05-12-2020 ERMU MIN - Laserfiche WebLink

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recommend an ongoing monitoring of the water department's cash reserves to ensure they continue to meet commission policy. Mr. Adams advised that the water department has large capital projects scheduled outside of the rate study timeframe that should also be taken into consideration when looking at the numbers. There was discussion on the philosophy of doing steady rate increases over the next five years versus doing one large one at the end of the five-year study period. Mr. Berg also touched on the cost of service analysis for ERMU's water access charge (WAC) and stated that based on the results he recommended no increase. There was discussion on ERMU's WAC and the city's Sewer Access Charge (SAC) fee. For the Electric Cost of Service and Rate Design Study draft Mr. Berg noted that the preliminary report presented contains financials assuming a 1.5% rate increase each year from 2021-2024. He stated that the final rate recommendations by class will be developed following discussion of these results with the commission. Next, Mr. Berg walked the commission through the high points of the report which included: Projected Operating Results with Existing Rates, Cost of Service, and Proposed Rates. For the Projected Operating Results with Existing Rates in the electric report, Mr. Berg explained that the study showed a need for additional revenue over the five-year study period, noting that with current rates ERMU could expect a nearly $2,000,000 deficit by 2024, ending up with just 30% of its electric reserves goal. For the Cost of Service Section in the electric report Mr. Berg stated that based on the preliminary study results, he recommended a 1.5% electric rate increase each year from 2021 to 2024. Chair Dietz asked how ERMU's commercial demand and industrial electric rates compared to competitors. Mr. Sagstetter responded that ERMU is within 3% of competitor rates. After the discussion, the commission instructed Mr. Berg to come back with projections based on a 1.5% increase. Mr. Adams reiterated this is a conservative estimate that uses flat electric and water revenues across five years, adding it is possible that ERMU could be in a better position should revenues increase. Commissioner Stewart had a few questions on the study's supporting documents. For the electric study exhibit 2-A she questioned why the bond issuance costs is shown as a negative number in 2016, and then a positive number in 2020. Ms. Slominski said she would look into the reason for this. Commissioner Stewart also inquired about the specifics of the amortization numbers shown on exhibit 3-A of the electric study. Staff stated they could make breakdown more specific in the final report. The commission requested that Mr. Berg attend the June commission meeting to present the final reports. Elk River Municipal Utilities Commission Meeting Minutes May 12, 2020 Page 5