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��i <br />Elk River <br />Municipal Utilities UTILITIES COMMISSION MEETING <br />TO: <br />FROM: <br />ERMU Commission <br />Theresa Slominski - General Manager <br />MEETING DATE: <br />AGENDA ITEM NUMBER: <br />December 13, 2022 <br />4.4 <br />SUBJECT: <br />Margins Policy <br />ACTION REQUESTED: <br />Approve revised ERMU Commission Policy G.5a Margins. <br />BACKGROUND: <br />As presented in October, Section 5 of the Commission Policies is Goals and Results, G.5, and has <br />two intended policies, G.5a Margins and G.5b Competitive Rates. The purpose of these two <br />policies is to provide Commission and staff parameters for determining appropriate margins <br />and rates that are reasonable and justifiable to our customers, while taking the emotion out of <br />decision making and provide consistency year to year. The first of these policies, G.5a Margins, <br />was presented and approved in October. In preparation of 2023's budget, and the application <br />of the policy, there is a revision proposed. <br />DISCUSSION: <br />Staff had proposed that the policy exclude depreciation for the calculation of the margins, <br />however, staff feels that the long-term needs for reserves would not be met under that <br />calculation. Including depreciation results in higher reserves contributions year over year and <br />better positions ERMU for success. It is also proposed to change the margin percent range to be <br />1.5%-3.5%. <br />The full policy with revisions in red is attached for reference. <br />ATTACHMENTS: <br />• Proposed ERMU Policy -G.5a Margins revision <br />Page 1 of 1 <br />54 <br />