HomeMy WebLinkAbout21 Budget Performance Review FY22 - AGENDA ITEM #21
Public Utility District
MEETING DATE: April 5, 2023
TO: Board of Directors
FROM: Michael Salmon, CFO
SUBJECT: Budget Performance Review, 2022 Year End
APPROVED BY
B. Wright, General Manager
RECOMMENDATION:
Accept this report of Budget Performance for 2022 end of year which includes variances
identified since the adoption of the budget for 2022 and 2023.
BACKGROUND:
This is a year-end review of the financial results as of December 31, 2022. District code requires
a semiannual review of the budgeted revenues and expenditures compared to actual revenues
and expenditures. This is the second of four reviews for the FY22 and FY23 Board approved
Budget.
Staff reviewed the mid-year FY22 budget to actual financial performance at the regular board
meeting on August 3, 2022. The budget to actual report is a consolidated report of actual activity
for revenues, operational expenses, and capital improvement projects funded by rates and
reserves. The budget reporting excludes certain non-budgeted items non-cash and cash flow
items, such as depreciation, amortization, and revenue and expenses associated with
contributed capital projects.
Preliminary (audit in progress) FY22 year-end financial summary results are included in
Attachment 1 and Attachment 2, Electric and Water respectively. Both the Electric and Water
utilities reported positive net operating inflows. The Electric Utility had net operating inflow of
$0.246M. The Water Utility had a net operating inflow of $1.732M. Attachment 3 provides a
report on Reserves and Attachment 4 is a report of Facility Fees.
Electric Utility
Attachment 1 is the preliminary Budget to Actual Comparison report for the Electric Utility for
FY22. Revenues of $31.7M exceeded budget expectations by $0.891 M or 3%. Energy demand
continued in the District, up compared to budget and last year. Compared to 2021, average
billed kWh per day was up 1.5%, number of accounts billed for the year was up 1.3%, and
average kWh per account per month was up 0.2% for the year. Per account kWh usage was
1% below prior year until the cold stormy December 2022.
Page 1 of 7
Purchased Power expense of$16.8M was over budget by $3.3M or 25%. The average cost per
MW of $96.79 was 22% over budget driving $3.033M of the variance and the volume of MW
purchased was 2.1% over budget driving $0.282M of the variance. This is a material variance
and staff has a separate agenda item further detailing this variance and a recommended rate
reserve transfer for board consideration.
Operating Expenses of $13.5M were net $123,000 or 1% under budget expectations and the
key variances summarized by cost center as follows:
• Board of Directors - $217,000 / 48% under budget: $50k training, $64k legal fees
and $105k strategic planning/initiatives;
• General Management- $147,000/ 10% under budget: $54,000 under in legal fees,
$86,000 under in professional services, $27,000 under in
marketing/surveys/PSOM, and $44,000 under in various other categories, offset
by $64,000 over in Overheads.
• Administrative Services - $53,000 / 4% over budget; $31 k/4% over in wages due
to overtime and various other personnel factors, $12k reserve for bad debt
allowance increase (YE book entry), $15k insurance over budget, $9k over budget
in in damage claims, and $14k net under budget for all other variances.
• Conservation - $202,000 / 23% under budget: variance driven by delay in LCFS
sales impact on programs launch, commercial program delay due to resources,
and new programs conservative in rebate amount per unit.
• IT/GIS - $75,000 / 5% under budget: $36k position vacancy (IT Manager 4.0
months) and $39k in various expense savings.
• Building Maintenance - $150,000 / 20% under budget; delays in filling new
positions during the year, combined with related overhead savings impact.
• Electric Operations - $615,000 / 9% over budget:
o $322,000 or 7% over budget in wages and overhead
■ $1,022,000 over due to less labor charged to capital projects than
anticipated. Budget anticipated 19,548 hours charged to capital projects,
whereas, actual was 10,229 hours.
