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<br />______________________________________________________________________________ <br /> <br />Page 1 of 2 <br /> <br /> <br /> <br /> <br /> <br />UTILITIES COMMISSION MEETING <br /> <br />TO: <br />ERMU Commission <br />FROM: <br />Mark Hanson - General Manager <br />MEETING DATE: <br />December 9, 2025 <br />AGENDA ITEM NUMBER: <br />5.3 <br />SUBJECT: <br />Management Policy – A.10 – Financial Reserves <br />ACTION REQUESTED: <br />None <br /> <br />BACKGROUND: <br />For ERMU there are two utility funds, the Electric Utility and the Water Utility. These funds have <br />separate reserves. Their reserve balances are classified as either restricted for debt service or <br />unrestricted designated reserve. <br /> <br />At the November meeting, the Commission reviewed the attached Management Policy – A.10 – <br />Financial Reserves. The Commission directed staff to revise the policy to include the following <br />reserve layers and target levels: <br /> <br />Restricted Layers: Target Level: <br />Debt Service Specified by bond covenants <br />Trunk/Capacity (Water Only) Water Access Charges and Trunk Funds received will be <br />restricted to Trunk/Capacity capital projects <br /> <br />Unrestricted Designated Layers: Target Level: <br />Annual Debt Service Reserve Current year's principal and interest payment due on <br />outstanding debt <br />Operating Reserve Two months of budgeted operating expenses, including <br />purchased power for electric <br />Capital Reserve Average of the next five-year capital plan <br />Catastrophic Reserve Estimated replacement cost of a substation (electric <br />reserves) or water treatment plant (water reserves) <br /> <br />DISCUSSION: <br />The attached policy includes the requested revisions as outlined above. Staff also included two <br />additional revisions not discussed at the November commission meeting. The first is a <br />statement clarifying that the Financial Reserve policy is intended to serve as a guide. The <br />144