5.3 ERMUSR 12-11-2018 - Laserfiche WebLink

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Elk River k Municipal Utilities UTILITIES COMMISSION MEETING TO: FROM: ERMU Commission Troy Adams, P.E.—General Manager MEETING DATE: AGENDA ITEM NUMBER: December 11, 2018 5.3 SUBJECT: 2019 Annual Business Plan (Budget, Schedule of Rates & Fees) ACTION REQUESTED: Adopt the 2019 Annual Business Plan BACKGROUND: In November,the preliminary 2019 Annual Business Plan was presented to the commission. There have been several changes due to finalizing of projects and expenses, and the most significant change is implementation of electric rate reductions at the direction of the commission. DISCUSSION: Electric Budget and Rates There are multiple reasons that supported the commission's consensus to implement electric rate reductions. The top three are as follows: First, in October 2008 ERMU received a ten-year notice for the termination of our wholesale power contract. After five years of research and consideration,the ERMU commission approved joining the Minnesota Municipal Power Agency (MMPA). In October 2018, Great River Energy(GRE) stopped providing power to ERMU and ERMU began receiving power from MMPA. And 2019 will be the first complete budget year where ERMU is receiving power from MMPA. Second, starting in 2015 Connexus Energy has been transferring electric service territory within the corporate boundaries of the City of Elk River to ERMU as part of a negotiated agreement. In 2019, ERMU will be receiving the transfer to the remaining electric service territory areas as identified in the 2015 transfer agreement. In the end,the electric service territory transfer agreement will have resulted in an approximate 20% growth in customers for ERMU.And third, ERMU has recognized significate efficiencies as a result of the 2018 change to multi billing cycles and administratively have been able to reduce staff through attrition lowering fixed costs. The change from GRE to MMPA,the growth in customer base and service territory, and the efficiencies gained through the change to multi billing cycles have put ERMU in a unique and unprecedented situation to lower electric rates. The reset of rates affect consumers differently based on usage. A residential customer with typical electric usage will experience a 5%reduction in electric costs. For commercial customers,the service size and usage can vary drastically which had a varying effect on the rate reset impact. Commercial customers should experience a rate reduction between 5%and 4%. Included new this year in the Schedule of Rates & Fees section of the Annual Business Plan are a Large Demand Electric Service Rate, a Residential Clean Energy Choice Program Rate, and Page 1 of 3 81