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Section 2 <br /> Depreciation <br /> ERMU has annual depreciation costs based on its system investments. Depreciation <br /> during the Study Period is based on budgeted ERMU amounts and future capital <br /> improvements. Depreciation is a funded non-cash expense that generates monies <br /> available for annual capital improvements and reserves. <br /> Non-operating Revenue (Expenses) <br /> ERMU's non-operating revenue is primarily associated with investment income and <br /> miscellaneous revenues. Non-operating expenses are related to interest expense for <br /> existing debt and the planned 2018 bonding. There is also a one-time non-operating <br /> revenue in 2016 related to the sale of the security system. <br /> City Transfer <br /> ERMU makes an annual operational transfer to the City's general fund. The transfer is <br /> assumed to be 4% of electric retail sales revenue, not including revenue from sales in <br /> other cities and the acquisition areas that are part of the 2015 Territory Transfer <br /> Agreement with Connexus Energy. <br /> Capital Improvements <br /> ERMU makes annual normal capital investments in its electric system. Annual electric <br /> capital improvements for the Study Period, as budgeted by ERMU, are shown in Table 2- <br /> 2 below. <br /> Table 2-2 <br /> Capital Improvements (1) <br /> Capital Item 2016 2017 2018 2019 2020 <br /> Capital Fee Projects $13,756,468 $2,531,100 $11,901,122 $3,961,144 $3,731,167 <br /> (1) Includes territory transfer costs associated with Areas 1 and 2. <br /> - 4 - <br /> Al <br />