EES revenues fall

By Thomas Wilson

STAR STAFF
twilson@starhq.com

   An accounting firm's recommendation that the Elizabethton Electric System bolster its discretionary funds by over $1.5 million sounds nice in theory, but EES board members and General Manager Phill Isaacs say sagging power revenues are keeping the municipal power provider from reaching that goal.
   "This is where we are having problems," said Shirley Hughes, one of three EES board members who reviewed the electric system's financial statement for December at the board's meeting on Tuesday.
   In its audit of the system for the 2003 fiscal year, the Blackburn, Childers and Steagall accounting firm advised board members that the system needs to have two months of operating revenue in its general fund -- approximately $3.4 million -- available each month.
   "We don't have enough money to meet the shortage," said Hughes.
   EES revenues have ebbed in recent months resulting in the system having to use a portion of its unrestricted fund balance to pay its own monthly power bill from the Tennessee Valley Authority.
   Director of Finance, Andie Talbert, said that, while operating revenues for December grew by 3.3 percent over the same month in 2002, the system's power bill jumped by 3.6 percent.
   The general fund balance took a hit in December when an EES power bill of $2.7 million exceeded accounts receivable numbers by more than $100,000, according to the system's monthly report.
   December's unrestricted fund balance came in at $1.7 million, according to the report. However, the fund balance dropped to roughly $327,000 last month when factoring in restricted funds of $1.4 million dedicated to financial and debt-related obligations of the system.
   Isaacs said the fund balance is gradually replenished each month with incoming revenues, but EES usually receives its own power bill sometime during the middle of each month. Isaacs said revenues for the 2004 fiscal year are roughly four percent below what was projected.
   Board members and staff also feel the electric system is beginning to feel the effects of the industrial exodus the county has suffered in the past two years. "A lot of this is attributed to the number of jobs we've lost here," Hughes said.
   The departure of Alcoa Extrusions -- formerly the system's largest industrial customer -- as well as companies such as Frank Schaffer Publications and the Inland Paperboard and Packaging facility on West Elk Avenue have dropped power revenues considerably.
   Isaacs said the proposed new Lowe's home improvement store and Wal-Mart Supercenter will create two large, new customers and will require work to relocate power lines.
   "We will see a little from Wal-Mart, but they will be closing their old store," Isaacs said.
   While the system has not been buying as much electricity to accommodate those needs, the price of power purchased from TVA has edged up. The TVA board of directors voted unanimously in August to approve a 6.1-percent increase in electric revenues. The rate restructuring measure was expected to result in a 7.4-percent increase in wholesale residential and non-manufacturing electricity rates.
   Isaacs also possibly moved one step closer to receiving board approval to purchase a new vehicle large enough to set wood and metal utility poles. He presented two bids submitted by the Altec and Terex companies featuring a maintenance truck with extensive capabilities for line repair work. The truck would replace a maintenance truck purchased in 1991 that is now unusable due to mechanical problems.
   Previously, EES leased a similar truck to do large-scale repair work when the need arises. Talbert said the system has spent $27,000 over the past two years leasing the vehicle from the Dillard Smith company and spent $25,000 servicing the former maintenance truck.
   The low bid of $183,000 made by Altec wasn't low enough for at least one board member.
   If EES already leased a truck to do the job, "You don't really need it," said board Chairman Gary Nave. However, Isaacs said when large transmission lines go down, having a truck immediately available to restore electricity is critical.
   "How much is it worth to get the lights back on?" Talbert added.
   Isaacs offered to submit a new proposal reducing some items on the truck to shave up to $20,000 off the price. The board is expected to hear the revised truck bid offer next month.