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~~ a ate ~T~~~~~ es~~°ve C'~ass~ca~~o~t~ <br />Restricted For Debt Service: This reserve is established to maintain compliance with bond <br />covenants. <br />The target level for this reserve shall be set at the level specified by bond covenants, <br />Unrestricted designated Reserve: This reserve is established to address the shortbterm financial <br />variability inherent in operating a water Utility, Potential sources of this variability include but <br />are not limited to: risks associated with natural disasters, reduction in overall customer usage, <br />changes in total system usage resulting from the actions of large customers, failure to achieve <br />budgeted levels of net income, changes in interest income, and general operational exposures. <br />The target level for this reserve shall be set at the sum of 6 months operating expenditures less <br />depreciation plus the sum of next year's total principal and interest payments. The balance <br />above this target level sha11 be unrestricted. <br />.0 Yea~~end deserve ala~ce~ <br />If the year-end reserve balances are above their target levels after the completion of the year-end <br />audit, these balances shall be unrestricted with a defaulting designation as working capital. The <br />Utilities Commission sha11 then consider optimal uses of these unrestricted reserves through any <br />of the following but not limited to: working capital, designated for power costs electric fund <br />only}, debt reduction, retention for reserve fund growth for future needs, or use for rate <br />stabilization or reduction. <br />If the year-end reserve balances are below their target levels aver the completion of the yearend <br />audit, the Utilities Commission shall consider the balances and plan for their replenishment to <br />target levels in a timely manner. <br />Proposed May 11, 2010 <br />2 <br />