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Home My WebLink About17 Mid-Year 2022 Financial UpdateAGENDA ITEM #17 TRUCKEE DONNER Public Utility District MEETING DATE: August 3, 2022 TO: Board of Directors FROM: Michael Salmon, Chief Financial Officer SUBJECT: Mid -Year Financial Update — 2022 - r APPROVED BY -- Brian &--Wright, General MaMager RECOMMENDATION: Accept and file the 2022 mid -year financial update. BACKGROUND: District Code requires a semi-annual review of the budgeted revenues and expenditures as compared to the year-to-date actual revenues and expenditures. The included and referenced herein budget to actual reports are a consolidated report of actual activity for revenues, operating expenses, capital expenditures, debt service, and transfers. The report is a non-GAAP sources and uses style report and excludes depreciation, amortization and contributed capital activities. ANALYSIS/BODY: General Comments: In 2021, the District applied for utility bill arrearage relief funds (Federal via State) and in Q1 of 2022 received $212,000 and applied all funds to customer accounts. In Q2 of 2022, the pandemic -paused standard collection policies were re -instituted. Past due account balance was $513,000 and $166,000, as of December 31, 2021 and June 30, 2022 respectively. A 2nd round of electric utility bills relief funds (State funded) is actively being researched. This 2nd round is specific to Active Residential accounts only with arrearages from billings March 2020 to December 2021. A material portion of the District's 90+ past due balance is Commercial and Inactive Residential based. The District is actively applying for CalOES disaster relief funds related to the December 2021 winter storm. The actual amount of relief funds is to be determined, but could be in excess of $750,000, replenishing a substantial portion of the storm's cost of $1.3M which depleted electric's operating reserve. Page 1 of 4 On June 30th 2022, the District issued Electric ($6.470M) and Water ($14.825M) Certificates of Participation bond debt, consistent with Budget and the Financial Master Plan. These debt issuances are a key capital funding source over the next three years for respective capital improvement plan projects. The effective all -in true interest rates (priced/sold June 9th) are 4.31 % and 4.28%, Electric and Water respectively. Current inflation rates are at forty+ year highs and supply chain issues are both consistently in the US economic news. Year to date, the District has managed to operate within budget (other than certain capital projects bids and fuel costs) and obtain supplies and materials with reasonable timelines. The District is proactively addressing core supply and material inventories to mitigate potential future issues in obtain these core operational items. Electric Utility (Attachment 1): Billed accounts in June 2022 were 14,595 and Year to Date (YTD) billing accounts are up 1.6% to last year. YTD billed KWH of 87.7M up 0.5% on a per days billed basis, while KWH billed per customer per billing day down 1.1 % YTD compared to last year. This decrease is attributed to a generally milder winter this year to last. Operating Revenues YTD 6/30/2022 of $16.60M are 52% of annual budget which equates to favorable $0.63M. Compared to budget, residential sales are up 6% to budget and commercial sales are up 6% to budget. Miscellaneous revenues are generally on budget. Annual forecast operating revenue of $31.82M is favorable $0.17M or 0.5% to budget in operating revenues. Operating Expenses YTD 6/30/2022 of $6.11 M are 45% of annual budget which equates to a favorable $0.68M. Electric operations at 49% of annual budget YTD is pacing slightly over budget for annual forecast at 101 % of budget. All other departments are running at or below budget for the year. Annual forecast for Operating Expenses is $13.38M, favorable $234,000 or 1.7% to budget. Purchased Power cost YTD 6/30/2022 of $6.79M are 50.3% of annual budget and equates to an unfavorable $84,000. This is driven primarily by a net increase in demand due to customer growth. The annual forecast for purchased power of $14.43M is unfavorable $922,000 or 7% to budget in purchased power driven primarily by the delay in Red Mesa solar power supply project. The annual forecast includes $892,000 midpoint of $618,000 to $1,166,000 range negative impact (purchased power cost increase) caused by the delay of the Red Mesa solar UAMPS solar project in July — December of 2022. The District has worked with UAMPS to take actions which mitigate this cost increase; without these efforts the project delay impact midpoint would be in the $1.1 m range. At year-end (November or December), staff recommends review with Board purchased power costs for 2022 and the potential utilization of rate reserve funds