5.3. ERMUSR 10-09-2012 (5l
W
Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
Elk River Municipal Utilities Commission Troy Adams, P.E. — General Manager
John Dietz—Chair
Daryl Thompson— Vice Chair
Al Nadeau—Trustee
MEETING DATE: AGENDA ITEM NUMBER:
October 9, 2012 5.3
SUBJECT:
2013 Water and Electric Expense Budgets
BACKGROUND:
In preparation for submittal in November, Staff continues to work through the 2013 budget
process. The first cut of the expense portion of the 2013 budget has been completed for
commission review. The expense budget will change as the complete 2013 budget is assembled
and the finalized wholesale power costs are reflected.
DISCUSSION:
Attached is the following information for your review. Additional budget detail is available upon
request. Please contact staff for additional information.
1. Water Department Expense Budget—The water rate analysis conducted in spring of 2010
established a cash flow plan that results in the rates remaining unchanged through 2012.
The 2013 forecast for water sales and connections are similar to 2012. There is also the
continued revenue from the recent water tower antenna space leases with the potential for
additional lease revenue. As budgeted without any water rate increase, the water
department would see a $131,628 or 5.5% loss. The rate design would be done to cover
this amount plus a small margin.
2. Electric Department Expense Budget—Wholesale power costs make up between 70-75%
of the operating budget. Ultimately, the wholesale rates set by Great River Energy (GRE)
have an enormous impact on ERMU's rates. Therefore, ERMU's most effective way to
lessen the electric rate increases to our customers would be through reducing our
wholesale power costs. Cutting services, maintenance, labor, or capital purchases do
contribute to lowering electric rates; however these actions also have an impact to
operations and must be considered with good business practices. GRE has not finalized
their 2013 wholesale power rates. Through discussions, GRE looks to have a 4%
increase to their revenue. The final GRE board approval of wholesale power rates
typically comes by early December. Typically their percent revenue increase is less than
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the rate impact experienced by ERMU. For preliminary budgeting, the attached expense
budget reflects a 5% increase in wholesale power costs.
This draft of the electric expense budget reflects the estimated 5% in wholesale power
cost increase, update ERMU customer count, and updated ERMU power sales. Similar to
the water expense budget, this draft does not reflect any increase in ERMU electric rates.
The rate design will be completed for the November meeting. Without any electric rate
increase, the electric department would see a $1,316,385 or 4.5% loss. The rate design
would be done to cover this amount plus a small margin. In the recent past we have
designed for a 1.5% margin.
The following are recommended discussion point for the Commission.
1. Wages—The water and electric budgets reflect a 3% wage increase as typically done for
preliminary budgeting. The utilities practice has been to have the Wage and Benefits
Committee review wages and benefits then make a recommendation to the Commission
for consideration. The Commission typically will give the Committee direction for items
to survey or consider. Possible consideration could include review of a COLA formula
based pay increase system, third party benchmarking of wages and/or benefits, analysis
of employee turnover and related expenses.
2. Rates and Margins —Does the Commission have and comments on direction or have any
concerns prior to the development of the 2013 rates? Because the financial reserve
targets have been met, what is the Commission's comfort level with margins?
3. Staff Additions— In August staff proposed the consideration of the addition of 3 staff
positions: an executive assistant, a conservation and key accounts assistant, and a water
operator. Staff has reviewed the proposed positions, prioritized them by greatest positive
impact and value, required skill sets, and position duties.
The highest priority would be the executive assistant. This position would provide higher
level administrative support for the managers, oversee the preparation of the commission
packets and marketing materials, oversee social media communications, and provide
secretarial duties for the Commission board meetings. Through these duties, this position
would free up customer service resources and managerial resources. This position would
be a non-exempt, salary position.
The second highest priority would be the conservation and key accounts assistant. This
position would provide technical and customer service assistant. Job duties from this
position would include support for conservation programs, key accounts, well head
protection program support, irrigation system inspections, and energy audits. Through
these duties, this position would significantly free up water operator resource allowing
the licensed water operators to focus on water system maintenance. This position would
also free up the Conservation and Key Account Manager to focus on higher level
department issues.
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The lowest in priority would be hiring an additional water operator. With a recently
vacated water operator position, management has advertised for a lead water operator to
replace the water operator. The hiring of an executive assistant would free up the current
water operators who allocate a significant amount of hours to administration work. And,
the hiring of a conservation and key accounts assistant would free up a significant amount
of water operator time. Because of these, the current need for an additional water
operator is minimal.
