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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 12, 2024 <br />5.02 <br />SUBJECT: <br />2025 Annual Business Plan: Rates and Review, Stakeholder Communication <br />ACTION REQUESTED: <br />None <br />DISCUSSION: <br />In preparation for budget approval in December, staff continue to work through the budget <br />process. Based on the wholesale power rate and projected expense increases and capital <br />expenditures, a preliminary balanced budget and rates have been drafted. <br />Attached is the following information for your review. Additional budget details are available <br />upon request. Please contact staff for additional information. <br />1. Electric Department Expense Budget — The 2025 forecast for electric expenses is a 2.1% <br />decrease over the current year budget. Wholesale power costs make up about 67% of <br />the operating budget. Our wholesale power provider, MMPA, is projecting a 0% rate <br />increase for 2025. Without wholesale power costs, electric expenses are an 8.2% <br />increase over the current year's budget. Most notable increases are depreciation, <br />material/labor for maintenance of substation equipment and maintenance of <br />underground primary, contractors for tree trimming, and for increased labor and benefit <br />expenses. <br />The budgeted Payment in Lieu of Taxes (PILOT) amount for 2025 is $1.903 million. <br />PILOT is comprised of $1.638 million with the 4% of Elk River City's sales calculation, and <br />$265k in donated utilities and labor. <br />Currently there is a 0% rate increase proposed. There will more than likely also be a <br />Power Cost Adjustment (PCA) passed onto our customers throughout 2025. Currently <br />we are budgeting for a PCA of 15.9 mils which is a very slight increase from the 2024 <br />budget of 15.8 mils. <br />2. Water Department Expense Budget —The 2025 forecast for water expenses is a 9.4% <br />increase over the current year's budget. Most notable increases are increased costs for <br />depreciation, material/labor for maintenance of wells and structures, and for increased <br />labor and benefit expenses. <br />Page 1 of 2 <br />