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UTILITIES COMMISSION MEETING <br />TO:FROM: <br />ERMU Commission Melissa Karpinski –Finance Manager <br />MEETING DATE: AGENDA ITEM NUMBER: <br />April 12, 2022 4.2 <br />SUBJECT: <br />2021 Year End Reserve Balance <br />ACTION REQUESTED: <br />Designate unrestricted reserve balances above target levels for Electric and Water funds. <br />BACKGROUND: <br />The purpose for reserves to a public utility is to meet bond covenants and provide a financial <br />buffer to mitigate unforeseen or volatile operational costs. In 2010, the commission adopted a <br />financial reserves policy that defined the structure and formula on how financial reserves will <br />be calculated for the Electric Utility and Water Utility funds. This provides transparency to the <br />public on the purpose and levels of utility reserves. Additionally, this policy is consistent with <br />Governance Policy G.4i2 Financial Reserves which was adopted by the commission in 2017. <br /> <br />DISCUSSION: <br />As defined by policy, the year end reserve balances are to be reviewed after the completion of <br />the audit. These balances, if above their target levels, shall be unrestricted with a defaulting <br />designation as working capital. The commission shall then consider optimal use of these <br />unrestricted reserves. <br /> <br />Staff recommends that unrestricted reserve balances above target levels for the Electric Utility <br />fund be designated for electric service territory transfer costs, capital infrastructure costs, and <br />Energy Adjustment Clause (EAC) to be capped at $500,000; and for the Water Utility fund to be <br />designated for future capital infrastructure costs. Please note that part of the unrestricted <br />reserve balances includes unspent bond proceeds for the new field services building. <br /> <br />FINANCIAL IMPACT: <br />None <br /> <br />ATTACHMENTS: <br /> ERMU Policy – A.10 – Financial Reserves Policy <br /> ERMU Policy – G.4i2 – Financial Reserves <br /> Electric Reserves Policy Calculation <br /> Water Reserves Policy Calculation <br /> <br />______________________________________________________________________________ <br />Page 1 of 1 <br />136 <br />