Management recommends the addition of the executive assistant and the conservation
and key account assistant in 2013. In August, the Commission question whether or not
these two jobs could be combined. After further analysis of the needs, these two
positions have vastly different skill set requirements. Hiring one to cover both would
compromise the ability to effectively accomplish the required duties. In addition, the
work load is sufficient to justify both today. Included in the budget is the mid-year hiring
of the two recommended position. Management would strongly support hiring one or
both at the beginning of 2013.
ATTACHMENTS:
• Proposed 2013 Electric Expense Budget
• Proposed 2013 Water Expense Budget
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2013
ESTIMATED BUDGET
WITH HISTORY
ACCOUNT M DESCRIPTION 2000 2010 2011 2012 2013
ACTUAL ACTUAL ACTUAL BUDGET BUDGET
TOTAL RESIDENTIAL 8,667,659 9,431,139 9,686920 10,111,317
ELECTRIC TOTAL NON-DEMAND 2,222,276 2,552,587 2,736,098 2,641,997
TOTAL DEMAND 11,493,445 12,771,762 14,157,857 15,332,465
TOTAL SECURITYLTS 47,780 48,405 49,091 49,800
TOTAL PUBLIC ST/HWY LIGHTING 245,242 253,067 253,976 255,000 268,038
TOTAL SALES 22,576,402 25,056,960 26885,942 28,390,579 268,038
PROJECTED SALES WITH ERMU RATE INCREASE O - 28,243,790
TOTAL SALES WITH RATE INCREASE 22,576,402 25,056,960 26,885,942 28,390,579 28,511,828
TOTAL OTHER 1,847,785 1,928,279 1,885,738 1,075,646 748,514
TOTAL REVENUE 24,424,187 26,985,239 28,771,681 29,466,225 29,260,342
ACCOUNT# DESCRIPTION 2009 2010 2011 2012 2013
ACTUAL ACTUAL ACTUAL BUDGET BUDGET
OPERATING/MTCE
PURCHASED POWER 16,161,444 18,373,386 19,604,951 20,712,143 $ 21,747,750
TOTAL 17,022,848 19,293,023 20,490,532 21,670,818 22,680,833
DISTRIBUTION
TOTAL 200,763 182,431 194,327 184,000 203,925
MAINTENANCE
TOTAL 693,240 609,971 707,173 719,000 734,050
OTHER EXPENSE
TOTAL 3,663,983 3,628,510 3,706,936 3,902,040 3,977,612
CUSTOMER ACCOUNTS EXP
TOTAL 368,975 258,288 167,685 223,000 283,000
ADMINISTRATIVE/GENERAL EXPENSE
TOTAL 1,904,884 2,140,949 2,183,021 2,220,670 2,636,027
Proposed staff additions 61.080
TOTAL EXPENSE 23,854,693 26,113,172 27,449,674 28,919,528 30,576,727
2009 2010 2011 2012 2013
ACTUAL ACTUAL ACTUAL BUDGET BUDGET
TOTAL REVENUES 24,424,187 26,985,239 28,771,681 29,466,225 29,260,342
TOTAL EXPENSES 23,854,693 26,113,172 27,449,674 28,919,528 30,576,727
PROFIT(LOSS) 569,494 872,067 1,322,007 546,697 (1,316,385)
BUDGET COMPARISON 1
2013
ESTIMATED BUDGET
ITH HISTORY
ACCOUNT# DESCRIPTION 2009 2010 2011 2012 2013
ACTUAL ACTUAL ACTUAL BUDGET BUDGET
WATER
TOTAL REVENUES 2,434,651 2,472,010 2,454,606 2,128,704 2,278,798
(99 BOND) 20,000 25,000 25,000 25,000 25,000
MAINTENANCE
TOTAL 37,643 32,975 34,422 36,400 47,910
PUMPING
TOTAL 356,774 338,965 360,657 335,025 402,100
DISTRIBUTION
TOTAL 169,446 151,496 133,933 139,000 188,300
OTHER EXPENSE
TOTAL 1246,270 1,110,015 1,112,526 1,176,002 1,201,669
CUSTOMER ACCTS EXP
TOTAL 61,405 46,604 39,667 43,000 62,500
ADMIN/GEN EXPENSE
TOTAL 497,168.0 444,599,00 464,403 414,695 492,477
Proposed staff additions 15.270
TOTAL EXPENSE 2,368,706 2,125,554 2,145,808 2,143,621 2,410,426
'OTAL REVENUES 2,434,651 2,472,010 2,454,606 2,128,704 2,278,798
'OTAL EXPENSES 2,368,706 2,125,554 2,145,808 2,144,121 2,410,426
'ROFIT(LOSS) 65,945 346,456 _ 308,798 (15,417) (131,628)
BUDGET COMPARISON 2