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��i <br />Elk River <br />Municipal Utilities UTILITIES COMMISSION MEETING <br />TO: <br />FROM: <br />ERMU Commission <br />Melissa Karpinski — Finance Manager <br />MEETING DATE: <br />AGENDA ITEM NUMBER: <br />November 14, 2023 <br />5.03 <br />SUBJECT: <br />2024 Annual Business Plan: Rates and Review, Stakeholder Communication Plan, CIP Budget <br />ACTION REQUESTED: <br />None <br />DISCUSSION: <br />In preparation for budget approval in December, staff continues to work through the 2023 <br />budget process. Based on the wholesale power rate and projected expense increases and <br />capital expenditures, a preliminary balanced budget and rates have been drafted. <br />Attached is the following information for your review. Additional budget details are available <br />upon request. Please contact staff for additional information. <br />1. Electric Department Expense Budget —The 2024 forecast for electric expenses is a 1.5% <br />increase over the current year's budget. Wholesale power costs make up about 70% of <br />the operating budget. Our wholesale power provider, Minnesota Municipal Power <br />Agency, is projecting a 0% rate increase for 2024. Without wholesale power costs, <br />electric expenses are a 5.3% increase over the current year's budget. Most notable <br />increases are pension expense (GASB 68), loss on disposition of capital (for meters due <br />to Advanced Metering Infrastructure [AMI] implementation), CIP related expenses (due <br />to increased spending requirements), and increased transportation expense (increased <br />maintenance labor costs and fuel costs). Additional expenses have also been added as a <br />placeholder for the compensation study and potential for increased labor expense. <br />The budgeted Payment in Lieu of Taxes (PILOT) amount for 2024 is $1.974 million. <br />PILOT is comprised of $1.710 million with the 4% of Elk River City's sales calculation, and <br />$264,000 in donated utilities and labor. <br />Currently there is a 0% rate increase proposed. Once again, we are projecting a Power <br />Cost Adjustment (PCA) passed onto our customer throughout 2024. Currently, we are <br />budgeting for a PCA of 15.8 mils which is an increase from the 2023 budget of 13.75 <br />mils. <br />2. Water Department Expense Budget —The 2024 forecast for water expenses area 5.4% <br />increase over the current year budget. Most notable increases are increased costs for <br />Page 1 of 2 <br />79 <br />