5.3 ERMUSR 12-12-2017 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
ERMU Commission Troy Adams, P.E. —General Manager
MEETING DATE: AGENDA ITEM NUMBER:
December 12, 2017 5.3
SUBJECT:
2018 Budget/Business Plan: Budget and Rates
ACTION REQUESTED:
Adopt the Proposed 2018 Budget and Rates.
BACKGROUND:
In November the preliminary 2018 budget and rates were presented to the Commission. There have been
several changes due to finalizing of projects and expenses, as well as some new accounts created and
amounts redistributed. The changes have all been noted on the Revenue and Expense Budgets in the
Notes and Explanations,with the prior items presented in November in blue. The proposed 2018 budget
is as follows.
DISCUSSION:
Electric Department Revenue and Expense Budget
Wholesale power costs account for 70% of operating expenses for 2018. The rates set by Great River
Energy(GRE)result in an impact of less than 1%to ERMU. The transition to MMPA in October is also
conservatively accounted for the last two months of the year. The proposed electric rates are an
approximate 1% increase as discussed last month. The proposed 2018 budget and rates result in electric
fund revenue of$37,952,480 which includes a projected 2.75%margin and a projected$28,144 net to
reserves.
Notable items in the electric budget for 2018 are:
• Up to a 3% COLA for all four pay plan groups;
• An estimate of 1.9%growth in usage from data centers, 1% growth for all other customer classes;
• Replacement of bucket truck#21
• Delay of digger truck#10 and bucket truck#8 purchases;
• Replacement for Pickup Truck#33 and#14 for Technical Services;
• Electric Service Territory acquisition plant and reintegration costs for Areas 5 &6 from reserves;
• Electric Service Territory acquisition loss of revenue for Areas 1 &2 from reserves;
• Consultant costs and Fee costs for MMPA bonding;
• Preliminary Field Services Facility expansion planning and site prep;
• Budgeting for audit adjustment of GASB required Pension Expense.
The proposed 2018 electric rates are:
Residential
Basic Monthly Electric Charge ... ... ... ... ... ... $13.50/Month
Summer Energy Charge(Jun-Oct) ... $0.1370/kWh
Winter Energy Charge(Nov-May) ... ... ... ... ... $0.1215/kWh
Page 1 of 3
1 02
Non-Demand Commercial
Basic Monthly Electric Charge ... ... ... ... ... ... $26.00/Month
Summer Energy Charge(Jun-Oct) ... ... ... ... ... $0.1314/kWh
Winter Energy Charge(Nov-May) ... ... ... ... ... $0.1095/kWh
Demand Commercial(50kW peak or greater)
Basic Monthly Electric Charge ... ... ... ... ... ... $75.00/Month
Energy Charge ... ... ... ... ... ... ... ... $0.0667/kWh
Summer Demand Charge(Jun-Oct) ... ... ... ... ... $17.00/kW
Winter Demand Charge(Nov-May) ... ... ... ... ... $12.00/kW
The proposed rates will result in increases under 1%for typical customers in all classes. This is equivalent
to a$14 per year increase for a typical residential customer. The $1/kW demand reduction for commercial
demand customers goes away for 2018(it was $2/kW in 2016 and$1/kW in 2017),which results in a
larger increase for these customers.
Water Department Revenue and Expense Budget
The proposed 2017 water budget reflects a 1.3% increase in revenue with a total budget of$2,982,460.
This water budget results in a negative 15.23%projected margin,yet a projected$19,821 net to reserves.
Notable items in the water budget for 2018 are:
• Up to a 3% COLA for all four pay plan groups;
• Conservative estimate for usage growth;
• Water Main Construction for the MNDot project;
• Preliminary Field Services Facility expansion planning and site prep;
• Sandblasting Well#5 filter;
• Rehabilitation Well#9;
• Budgeting for audit adjustment of GASB required Pension Expense.
The proposed rate design continues the direction of shifting to more fixed cost recovery to mitigate
revenue recovery volatility related to weather. The proposed 2018 residential water rates are a 2.26 %
increase to the first tier and a 2.03% increase in the basic monthly charge:
Residential(1 Unit= 1000gallons)
1st Tier Unit Cost(0—9,000 gallons) ... $1.81/Unit
2nd Tier Usage(between 1st Tier and up to 15,000 gallons) ... ... $3.50/Unit
3rd Tier Usage(over 2nd Tier usage) ... ... ... ... ... $4.00/Unit
5/8"Basic Monthly Water Charge ... ... ... ... ... $9.04/Month
These rate changes result in a projected 1.85% annual water cost increase for a typical residential
customer. This is the equivalent to a$5.00 per year increase for these customers.
