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3.0 BUSINESS ACTION <br />2.1 Receive Final Electric and Water Cost of Service and Rate Design Studies <br />Commissioner Stewart had questions regarding the classification of specific line items within <br />the final Cost of Service and Rate Design Studies prepared by the ERMU's consultant, Dave <br />Berg. <br />Commissioner Stewart stated that the amortization of the Minnesota Municipal Power Agency <br />(MMPA) membership buy -in cost, valued at approximately $668,000 annually, was classified <br />under Plant in Service but suggested it would be more appropriately categorized under Power <br />Supply. It was noted that this reclassification, while not affecting the overall 2% revenue goal, <br />could impact how costs are allocated across different customer classes. <br />A second point concerned the description of Other Operating Expense, which referenced the <br />local power peaking plant. Since the plant is no longer operational for power generation, its <br />associated costs, including labor for caretaking, may need to be re -categorized from Power <br />Generation to a more appropriate account, such as Distribution or General Campus <br />Maintenance. <br />Staff stated they will work with the consultant to review the classification of the MMPA <br />amortization and the former peaking plant expenses. An updated report will be brought back <br />to the Commission in January for final review and filing. No formal action was taken to receive <br />the report at the time. <br />3.1 Verizon Water Tower Lease Agreements <br />Commissioner Zerwas formally recused himself from discussion and voting, due to a <br />professional relationship with Verizon. <br />Having received guidance from the Commission in November 2025 to not proceed with <br />any changes, staff provided an update on the latest unsolicited offers from Verizon to <br />amend its water tower lease agreements. Verizon is requesting reductions ranging from <br />26.5% to 32.8% across different towers, citing financial challenges and its analysis of <br />redundant tower coverage, the potential consequence of which being removal of the <br />equipment and a loss of revenue for ERMU. <br />Staff noted that Verizon's actions, such as proposed longer lease durations and recently <br />upgrading equipment on a tower, seem to contradict their claim that the towers are less <br />valuable. <br />Mr. Hanson corrected his memo which was published as stating, "Further reductions <br />beyond 5% would require reducing the annual payments as needed to achieve the desired <br />goal," as it should actually state 10% as that threshold. <br />Elk River Municipal Utilities Commission Meeting Minutes <br />December 18, 2025 <br />Page 2 <br />