to mitigate the purchased power costs over -run. Capital Expenditures YTD 6/30/2022 of $1.36M are 8% of annual budget, under -running due primarily to timing of projects for the year and between years. Annual forecast is $4.98M, under budget $11.42M in expenditures for the year, due to certain projects deferred to future years. Budgeted to be expended in 2022, but delayed to 2023 include: Corp Yard Building ($6M), Page 2 of 4 District Office Modernization ($3m), District Office Drainage/Paving ($1.5m) and SCADA reliability ($1.3m). The deferrals due to resources (time mainly) to properly plan and execute projects. Electric, other cash flow items: Investment income is significantly over budget YTD and forecasted to be favorable to budget $49,000 for the year. Interest rates have increased since conservative budget established. Debt service for Electric of $447,000 includes final payment for Pension Obligation Bonds (side fund) payments; and annual forecast is on budget. Transfers In/Out has a budget of $13.15M and is forecasted to be $1.73M, attributed to timing of bond proceeds utilization of funds and capital reserves for projects. Note the transfers net variance of $11.42M mirrors the capital expenditures variance to budget. Electric Utility's Net Budget Activity YTD 6/30/2022 is positive $1.19M. Forecast 2022 is a positive $0.16M compares unfavorably to Budget 2022 of $0.67M by $513,000. This unfavorable net cash flow activity is driven primarily by the purchased power cost over -run of 7%, partially offset by operating revenues 1 % favorable to budget and operating cost savings of 2%. Water Utility (Attachment 2): Billed accounts in June 2022 are 13,511 and Year to Date (YTD) billing accounts are up 1.0% to last year. YTD billed gallons of 344M are down 15% to last year. Billed gallons per customer per day YTD June of 142 are down 15% to last year (residential down 16% and non-residential down 12%). This decrease is attributed to a generally milder winter this year to last and drought restrictions and awareness. The 2022 net impact of current drought restrictions is estimated to be in the $80,000 to $100,000 range; with estimated $200,000 to $250,000 range in revenues negative impact, partially offset by estimated $120,000 to $150,000 range savings in operating costs. Operating Revenues Year to Date (YTD) 6/30/2022 of $7.75M are 47% of annual budget which equates to unfavorable $493,000 on a straight-line budget spread basis. YTD June historical average is 48% of annual revenues, producing a 1 % variance. Miscellaneous revenues are generally on budget. Annual forecast operating revenues of $16.31 M are unfavorable $128,000 or 1 % to budget, driven primarily by the forecasted drought impact remainder of the year. Operating Expenses YTD 6/30/2022 of $4.84M are 43% of annual budget which equates to a favorable $779,000. Water operations at 43% of annual budget is pacing under budget primarily due to timing between months, with annual forecast to be $21,000 or 0% under Budget. All other departments are running at or under budget pace and forecasted to be at or below budget for year. Annual forecast for Operating Expenses is $11.01 M, favorable Page 3 of 4 $123,000 or 1 % to budget. Capital Expenditures YTD 6/30/2022 of $2.35M are 25% of annual budget, under -running due primarily to timing of projects for the year and between years. Annual forecast is $8.16M, favorable to budget $1.24M primarily due to timing of projects between years. Water, Other cash flow items: Investment income is significantly over budget YTD and forecasted to be favorable to budget $49,000 for the year. Interest rates have increased since conservative budget established. Debt service for water budget and forecast is $1.67M. Transfers In/Out has a budget of $6.75M and is forecasted to be $5.51 M, attributed to timing of bond proceeds utilization of funds and capital reserves for projects. Note the transfers net variance of $1.24M mirrors the capital expenditures variance to budget. Water Utility's Net Budget Activity YTD 6/30/2022 is positive $13,000, Forecast 2022 is a positive $715,000, and Budget 2022 is a positive $713,000. Forecast for year is net favorable $2,000. GOALS AND OBJECTIVES: This item is in support of the following goals and objectives: District Code1.05.020 Objectives: 6. Manage the District in an effective, efficient and fiscally responsible manner. Strategic Goals: 1. Manager for Financial Stability and Resiliency FISCAL IMPACT: This financial review of actual to budget activity and year end projections for FY2022 serve as Board's review of the District's current financial performance. ATTACHMENTS: 1 — Annual Budget, YTD 6/20/2022 Actual, Annual Forecast - Electric Utility 2 — Annual Budget, YTD 6/20/2022 Actual, Annual Forecast - Water Utility Page 4 of 4