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<br />- 2 - <br /> <br />Section 2 <br />Projected Operating Results <br />Existing Rates <br /> <br />The rates charged for water 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 water customers. This is necessary to ensure the long-term financial health of the <br />ERMU water utility. The cost of providing utility service consists of normal operating <br />expenses such as production, pumping, distribution, customer and A&G functions, <br />system depreciation expenses, capital improvements and other non-operating expenses. <br />An analysis of the operating results for the ERMU water utility during the 2020-2024 Study <br />Period has been performed assuming the current retail rates and charges remain in effect <br />through the Study Period. This analysis has been done to determine the overall need, if <br />any, for additional revenue through rates to meet projected revenue requirements. The <br />analyses and assumptions utilized in these projections are explained below. <br />Estimated Revenues – Existing Rates <br />Operating Revenues <br />ERMU sells water to residential, commercial and industrial customers. Total sales to <br />ERMU retail customers for the Study Period are based on ERMU’s actual 2024, YTD <br />2025 water sales and discussions with ERMU staff. For this analysis, sales are estimated <br />to remain flat during the Study Period. <br />Exhibit 2-A is a summarized listing of ERMU’s historical and projected water operating <br />results at existing rates. The historical and projected revenues from retail sales of water <br />94