For commercial customers, it is more difficult to classify typical users. The 1st Tier and meter charges are
increased in the proposed budget. But because the 2nd and 3rd Tiers are not being increased,the amount of
usage will result in commercial customer increases between 2.1% and 2.3%. The proposed 2018
commercial water rates are:
Commercial (1 Unit= 1000 gallons; Winter Measurement Period=December—April billing cycles)
1st Tier Unit Cost(less than110%of average winter usage) ... ... $1.81/Unit
2nd Tier Unit Cost(between 1st Tier and an additional 40,000 gallons) ... $3.50/Unit
3rd Tier Unit Cost(over 2nd Tier usage) ... ... ... ... ... $4.00/Unit
Page 2 of 3
1()l
0.75"Meter Charge ... $10.84/Month
1.00"Meter Charge ... $12.06/Month
1.25"Meter Charge ... $13.27/Month
1.50"Meter Charge ... $14.47/Month
2.00"Meter Charge ... $19.29/Month
3.00"Meter Charge ... $42.19/Month
4.00"Meter Charge ... $57.86/Month
6.00"Meter Charge ... $84.38/Month
8.00"Meter Charge ... $114.52/Month
Seasonally or Permanently Installed Irrigation Meter Charge ... ... $19.29/Month
FINANCIAL IMPACT:
Discussed above.
ATTACHMENTS:
• Proposed Summary of 2018 Budgets
• Proposed 2018 Electric Revenue and Expense Budget
• Proposed 2018 Water Revenue and Expense Budget
• Proposed 2018 Electric Capital Budget
• Proposed 2018 Administration and Technical Services Capital Budgets
• Proposed 2018 Water Capital Budget
• Proposed 2018 Training and Travel Budget
• Proposed 2018 Dues and Subscriptions Budget
• Proposed 2018 Conservation Improvement Program Budget
Page 3 of 3
1n4
ELK RIVER MUNICIPAL UTILITIES
SUMMARY OF YEAR 2018
BUDGETS
ELECTRIC BUDGET SUMMARY 2018
ELECTRIC REVENUE $ 37,952,480
ELECTRIC EXPENDITURES (36,907,205) 4% A 2017
ELECTRIC NET FOR CAPITAL 1,045,275 2.75%
DEBT RETIREMENT (720,000)
PROMISSORY NOTE TO COUNTY (198,252)
LESS DEBT PRINCIPAL PMTS 127,023
CAPITAL EQUIPMENT/CONSTRUCTION (3,143,817)
FUND FROM RESERVES 350,000 * Territory Acquisition Areas 5&6 Plant and Reintegration
511,117 * Territory Acquisition Areas 1&2 Loss of Revenue
NET (2,155,677)
DEPRECIATION 2,183,821
NET TO RESERVES 28,144 * Note that this is separate from funding of territory draw on r
WATER BUDGET SUMMARY 2018
WATER REVENUE $ 2,588,215
WATER EXPENDITURES (2,982,460) 5% ^2017
WATER NET FOR CAPITAL (394,245) -15.23%
DEBT RETIREMENT (255,000)
GROSS (649,245)
CAPITAL PROJECTS (559,800)
FUND FROM RESERVES
FUND FROM WATER TRUNK FUND
BONDING -
NET (1,209,045)
DEPRECIATION 1,228,866
NET TO RESERVES 19,821 *
*Currently,target reserves are met.
2018 BUDGET SUMMARY.x1s2018
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Elk River Municipal Utilities Business Plan/Budget
2018 Electric Department Capital Budget
Capital Construction Projects-Non-Recurring Normal Distribution, Feeders,and Substations
Labor Priority Cost Description
4 $ 75,000 OH and URD 197th to GRE Transmission
5 $ 35,000 Otsego Street Lights
2 $ 50,000 Area 3&4 rebuild
1 $ 600,000 Area 5&6 prep
3 $ 50,000 Highway 10 Bridge
Subtotal $ 810,000
Capital Construction Projects-Recurring
Cost Description
$ 150,000 Transformers and Meters Reduced from$200,000 to$150,000
$ 350,000 New Development Distribution Installation
$ 50,000 Ongoing OH Equip Replacement(Poles, Switches,Cut-Outs)
$ 100,000 Ongoing URD Equip Replacement(Switches,J-Boxes, Fuse Pads)
$ 20,000 Street Lighting Replacement
$ 500 Territory Acquisition-Loss of Revenue payment(1991 contract)
$ 511,117 Territory Acquisition-Loss of Revenue payment(2015 contract-Area 1 &2) Reserves
$ 350,000 Future Territory Acquisition(Area 5&6 Plant) Reserves
$ - Additional Feeders
Subtotal $ 1,531,617
Administration Noteworthy Non-Recurring Expenses
Cost Description
Subtotal $ -
Capital Equipment Needs
Cost Description
