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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 outlinesthe 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 />In Section 2, it shows that ERMU <br />from 2.8% of revenues in 2020to negative5.2% of revenues in 2024assuming existing <br />rates are maintained through the Study Period(during 2015-2019this averaged 6.4%). <br />It also shows that ERMUprojected unrestricted cash reserves at current rates decline <br />from $14.9million to $2.6million over the Study Period. The <br />reserve levels dropping below the current policy defined level by the end of 2023. <br />As a preliminary indication of a potential rate increase approach,this draftreport shows <br />the impact on the electric financial results with 1.5% overallrateincreases in each of the <br />years from 2021-2024while still assuming no increase in overall sales. Specific rate <br />recommendations by class have not been developedyet. Exhibit 4-A shows the <br />existing rates with current blanks for proposed rates. <br />173 <br />