■ $700,000 under budget due to position vacancies in management and
line positions, effectively down approximately 2.6 positions for 2022
o $293,000 or 11% over budget in supplies/services (vendors) expenses,
notables include:
■ $29,000 over in uniforms; fire resistant clothing inflation and safety mods
■ $61,000 over in vegetation management/defensible space (timing, not
over contract amounts) (total expense of $1.6M)
■ $62,000 over in storm damages (down tree services, only $3k Budget)
■ $98,000 in materials and supplies deployed to fleet trucks (timing)
■ $43,000 net over budget 4%, all other categories; primarily in materials
and supplies, due to inflation, supply chain fronting, and greater repairs
& maintenance (non-capital projects related) expense type projects
Page 2 of 7
Capital Expenditures of the Electric Utility for FY22 invested $2.7M compared to a budget of
$16.4M. The $13.7M of lower expenditures was due primarily to pandemic and turnover
impacting of delayed execution of planned projects. The most notable delay was the planned
expenditure of $10.5M for the District's building modernization project, District office
drainage/paving replacement project and new corporation yard facilities. These delays were
due to unforeseen permitting and design issues with the Town building and planning
departments. The SCADA reliability project for $1.3M was also delayed due to project
engineering vacancies. Vehicle purchases were impacted by significant supply chain challengs.
The Electric Department's FY22 Capital Expenditures of $2.7M included: distribution
replacement and improvement projects $459K; pole replacements $997K, the Northwoods
Rebuild project $442K, ELF fuses project $322K, Truckee Sub OH to UG project $133K, and
vehicle purchases $131 K.
Other Cash Flow In (Out) net of$542K was $1.1 M or 189% favorable to budget; variance details:
• Investment Income for operating fund of$39k was 108% or$20k greater than budget due
to 2022 market conditions.
• Transfer to Vehicle Reserves of $675,000 was consistent with budget
• Transfer to Rate Reserves of $326,000 was consistent with budget
• Transfer In from AB32 funds for Horse Butte of$1 M was consistent with budget
• CalOES Dec'21 disaster relief funds of $1.16M were received (not budgeted)
• Debt Service of $437,000 was 2% favorable to budget.
• Debt Issuance costs of$224,000 was $39k over budget
Electric Net Operations Funded Cash inflow for FY22 was $246K, unfavorable to budget by
$423K.
Electric Reserve Balances:
• In 2022, as budgeted, transfers from the General Fund were made to the Vehicle Reserve
($675,000) and to the Rate Reserve ($326,000), and transfers were made to the General
Fund from AB32 Fund ($1.0M). There was no transfer in or out of the Capital Reserve
and no Electric 2022 COP debt project funds were expended in 2022.
• The General Fund serves as the operating reserve and the December 31, 2022 balance
of$6.52M increased from last year end by $670K. This reserve balance does not reflect
the accrual versus cash flow of numerous items. Generally, these timing items have
nominal differences year to year. However, of material note, the December 2022
purchased power costs of $3.1 M were $1 .76M over budget, and this cost and related
overage was appropriately accrued to December 2022, however, the cash flow payment
of invoice and corresponding decrease in General Fund occurred in 2023. In otherwords,
the $6.52M reserve balance reduced by the $1.76M overage, equates to as post-payment
reserve balance of$4.76M or 35% of Operating Expenses or 30% off the goal per District
Code of 50% of Operating Expenses. This reserve decline is further addressed in
separate agenda item, Rate Reserve Transfer.
• Refer to Attachment 3 Reserve Balances Report for further details.
Page 3 of 7
Water Utility
Attachment 2 is the preliminary Budget to Actual Comparison report for the Water Utility for
FY22. Revenues of $16.7M exceeded budget expectations by $294K or 2%. Account growth
was 0.9% in 2022, total gallons billed was down 8% to 2021 (Residential gallons down 13%,
Commercial gallons down 2%), and average gallons per billing day per account of 245 was down
9%.
