JAMESTOWN – The Jamestown Board of Public Utilities held its February meeting Monday and received a report on the final, unaudited financial summery for 2015.
During his report, BPU business manager Mike Anderson explained to board members that the mild winter has cut into the projected profits for the electric division for last year and will likely continue to affect profits in early 2016.
As for the final unaudited numbers for 2015, Anderson said the net income for the electric division in 2015 was $1.91 million. He also said that while both tariff sales ($31.1 million) and off-system sales ($9.7 million) were both under budget (2 percent and 22 percent, respectively), operating expenses were also under budget by $3.8 million (9 percent), which helped to result in the net income. Overall the electric division’s cash position continues to erode, finishing with an unrestricted balance of $9.8 million at the end of 2015, down from $13.5 million at the end of 2014 and $17 million from 2013.
Anderson also said that there were several concerns/threats facing the electric division that will continue to drive decisions in 2016. The include:
- The unrestricted cash of $9.8 million represents a “dangerously low” level of available cash at on 2.6 months, which is significantly less than the recommended 6 months to insure proper operation of the utility;
- Continued lost revenues from major industrial costumers and the lack of economic growth opportunities will require aggressive work related to business retention and business recruitment;
- Off-system sales (OSS) remain a huge benefit to customers and contribute to profitability, but recent direction from the state’s Public Service Commission (PSC) requires the majority of OSS profits to bbe restricted in their use for designated projects, or be returned to customers;
- There will be a continued need for several high-cost capital improvement projects to support future needs of the division;
- The potential expectation of the city of Jamestown’s general operating budget to receive additional funding from utility customers over and above the amounts currently being paid in tax equivalency payments will have a negative impact on operations at some point soon, and is not considered sustainable by staff;
- The PSC rate case filed on March 27 took longer to complete than expected and the authorized increase to annual revenues was cut by $381,000 (32 percent). Furthermore, estimated revenues from mini rate cases expected to be proposed in 2017 and 2019 do not sufficiently increase utility rate of return to the recommended level provided by the PSC.
The net income for the BPU’s four other divisions in 2015 were $517,000 for the water division, $399,000 for the waste water division, $180,000 for the solid waste division, and $178,000 for the district heating division.
Of those four divisions, Anderson said the water division presents the most serious challenges and concerns for the BPU, due to the need to replace aging infrastructure. But the division only has a limited amount of annual funding to address capitol projects ($1 million per year) that are projected to cost anywhere from $1.3 million to $1.8 million per year. He said the situation will continue to cause an erosion of cash if a different approach isn’t pursued.
Anderson also said that operating expenses in 2016 are expected to increase by 2.1 percent, yet there is also a lack of growth opportunities with water services, hindering the BPU’s chances to increase revenues without regular rate increases. He said that based on staff recommendations, the board raised water rates 2.7 percent for this year and the five-year plan includes increases in each of the next four years, totaling 14 percent.
During Monday’s meeting, the board approved a bid for the Elliott Group, located just outside of Pittsburgh, to provide work on the BPU’s steam turbine/generator no. 6, at a cost of $358,195. Additionally, the board approved a contingency line not to exceed $700,000 to cover any additional costs associated with the project.
Also during Monday’s meeting, the board heard from several members of the public, including Bill Stevenson, president of the Jamestown Riverfront Management Council, who asked to appear at the BPU’s next Strategic Planning meeting so it could provide more information about becoming a member of the Chautauqua Lake & Watershed Management Alliance.