ERMUSR 11-12-2025 - Laserfiche WebLink

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______________________________________________________________________________ Page 1 of 2 UTILITIES COMMISSION MEETING TO: ERMU Commission FROM: Mark Hanson - General Manager MEETING DATE: November 12, 2025 AGENDA ITEM NUMBER: 5.05 SUBJECT: ERMU Management Policy – A.10 – Financial Reserves ACTION REQUESTED: None BACKGROUND: For ERMU there are two utility funds, the Electric Utility and the Water Utility. These funds have separate reserves. Their reserve balances are classified as either restricted for debt service or unrestricted designated reserve. At the October 27, 2025, meeting of the Financial Reserves & Investments Committee (FR&IC), the Committee reviewed the attached Management Policy – A.10 – Financial Reserves. After comparing ERMU’s financial reserve policy with those of several similar municipal utilities (attached), the Committee recommended several updates to ERMU’s policy. These updates are presented below. DISCUSSION: ERMU’s current financial reserves policy for both electric and water defines two types of reserve layers and associated target levels: • Restricted for Debt Service: This layer is established to maintain compliance with bond covenants. The target level for this layer is set at the level specified by bond covenants. • Unrestricted Designated Reserve: This layer is established to address the short-term financial variability inherent in operating a municipal utility. o For electric, the target level is set at the sum of six months operating expenditures, less depreciation and less purchase power costs, plus the sum of next year’s total principal and interest payments, plus one month budgeted average purchase power cost. o For water, the target level is set at the sum of six months operating expenditures less depreciation, plus the sum of next year’s total principal and interest payments. 89