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Elk River <br /> Municipal Utilities UTILITIES COMMISSION MEETING <br /> TO: FROM: <br /> ERMU Commission Theresa Slominski—Finance & Office Manager <br /> MEETING DATE: AGENDA ITEM NUMBER: <br /> October 9, 2018 5.2 <br /> SUBJECT: <br /> 2019 Business Plan/Budget: Water and Electric Expenses; and Conservation Improvement <br /> Program <br /> ACTION REQUESTED: <br /> None <br /> BACKGROUND: <br /> In preparation for submittal in November, staff continues to work through the 2019 budget <br /> process. The first cut of the expense portion of the 2019 budget has been completed for <br /> commission review, as well as the Conservation Improvement Program (CIP)Budget. Items are <br /> subject to change as the complete 2019 budget is assembled and the finalized wholesale power <br /> costs and revenues are reflected. Revenues and rates for 2019 will be presented in November. <br /> DISCUSSION: <br /> Attached is the following information for your review. Additional budget detail is available upon <br /> request. Please contact staff for additional information. <br /> 1. Electric Department Expense Budget—The 2019 forecast for electric expenses are a <br /> 2.77% increase over the current year budget. Wholesale power costs make up between <br /> 70-75%of the operating budget and are estimated here with MMPA's rate structure. As a <br /> point of reference, it is a decrease in spite of an increase in kwh growth of 6%over the <br /> prior year. Depreciation and Amortization are increased largely due to the amortization of <br /> MMPA's intangible asset. Most notable increases are on the administrative side for <br /> increases in health insurance, benefits, and some IT projects. <br /> The budgeted Payment in Lieu of Taxes (PILOT) amount for 2019 is approximately$1.4 <br /> million. The PILOT is comprised of$1.19 million with the 4% of Elk River City's sales <br /> calculation, and $215,000 in donated utilities and labor. <br /> Currently, we are estimating a 0%rate increase. Growth through our acquisition is <br /> helping to keep the rates down(as noted above it is approximately a 6% increase over <br /> prior year), as well as MMPA as our new power provider. We will have more <br /> information with the presentation of the final revenue projections in November. <br /> 2. Water Department Expense Budget—The 2019 forecast for water expenses are less than <br /> 1% increase over the current year budget. Most notable increases are on the <br /> Page 1 of 2 <br /> 53 <br />