EPB Cuts Debt, But Facing Weather-Related Woes

Friday, July 18, 2014 - by Gail Perry

Members of the Electric Power Board of directors met Friday morning to hear the year-end financial report. Greg Eaves, chief financial officer, said that enough revenue was produced to cover costs this year, but not to the level that had been anticipated. The weather had a direct effect on the profitability of the utility.

TVA bills the EPB for the energy that  it supplies, based on the highest load that is registered during any month. That means if the temperature is extremely high for one day only during the month, the cost of energy that TVA charges is based on that peak level for the entire month.

This practice pushes risk to the distributors such as EPB, officials said.

Operating costs were higher in 2013-2014 than had been expected. In the past, EPB was in the practice of budgeting $2.5 million per year for costs related to storms. Because of the Smart Grid that has now been in place for one year, people are not feeling the consequences of bad storms as much as they did in the past; however the cost to deal with them is still high. In the last four-five years storms that have moved through the area have been more severe and caused extensive damage. This has prompted the company to increase the amount allotted to take care of weather related problems to $4.2 million. This increase still did not make up  the difference for increased costs over the past year. Mr. Eaves said that operating expenses were reduced where possible but that weather did negatively affect financial results of the electric system.

For the year the electric system had sales of $567 million. Profits on that revenue yielded $2.1 million, which is $5.4 million under the $7 million that had been expected in the budget.

The Fiber Optics division of the business has now been in place for five years. The profitability that it has provided has helped the electric system portion of the business to remain profitable. The electric division owns the system and the Fiber Optics division pays to use it. During the past year, Fiber Optics revenue was $99.8 with a net income of $15.2 million.

Mr. Eaves noted that the company made more money with the Fiber Optics portion of the business than was made from the electric system portion, despite the much smaller dollar amount in sales.

One of the biggest announcements made at the board meeting concerned debt created by the Fiber Optics network. Last year the debt was $62.2 million. During 2013-2014, EPB was able to pay $11.8 million on that debt leaving $50 million that is owed.

It is projected that the EPB Telecom division will be debt free by spring 2015. This system that was put in place in 2007 has generated $33 million.

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