PACKET 2026 6 8 Work Session website

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43 
 
Five Year 
Revenue and Cash Flow Projections 
 
 
It is important to note that these projections, like the year-one budget, are typically “worst-
case” scenarios that do not include issuance of new debt, grants, or increases in revenues that 
are seen as possibly temporary (such as large commercial wastewater revenues).  If projections 
for any division over the five-year period indicate positive revenues and cash positions that are 
flat or increasing, then there is a high probability that there will be no need for any rate 
increases in the near future.  The contrary is not necessarily true.  If revenues and cash are 
declining, that does not necessarily indicate the need for a rate increase.  It simply is an 
indicator that we will need to address the financials in terms of debt issuance, grants, 
postponement of capital investment, or possibly a future rate increase.   
 
Utility revenue and cost projections are by nature “best estimates” and are susceptible to a 
number of variables.  In particular, sales in the power and gas divisions are sensitive to 
weather, especially extremes in temperature.  To a lesser degree, water and wastewater sales 
can be affected by precipitation totals, i.e., drier weather will typically result in higher sales for 
water and thus higher wastewater revenue. 
 
Revenue projections must also account for changes in customer count in each classification 
(residential, commercial, industrial) and for general sales variation based on consumption and 
price.  Consumption is difficult to project because the market tends to be both elastic and 
inelastic in nature.  The basic needs are inelastic (basic home electrification, heating and 
cooling, baseline household water consumption) yet consumption above the basic needs 
(comfort zone cooling and heating, irrigation needs, ancillary lighting, etc.) are elastic, and the 
effects of pricing and consumer choice follow more closely classic economic consumption 
models.   
  
Similarly, cash flow estimates are affected by projected capital expenses and again are “best 
estimates” based upon projected needs.  In reality, rarely do actual capital costs in a given year 
mirror the capital budgets.  There are a number of reasons for discrepancy including actual 
“needs” verses “wants”; inability to meet anticipated schedule for a project; inaccurate 
estimates; changes in operations that delay or eliminate the need for the expenditure; and 
inadequate revenues to fund expenditures.  Capital projections for this exercise represent a 
basic wish list of value-added system improvements with few restrictions other than fiscal year 
finances or debt.  Therefore, many projects listed in this study may not be funded during the 
year listed, if ever.  
 
Statistical data used to estimate revenue and costs are listed in the appendix of this document.  
It is important to note that the escalation factors for each division are evaluated annually and 
updated to reflect current cost trends.  The projections for each division along with 
accompanying visual aids are in the tabulated sections for each division.