consistently raising electric rates,” Gibson said.

Reynolds reported all departments were given an opportunity to revisit their budget requests since the workshop and none provided cost-cutting measures.

Gibson asked Reynolds to revisit the numbers talked about Monday and present them Dec. 20 for the budget’s final approval. “We can change the numbers,” Reynolds said. “It always puts a lot of stress on gas and electric.”

Howell cautioned, “There will be a day we will go to the bond market. They don’t want to see that we are losing money three out of four years. We need to change that.”

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