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<br /> <br />Section 2 <br />Projected Operating Results <br />Existing Rates <br />The rates charged for electric service by ERMU, combined with other operating and non- <br />operating revenues, must be sufficient to meet the cost of providing services to ERMU’s <br />retail customers. This is necessary in order to ensure the long-term financial health of <br />ERMU. The cost of providing electric service consists of normal operating expenses such <br />as production and purchased power, transmission and distribution functions, customer <br />and administrative functions, system depreciation expenses, capital improvements, <br />payments on outstanding debt and contributions to the City of Elk River and other non- <br />operating expenses. <br />An analysis of the operating results for ERMU during the 2025-2029 Study Period has <br />been performed assuming the current retail rates and charges remain in effect for the <br />electric utility through the Study Period. This analysis has been done to determine the <br />overall need, if any, for additional revenue through rates to meet projected revenue <br />requirements. The analyses and assumptions utilized in these projections are explained <br />below. <br />Estimated Revenues – Existing Rates <br />Retail Sales <br />ERMU sells retail power and energy to residential, commercial and industrial customers. <br />ERMU has recently been experiencing growth in total retail sales to its electric customers, <br />primarily associated with the acquisition of additional electric service territory. During the <br />Study Period, ERMU does not anticipate acquiring any additional new service territory <br />areas. Based on a conservative assumption regarding sales growth, limited growth in <br />residential sales during the Study Period (1% per year) beyond the 2025 actual sales has <br />been included in this analysis. No growth in non-residential sales has been assumed.