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<br />- 1 - <br /> <br />Section 4 <br />Proposed Rates <br /> <br />Changes to rates are generally based on the overall need for revenues and results of the <br />cost-of-service analyses. The projected operating results at existing rates as presented <br />in Section 2 of this report outline the overall revenue needs of the water utility. Section 3 <br />summarizes the cost-of-service results for the water utility. These factors have been <br />considered in developing the proposed rates summarized in this section of the report. <br />Proposed Rates <br />Revenue Needs <br />In Section 2, it shows that ERMU’s projected annual change in water net position, <br />assuming continuation of the existing retail rates drops from 86% of the reserve goal to <br />52% of the reserve goal by 2029. ERMU’s projected cash reserves decline from $10.5 <br />million to $6.8 million by the end of the Study Period. This is a decrease in reserves of <br />35%. <br />Recommended Rates <br />Exhibit 4-A shows the existing and recommended rates for water for each year from 2026- <br />2029. <br />Based on discussions with ERMU management, a goal was set to increase overall <br />reserve levels by $1.3 million dollars at the end of the Study Period as compared to the <br />projections at current rates. To meet this goal, annual rate increases of 4% each year <br />are recommended through 2029. <br />