Closing of Alcoa to result in revenue loss for EES

By Julie Fann
star staff
jfann@starhq.com

  
At a special budget workshop Tuesday, the Elizabethton Electric System board said it anticipates a $200,000 net loss of revenue due to the recent closing of the Alcoa aluminum plant. As a result, Phil Isaacs, EES General Manager, made adjustments to the proposed 2002-2003 budget to account for funds lost.
   "We're concerned about the closing of Alcoa. We do have things built in, though, to reserve capacity. Peak billing demand is a 12-month cycle. That demand will be in place until November, but, after that, we will see a gradual decline in revenue," Isaacs said.
   Isaacs explained that the closing of Alcoa will impact the bottom line budget figure by $1 million in revenue, but that eight percent of that money goes to the TVA to pay the EES power bill. After that amount plus the offset of providing less power overall are figured in, the net loss is $200,000.
   "It will take away from total revenue, but our power cost will also be reduced. Still, we have to keep the power on for awhile to prevent structural problems so the building will sell. Hopefully, we can lure some other industry into that building," Isaacs said.
   After adjustments, projected revenue for EES is the same as it has been for the past two years with the bottom line figure at $1,215,800 and the net figure at $1,046,700. However, Isaacs said it is difficult to anticipate revenue increases that are dependent on the weather. The board expects a 7.8 percent increase in operational expenses and a 2.6 cost of living increase for employees.
   "Union negotiations are going on. We have to pay competitive wages or we'll lose employees. Over the past five years, we've lost three employees to the Johnson City Power Board. Everybody looks at that wage," Isaacs said.
   Isaacs told the board he wants to increase tree-trimming expenses from $500,000 to $800,000 due to a four percent loss of revenue if trees aren't trimmed properly. The board again addressed the fact that tree-trimming becomes a public relations problem, when the focus should be on keeping electrical lines clear.
   Joe Campbell, Director of EES Operations, stated what he feels is the power board's true tree-trimming purpose. "We're not a tree-trimming company. We do line clearing, and we have minimal clearance from some customers," he said.
   As a result, EES Board Chairman Gary Nave decided the board should look at the budget line by line to better determine expense numbers. "If you cut $1 million out of revenue (due to the closing of Alcoa), then you must cut $1 million on spending," Nave said.
  
Nave told Isaacs he made positive revenue projections but negative expense projections and that he needed to examine expenses more. Board accountant Richard Sammons said a gross margin number is what the board needs to get a better grasp on the budget.
   The board will meet again on Friday to look at new spreadsheets that reflect the gross margin for the anticipated 2002-2003 budget.