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��i <br />Elk River <br />Municipal Utilities UTILITIES COMMISSION MEETING <br />TO: <br />FROM: <br />ERMU Commission <br />Melissa Karpinski — Finance Manager <br />MEETING DATE: <br />AGENDA ITEM NUMBER: <br />November 8, 2022 <br />5.2 <br />SUBJECT: <br />2023 Annual Business Plan: Rates and Review, Stakeholder Communication Plan <br />ACTION REQUESTED: <br />None <br />DISCUSSION: <br />In preparation for budget approval in December, staff continues to work through the 2023 <br />budget process. Based on the wholesale power rate increase, projected expense increases, and <br />capital expenditures, a preliminary balanced budget and rates have been drafted. <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 2023 forecast fore I ectric expenses area <br />16.0% increase over the current year budget. Wholesale power costs make up over 71% <br />of the operating budget. Our increase from MMPA is about 23% over the 2022 budget <br />(more background information will be discussed at the meeting). Without wholesale <br />power costs, electric expenses are only a 1.6% increase over the current year budget. <br />Most notable increases are purchased power, Payment in Lieu of Taxes (PILOT), <br />depreciation due to the new field services building, and administrative expense due to <br />the administration director position being added back in for a full year. Additional <br />expenses have also been added in preparation of bonding for Advanced Metering <br />Infrastructure in 2023. <br />The budgeted PILOT amount for 2023 is $1.927 million. The PILOT is comprised of <br />$1.687 million with the 4% of Elk River City's sales calculation, and $240,000 in donated <br />utilities and labor. <br />Currently there is a 5% rate increase proposed. There will more than likely also be a <br />Power Cost Adjustment (PCA) passed onto our customers throughout 2023. <br />2. Water Department Expense Budget —The 2023 forecast for water expenses area 5.0% <br />increase over the current year budget. Most notable increases are consulting (to plan <br />for territory expansion), administrative expense due to the administration director <br />position being added back in for a full year, and increased costs for material in general. <br />Page 1 of 2 <br />