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Section 4 <br /> Proposed Rates <br /> Changes to rates are generally based on the overall need for revenues and results of <br /> the cost-of-service analyses. The projected operating results at existing rates as <br /> presented in Section 2 of this report outlines the overall revenue needs of the electric <br /> utility. Section 3 summarizes the cost-of-service results. These factors have been <br /> considered in developing the proposed rates summarized in this section of the report. <br /> Proposed Rates <br /> Revenue Needs <br /> In Section 2, it shows that ERMU's projected annual change in net position declines <br /> from 0.2% of revenues in 2016 to negative 9.2% of revenues in 2020 assuming existing <br /> rates are maintained through the Study Period (during 2011-2015 this averaged 5.7%). <br /> It also shows that ERMU's projected cash reserves at current rates decline from $12.7 <br /> million to negative $5.1 million over the Study Period. The analysis shows ERMU's <br /> reserve levels dropping below the current policy defined level by the end of 2018. In <br /> order to strengthen ERMU's financial position, an overall rate increase of approximately <br /> 2.8% is recommended. It is recommended that this rate adjustment be effective <br /> January 1, 2017. <br /> Rate Design Adjustments <br /> The unbundled analysis summarized in Section 3 shows the per unit cost of service for <br /> each class of customers. The results of this analysis have impacted the <br /> recommendation for specific implementation of the rate adjustment. The cost-of-service <br /> analysis summarized in Section 3 was also taken into account in the development of <br /> recommended rate adjustments. The proposed rates would increase estimated <br /> revenues for the residential and commercial non-demand customers by approximately <br /> ®BG <br /> ORM OCRC COnSULTI(IG.LLC <br /> RI <br />