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UTILITIES COMMISSION MEETING <br />TO:FROM: <br />ERMU Commission Theresa Slominski - GeneralManager <br />MEETING DATE: AGENDA ITEM NUMBER: <br />October 11, 20224.1 <br />SUBJECT: <br />Margins Policy <br />ACTION REQUESTED: <br />Approve proposed ERMU Commission Policy G.5aMargins. <br />BACKGROUND: <br />In 2017, with the increase to a five-member Commission from a three-member Commission, it <br />was determined to be beneficial to develop and update core governance policy to serve as a <br />guide for the expanded Commission. This process was started in 2016. Previously the policy <br />manual was a combination of management and governance policies, as well as procedures, <br />forms, and specifications. One of the goals of this project was to update the policy documents <br />the Commission is ultimately responsible for and separate out the procedure, forms, and <br />specifications that should fall under the responsibility of management. A consultant, <br />Collaboration Unlimited, was utilized for Phase 1 of this project, to develop the core <br />governance policies. In February 2017, the core governance policies were developed as G.1 – <br />G.3 items. In 2017-2019, additional work was done to identify and delegate the appropriate <br />items to management as policy, as G.4 items. The Table of Contents of these policies is in your <br />Commission Policy Manual and is attached for reference. <br /> <br />DISCUSSION: <br /> <br />Section 5 of the Commission Policies is Goals and Results, G.5, and has two intended policies to <br />be developed. Those two policies are G.5a Margins and G.5b Competitive Rates. The purpose of <br />these two policies is to provide commission and staff parameters for determining appropriate <br />margins and rates that are reasonable and justifiable to our customers, can take the emotion <br />out of decision making, and provide consistency year to year. <br /> <br />The first of these policies, G.5a Margins, is presented this month. Our Electric Revenue Bond <br />covenants determine a certain margin for the organization at 110% to 125% of bond <br />convenance. Staff proposes that we use the conservative margin of 125% of bond convenance <br />for electric. If bond convenance is not required, then a 1.5% revenue minimum to a 2.5% <br />revenue maximum calculation be used to determine the margin. <br /> <br />______________________________________________________________________________ <br />Page 1 of 2 <br />39 <br /> <br />