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(5l <br /> W <br /> Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> Elk River Municipal Utilities Commission Troy Adams, P.E. — General Manager <br /> John Dietz—Chair <br /> Daryl Thompson— Vice Chair <br /> Al Nadeau—Trustee <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> October 9, 2012 5.3 <br /> SUBJECT: <br /> 2013 Water and Electric Expense Budgets <br /> BACKGROUND: <br /> In preparation for submittal in November, Staff continues to work through the 2013 budget <br /> process. The first cut of the expense portion of the 2013 budget has been completed for <br /> commission review. The expense budget will change as the complete 2013 budget is assembled <br /> and the finalized wholesale power costs are reflected. <br /> DISCUSSION: <br /> Attached is the following information for your review. Additional budget detail is available upon <br /> request. Please contact staff for additional information. <br /> 1. Water Department Expense Budget—The water rate analysis conducted in spring of 2010 <br /> established a cash flow plan that results in the rates remaining unchanged through 2012. <br /> The 2013 forecast for water sales and connections are similar to 2012. There is also the <br /> continued revenue from the recent water tower antenna space leases with the potential for <br /> additional lease revenue. As budgeted without any water rate increase, the water <br /> department would see a $131,628 or 5.5% loss. The rate design would be done to cover <br /> this amount plus a small margin. <br /> 2. Electric Department Expense Budget—Wholesale power costs make up between 70-75% <br /> of the operating budget. Ultimately, the wholesale rates set by Great River Energy (GRE) <br /> have an enormous impact on ERMU's rates. Therefore, ERMU's most effective way to <br /> lessen the electric rate increases to our customers would be through reducing our <br /> wholesale power costs. Cutting services, maintenance, labor, or capital purchases do <br /> contribute to lowering electric rates; however these actions also have an impact to <br /> operations and must be considered with good business practices. GRE has not finalized <br /> their 2013 wholesale power rates. Through discussions, GRE looks to have a 4% <br /> increase to their revenue. The final GRE board approval of wholesale power rates <br /> typically comes by early December. Typically their percent revenue increase is less than <br /> PO <br /> NEOEO AT <br /> Page 1 of 3 NATURE <br /> Reliable Public <br /> Power Provider P 0 wEPED To SERVE <br />