Operating Expenses for the Water Utility of$10.8M were under budget $371,000 or 3%. The key
variances summarized by cost center as follows:
• Board of Directors - $122,000 / 42% under budget: $64k legal fees, $25k training, $15k
board meeting expenses, and $10k strategic planning
• General Management - $137,000 / 10% under budget: $54,000 under in legal fees,
$86,000 under in professional services, $27,000 under in marketing/surveys/PSOM, and
$44,000 under in various other categories, offset by $64,000 over in Overheads
• Administrative Services - $45,000 / 3% over budget; $11 k/1% over in wages and related
overhead due to overtime and various other personnel factors, $15k insurance over
budget, and $19k net over budget for all other variances
• Conservation - $87,000 / 92% under budget; primarily due to delay of HQ modernization
delaying conservation garden project programs
• IT/GIS - $51,000 / 6% under budget; $40k position vacancy (IT Manager 4.0 months) and
$11 k in various expense savings
• Interdepartmental Rent - $0 / 0% on budget at $491,000 for 2022
• Water Operations - $18,000 / 0% under budget; with the following notable variances:
o $315,000 / 7% under in payroll and related overheads
■ $214,000 savings due to greater labor costs charged to capital project work
orders
■ $101,000 savings due primarily to position vacancies
o $297,000 / 13% over in materials, supplies and services (vendor costs)
■ $144,000 / 25% over in materials and supplies due to inflation, supply chain
fronting, and repairs
■ $48,000 for Red Mtn. Tank Repairs (recovered via CalOES $40k)
■ $61,000 / 125% over in water quality treatment and analysis (regulatory
driven)
■ -$32,000 / 2% under in pumping charges with a total of $1.3M
■ $76,000 net over in all other vendor expenses to budget
Capital Expenditures of the Water Utility for FY22 invested $8.6M compared to a budget of
$9.4M. The major focus for the Water Utility for Capital Expenditures in FY22 included: the 2022
pipeline replacement $2.8M, Tank Rehabilitations(2) $1.1 M, Pioneer Trail Pipeline $718K,
Page 4 of 7
Pioneer Pump Station $471 K, SCADA Replacement Project $503K, vehicle replacements
$411 K, Generators(2) $371 K, SR89 Slipline Project $320K, and Red Mountain Tank $1.1 M
(Facility Fees and DLAD funded).
Water COP 2022 debt issuance provided $16M in project funds, with $4.1 M expended in 2022,
for a remaining balance of $11.9M.
Other Cash Flow In (Out) net of($1.2M)was $362K or 23% favorable to budget; variance details:
• Investment Income for operating fund of$56k was 302% or$42k greater than budget due
to 2022 market conditions.
• Transfer to Vehicle Reserves of $240,000 was consistent with budget
• Grant funds in for generators was $253,000 (not budgeted)
• CalOES Dec'21 disaster relief funds of $40K were received (not budgeted)
• Debt Service of $1.52M was 2% favorable to budget.
• Debt Issuance costs of$286,000 was $1 k over budget
Water Net Operations Funded Cash inflow for FY22 was $1.73M, favorable to budget by $899K.
Water Reserve Balances
• In 2022, as budgeted, a transfer from the General Fund were made to the Vehicle
Reserve of $240,000 and there was no transfer to the Capital Reserve.
• The Operating Reserve as of 12/31/2022 of$7.7M is 38% above the policy target of 50%
of budgeted operating expenses which equates to $5.7M. This year-end balance of
$7.7M operating reserve balance represents 69% of operating expense budget.
• The Capital Reserve as of 12/31/2022 of $1.OM is substantially below the policy target of
average annual capital expenditures, which is currently $3.9M and forecasted in capital
improvement plan to average $8.8M over the next 10 years. This capital reserve shortfall
to policy was addressed and resolved going forward in the Financial Master Plan
approved as part of the Budget 2022 & 2023 approval. In summary, 1 st priority bolstering
Operating Reserve balance and spending debt issuance proceeds; longer-term
increasing capital reserve balance. The reserve balances are re-assessed as part of the
budget cycle and 10-year financial master plan update this summer/fall.
