5.2 ERMUSR 11-13-2018 - Laserfiche WebLink

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Elk River Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: ERMU Commission Theresa Slominski — Finance & Office Manager MEETING DATE: AGENDA ITEM NUMBER: November 13, 2018 5.2 SUBJECT: 2019 Business Plan/Budget: Rates and Review ACTION REQUESTED: No action required at this time. BACKGROUND: In preparation for budget approval in December, staff continues to work through the 2019 budget process. Based on the wholesale rate increase and projected expense increases and capital expenditures, a preliminary balanced budget and rates have been drafted. Electric Department Budget Overall, the electric department expenses increased approximately 3%. Historically, wholesale power costs have been within an expected range of 70% - 75% of operating revenue and this is approximately 65% for 2019 with our new purchased power provider, MMPA's, wholesale rates. As a note, we are participating in MMPA's Clean Energy Choice program in 2019, which will have an impact of approximately $700. This proposed budget represents a 0% increase in ERMU rates, and still has a sizable contribution to reserves. The 2019 retail rates will be proposed for final approval with the 2019 budget in December. Water Department Budget Overall, the water department expenses decreased 2.5%, largely due to a change in depreciation calculations for a misclassified asset, and a reduction in well maintenance projections. As a note, we are participating in MMPA's Clean Energy Choice program in 2019, which will have an impact of approximately $1,100. Consistent with prior years' planning for the short and long term water capital project projections, the 2019 water budget reflects an overall 1.8% increase in revenue through water sales, with a reduction in reserves. The allocation of the increase will be collected through an increase in customer charge and 1't tier water use rates. The result for the proposed rate increase for a typical residential water customer would be 1.72%. This would result in an approximate increase of $5 annual for 2019 compared to 2018. The 2019 retail rates will be proposed for final approval with the 2019 budget in December. Page 1 of 2 65