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Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> ERMU Commission Theresa Slominski—Administrations Director <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> October 8, 2019 5.2 <br /> SUBJECT: <br /> 2020 Annual Business Plan: Water and Electric Expenses <br /> ACTION REQUESTED: <br /> None. <br /> DISCUSSION: <br /> In preparation for submittal in November, staff continues to work through the 2020 budget <br /> process.The first draft of the expense portion of the 2020 budget has been completed for <br /> commission review. Items are subject to change as the complete 2020 budget is assembled and <br /> the finalized wholesale power costs and revenues are reflected. Revenues and rates, and <br /> wholesale power costs for 2020 will be presented in November. <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. Electric Department Expense Budget—The 2020 forecast for electric expenses are a <br /> 7.85% increase over the current year budget. Wholesale power costs make up between <br /> 70-75% of the operating budget and will be provided in next month's budget with the <br /> revenue projections. Most notable increases are for contracted tree trimming, and <br /> administrative expense increases for the website redesign, IT projects, and staff related <br /> expenses due to the reorganization.These preliminary expense numbers are <br /> conservatively high and will likely be adjusted downward during the next phase of <br /> budgeting when the 2020 rates are designed. <br /> The 2019 budgeted purchased power cost amount was$25,724,105.The projected <br /> wholesale power cost increase is 1%, but may vary slightly when the rate formula is <br /> applied to ERMU's load profile and anticipated growth. Preliminarily applying the 1% <br /> projected wholesale power cost increase resulted in a preliminary amount of <br /> $25,681,347. When factoring the preliminary wholesale power cost forecast and the <br /> preliminary electric department expense budget, the overall preliminary electric <br /> department expense budget increase is 3.2%. The 2019 overall electric department <br /> expense budget increase was 2.67%. And in 2019, ERMU was able to lower electric rates <br /> by 5% because of growth, the switch to a new wholesale power provider, and <br /> efficiencies gained through implementation of multi-billing cycles. So, the preliminary <br /> expense increase does not necessarily directly correlate to rate increase. <br /> Page 1 of 2 <br /> 250 <br />