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Projected Operating Results Existing Rates <br />utilized in this analysis will be implemented by ERMU effective for 2020. The 2020 rate <br />adjustment represented an overall 1.7% increase in retail water rates. <br />ERMU also receives other miscellaneous operating revenue from other normal operating <br />procedures. These other operating revenues include net revenues from connection <br />maintenance and penalties. Charges for services combined with other operating <br />revenues results in ERMU <br />Revenue Requirements <br />Operating expenses for the water utility are shown in Exhibit 2-A. A more detailed listing <br />of operating expenses is included in Exhibit 3-A following section 3 of this report. The <br />operating expenses are associated with production, pumping, distribution, customer- <br />related, administrative and general expenses. Projected operating expenses have been <br />based on ERMU projections and are assumed to increase an average of 3% per year. <br />ERMU has annual depreciation costs associated with water system investments. <br />Depreciation during the Study Period is based on budgeted ERMU amounts and future <br />capital improvements. Depreciation is a funded non-cash expense that generates monies <br />available for annual capital improvements, debt principal payments and reserves. <br />ERMU-operating income and expenses are primarily associated with investment <br />income, interest payments on outstanding debt and miscellaneous revenue. ERMU also <br />has income from developer and connection fees. <br /> <br />- 3 - <br />