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Fayetteville PWC cautioned to be mindful of volatile economy

Power-supply costs down, revenue picture brighter, financial report says


Editor's note: This story has been updated to correct the spelling of Rhonda Haskins, the chief financial officer of the Fayetteville Public Works Commission.

Volatility in the energy market and the lingering economic pressures of the COVID-19 pandemic will mandate continued fiscal caution, leaders of Fayetteville’s public utility were told Wednesday.

Rhonda Haskins, the chief financial officer of the Fayetteville Public Works Commission, delivered a first-quarter financial recap to the board at its monthly meeting.

Before presenting her report, Haskins reminded the commissioners that a water and wastewater rate increase would take effect July 1.

“So we’ll see increases in revenue on that end for the water and wastewater side,” Haskins told the commissioners. “We also had a bond issuance that closed in November – actually, $95 million.”

And as the pandemic has eased, PWC has ended a temporary waiver of late fees for customers struggling through the economic downturn, she said.

“Almost back to full operation there,” she said.

Bad weather could also affect the utility’s economic picture, she noted.

PWC spokeswoman Carolyn Justice-Hinson said after the meeting that the report was “kind of a snapshot in time.”

“There are some positives there. The economy and the industry are getting volatile with fuel costs and other things. There are a lot of factors we’re watching very closely,” Justice-Hinson said.

“The next report could look very different,” she added. “It’s presented every quarter for the commission to get a financial look and to see what the trends are.”

Power-supply costs are down to $100.6 million in the first quarter of this year from $104.7 million in the first three months last year, Haskins said.

According to the report, the cost of a megawatt hour of electricity is down 2% from a year ago, from $63.27 to $62.03.

"Power cost is our overall biggest expense, so this is good," Justice-Hinson said. “But as I mentioned, the economy and changes coming from our wholesale provider, Duke Energy, indicate this can change very quickly. This is the importance of maintaining our reserves and rate stabilization funds that we can draw from them during these extreme fluctuations instead of having to raise rates to cover the cost."

Fayetteville PWC has budgeted $64 million for electric and water capital projects in this budget year. But nine months into the budget, the utility has been able to complete only $30 million worth of those projects, Justice-Hinson said.

The demand for contractors and the availability of materials are affecting the utility's ability to get the work done, she said.

In other business, PWC CEO and General Manager Elaina Ball gave her second presentation on the 2022-23 operating budget and capital improvement plan in advance of a public hearing on Wednesday.

No one spoke during the public hearing.

As first presented on May 11, the budget calls for an overall outlay of about $397.5 million, which would be a 10.9% reduction from 2022 spending.

The cost of electricity would not change next year, but water rates would increase, according to the recommended budget. In 2020, the commission voted to delay water rate increases because of the financial effects of the COVID-19 pandemic. Those higher rates will take effect for 2023, Ball has said.

Justice-Hinson has said the new water rates will vary because they depend on the customer’s location and water usage.

The budget supports the financial health of PWC, keeps borrowing costs low and affords a bigger slice of revenue for the city of Fayetteville. The city would receive roughly $24 million from PWC in cash and services. Payments in lieu of taxes would increase to $12.4 million in cash – more than $1 million a month, she said.

That rounds out to a 4.7% increase for the city.

Michael Futch covers Fayetteville and education for CityView TODAY. He can be reached at mfutch@cityviewnc.com. Have a news tip? Email news@CityViewTODAY.com.

Fayetteville, PWC, utilities, electricity