• The restricted Water 2022 Debt COP project funds of $15.9M have a year-end
balance of $11.9M, after $4.OM of funds expended on eligible planned projects in
2022.
• Staff has no recommended transfers related to Water and 2022 for this report.
Refer to Attachment 3 Reserve Balances Report for further details
Facility Fees
The District establishes and collects facilities fees on new development for electric and water
system improvements attributable to new developments in accordance with the Electric and
Water Master Plans. Attachment 4 reports the status of the restricted Facilities Fees Fund for
each Utility respectively as of the end of FY22. The Electric Utility facilities fee collections in
FY22 were $173K compared to $261 K in FY21 . The Electric Utility had no expenditures for
facilities fees in FY22 (as budgeted).
Page 5 of 7
The Water Utility facility fee collection in FY21 remained strong with receipts of$909K compared
to $784K in FY21 due to continued development and new construction within the District. The
District utilizes facilities fees for qualifying debt service for the Water Utility on an annual basis.
In FY22 facilities fees of $358K were utilized for the 2006 Pipeline COP debt payment, as
budgeted. In 2022, the Red Mountain Tank (RMT) was placed in service/capitalized by the
District for$1.1 M. RMT was funded in part by Donner Lake Assessment District funds of$575K
and remainder through $500,000 of related facility fees `paid as collected'. The portion of facility
fees for RMT paid in 2022 was $216,948.
The District is obligated to utilize facilities fees collected within a 5 year period, and is in
compliance with this requirement.
Accounts Receivable
The pandemic drove a pause in late fees and termination of service for non-payment of billings.
Customer billings accounts receivable past due 90+ days compares as follows:
12/31/2019 12/31/2020 12/31/2021 12/31/2022
Electric $ 6,309 $ 74,075 $ 179,136 $ 44,236
Water $ 7,348 $ 36,950 $ 80,802 $ 17,669
Total $ 13,657 $ 111,025 $ 259,938 $ 61,905
The District's pandemic relief program has provided bill credits of $85,000 in 2020, $35,000 in
2021, and $35,000 in 2022 for a combined total of $155,000 to 539 customers.
The District applied for Federal/California financial relief in fall of 2021 and funds were received
in January 2022. The funds were distributed as bill credits in Feb/Mar of 2022 to customers.
The relief amount received totals $195,000 ($113,000 Electric and $82,000 Water).
The District has reserved $63,000 as an allowance for bad debt estimate in the year-end 2022
financial statements. This compares to $68,000 as of 12/31/2021.
This matter is being monitored closely by staff and we will continue to periodically update the
Board.
Budget and Notable Financial Matters
All of the above addresses 2022 performance to FY22 Budget (and FY23 Budget) approved in
in late fall of 2021. Specific to approved Budget, notable financial matters are updated with each
semi-annual performance to budget report to the Board. Notables include:
• High Inflation — CPI inflation metrics; Jun22 9.1%, Dec22 6.5%, Feb22 6.0%
• Increasing Interest Rates — the Federal Reserve as increased rates from 0.25% in March
2022 to now 4.75% in March 2023
• Increasing economic recession concerns — see above two items
• Supply Chain Issues-the District is experiencing supply chain issues for certain materials
and equipment, most notably Transformers
Page 6 of 7
Goals and Objectives:
This item is in support of the following goals and objectives:
District Code1.05.030 Goals:
1. Manage for Financial Stability and Resiliency
2. Environmental Stewardship: Create a sustainable resilient environment for all of our
communities.
District Code1.05.020 Objectives:
1. Responsibly serve the public.
6. Manage the District in an effective, efficient, and fiscally responsible manner.
FISCAL IMPACT:
There is not direct financial impact by means of accepting this report.
ATTACHMENTS:
Attachment 1 — FY22 Budget versus Actual Results, Electric Utility
Attachment 2 — FY22 Budget versus Actual Results, Water Utility
Attachment 3 — FY22 Year End Reserve Balances Report
Attachment 4 — FY22 Year End Facility Fees Balances Report
Page 7 of 7