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~/ <br />Elk River -; <br />Municipal Utilities <br />13069 Orono Parkway • P.O. Box 430 <br />Elk River, MN 55330-0430 <br />November 30, 2009 <br />To: Elk River Municipal Utilities Commission <br />John Dietz <br />Jerry Gumphrey <br />Daryl Thompson <br />From: Troy Adams <br />Subject: Industry Rate and Finance Challenges <br />Phone: 763.441.2020 <br />Fax: 763.441.8099 <br />At the October 13`", 2009 commission meeting, the commission directed staff to comment on an <br />article published in the September 2009 Public Power magazine. The article, "7 Rate and <br />Finance Challenges" v~~ritten by Dave Berg, P.E. of R.W. Beck, is attached for reference. <br />In the article, the following issues were discussed: <br />1. Special rate programs, including conservation and demand response <br />2. Net metering and backup power tariffs <br />3. Renewable portfolio standards and carbon legislation <br />4. Large customer/local employer incentives <br />5. Municipal government cash requirements <br />6. Infrastructure needs: debt vs cash flow funding <br />7. Overall rate strategy <br />These issues are truly relevant enough to be stand alone topics of discussion. The following is a <br />brief response to address how these issues relate to Elk River Municipal Utilities. The response <br />is as it pertains to the electric utility only, not the water. This article was written specifically <br />about municipal electric utilities. However, many of the issues relevant to municipal electric <br />utilities are also relevant to municipal water utilities. <br />1. Special Rate Pro rg_ ams <br />The rate structures that Elk River Municipal Utilities (ERMU) utilizes have been in place for <br />years. The residential and small commercial (non-demand) customer rates are based on energy <br />(kWh) use. The large commercial/industrial (demand) customer rate is based on energy (kWh) <br />and demand (kW). There are also well established conservation improvement programs with <br />many rebates and incentive programs. These are very common rate structures and programs. <br />They have worked well for the ERMU. However, there isn't any reason why the ERMU <br />shouldn't be continually assessing rate structures and new programs. One of the benefits of a <br />municipal utility, as opposed to a coop or investor owned utility, is the local governing body with <br />