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Elk River <br /> Municipal Utilities <br /> 322 King Avenue phone: 763.441.2020 <br /> Elk River,MN 55330 Fax:763.4413099 <br /> November 3, 2003 <br /> To: Elk River Municipal Utilities Commission <br /> John Dietz <br /> Jerry Takle <br /> James Tralle <br /> From: Bryan Adams <br /> Subject: Electric & Water Income Statement <br /> Springstad Studies <br /> As you may recall, Springstad helped us develop income statement projections for the <br /> water department. Your staff in turn used this water department model and developed an <br /> electric department income statement projection. Due to the fast growth in our utility <br /> services area, we need to keep an eye on our projected revenues, expenses and cash <br /> balance to ensure we have the financial resources necessary to adequately serve our <br /> customers with no large unexpected rate changes. Your staff uses these financial models <br /> to project the effects of growth rates and rate changes. <br /> Enclosed are the electric and water income statement projections using the 2004 budget <br /> assumptions. Future critical assumptions and results are as follows. The electric income <br /> statement projections include one with a $750,000 bond and one without. <br /> Electric <br /> a) Projected sales growth at 5% may be conservative, depending upon economy. <br /> b) No power cost increases beyond 2004, have been considered because the dollar <br /> value of power cost increase will be passed on in rate increases so the net effect <br /> is zero. <br /> c) Assumed expense increase shown in column P. Capital expenses are reflected on <br /> line 48. Bonding requirements are shown in lines 39 through 46. <br /> d) Electric rate increase as per section 5.6 of this agenda and as we discussed at our <br /> October 2003 meeting. <br /> e) This study continues to show that we may not need to pass on the entire electric <br /> wholesale rate increase in future years to maintain adequate cash reserves. <br />