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Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> Elk River Municipal Utilities Commission Troy Adams, P.E.—General Manager <br /> John Dietz—Chair <br /> Al Nadeau—Vice Chair <br /> Daryl Thompson—Trustee <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> November 17, 2015 5.1 <br /> SUBJECT: <br /> 2016 Budget: Rates and Review 1 <br /> BACKGROUND: <br /> In preparation for budget approval in December, staff continues to work through the 2016 budget <br /> process. Based on the preliminary rate increase notifications and projected expense increases and <br /> capital expenditures, a preliminary balanced budget has been drafted. <br /> DISCUSSION: <br /> Electric Department Budget <br /> Wholesale power costs makes up a considerable portion of the required operating revenue, <br /> approximately 72% for 2015, and the wholesale rates set by Great River Energy(GRE)have <br /> an enormous impact on ERMU's rates. The 2016 wholesale power rates have been approved <br /> by the GRE board which results in a projected 2.0% impact to ERMU. This increase in <br /> wholesale power costs are passed through in ERMU's retail rates. The projected system <br /> growth and conservative approach to expenses help to offset this rate increase. As a result,the <br /> proposed ERMU budget reflects a projected 1.25%increase in retail rates. These numbers are <br /> still preliminary and are subject to change by the December Commission meeting. <br /> Notable items in the electric budget: <br /> • An estimate of 1.0% growth in usage, higher growth for data centers. <br /> • NISC software and implementation costs <br /> • Electric service territory acquisition costs <br /> Water Department Budget <br /> After not implementing rate increases in 2010, 2011, or 2012, staff worked to establish a <br /> multi-year plan to bring rates and cash flow projections in line with capital improvement plan <br /> projections. The multi-year plan was intended to feather in the projected larger rate increase <br /> needed for required future capital improvements. Staff had established a three year plan <br /> stating in 2013. The 2015 budget was based on implementing the 3`d year of the three year <br /> re <br /> NEDED D IPage 1 of 2 ATURE <br /> Reliable Public' <br /> Power Provider P O W E R E D T O S ERV E <br /> 120 <br />