$ 7,500 Laptop Computers,Software,Accessories
$ 2,000 SCADA equipment
Replace Digger Truck#10 with new 2020 $250,000
$ 250,000 Replace Bucket Truck#21 with new
Replace Bucket Truck#8 with new 2019 $250,000
$ 36,000 Replace Bobcat/skidloader 80/20%
$ 70,000 550 Truck
$ 8,500 Replace tracks on bore rig
$ 35,000 Triple-bunk self loading trailer
$ 270,000 Field Services Building addition ?years 80/20% Bond$5,000,000
$ 123,200 80%share of Administration and Technical Services
Subtotal $ 802,200
Total $ 3,143,817
111
Elk River Municipal Utilities Business Plan/Budget
2018 Administration and Technical Services Departments Capital Budgets
Administration Capital Equipment Needs
Cost Description
$ 7,000 Computer, Software, Accessories-Upgrades
Subtotal $ 7,000
Administration Noteworthy Non-Recurring Expenses
Cost Description
$ 15,000 Office Furniture carried forward 2017
$ 500 printers/scanners
Subtotal $ 15,500
Total $ 22,500
Technical Services Capital Equipment Needs
Cost Description
$ 7,500 Computers, Software,Accessories- Upgrades
Diesel Engines Emission Retrofit $ 350,000 Currently designated as emergency standby,
Diesel Plant to run on Natural gas. $ 20,000 Deferred until MMPA transition
$ 45,000 Electric Vehicle #33 Meter Reading
$ 45,000 Pickup truck #14 Locating
Subtotal $ 97,500
Technical Services Noteworthy Non-Recurring Expenses
Cost Description
$ 10,000 ?Mobile Access Software
$ 1,000 Operating Software for server blade
$ 18,000 ARC GIS Enterprise
$ 5,000 ESRI user licenses online account
Subtotal $ 34,000
Total $ 131,500
117
Elk River Municipal Utilities Business Plan/Budget
2018 Water Department Capital Budget
Water Capital Construction Needs
Cost Description
$ 240,000 Water Main Construction MNDot Project
$ 70,000 Well 5 Filter Sandblast/Paint
$ 40,000 Well 9 Rehabilitation
$ 100,000 Facility Repair
$ 15,000 Auburn Tower Engineering Documents prep for 2019
Subtotal $ 465,000
Water Noteworthy Non-Recurring Expenses
Cost Description
$ - Computers
$ 10,000 Meters/ERT
$ 15,000 Miscellaneous Tower Repairs/Maintenance
$ - Jackson Water Tower $90,000 Reserves
Subtotal $ 25,000
Capital Equipment Needs
Cost Description
$ - Trucks
$ 9,000 Replace Bobcat/skidloader 80/20%
$ 30,800 20%share of Administration and Technical Services
$ 30,000 Field Services Facility site work
Subtotal $ 69,800
Total $ 559,800
113
ELK RIVER MUNCIPAL UTILITIES BUSINESS PLAN/BUDGET
TRAINING AND TRAVEL BUDGET FOR 2018
Budget Budget Budget Budget
ELECTRIC 2015 2016 2017 2018
MMUA Overhead Hot Line School 3 people 3,111.00 3,165.00 3,165.00 3,165.00
MMUA Underground School 3 people 3,111.00 3,165.00 3,165.00 3,165.00
MMUA Transformer School 3 people 3,111.00 3,165.00 3,165.00 3,510.00
MMUA Substation Workshop 2 people 2,074.00 2,110.00 2,110.00 2,110.00
1st Line Supervision 1 person 300.00 1,470.00 1,470.00 1,700.00
Apprenticeship 4 people 3,750.00 1,602.00 1,602.00 2,200.00
MMUA Meter School 2 people 1,940.00 1,940.00 1,940.00 1,940.00
MMUA Locator Workshop 2 people 650.00 720.00 720.00 720.00
Regional Workshop 10 people 450.00 650.00 650.00 650.00
Infrared Camera training 1 person 529.00 750.00
GPS 1 person 1,500.00 750.00 750.00 750.00
APPA Linemen Rodeo team 3 people 5,500.00 4,340.00 4,284.00 4,284.00
Cross Training School/Diesel Workshop 2 people 955.00 1,910.00
PCB Training 1 person 1,428.00 1,428.00
Member Information Conf(NISC) 1 person 1,800.00 1,800.00
Additional Training 1,000.00 1,000.00 2,000.00 2,000.00
27,026.00 25,032.00 28,249.00 32,082.00
WATER
Water Certification Continuing Education 3 people 4,000.00 2,000.00 2,000.00 2,000.00
Wastewater Certification Continuing Education 3 people 1,000.00 1,500.00 1,500.00 1,500.00
1st Line Supervision 1,200.00 1,470.00
Meter School/Training 1 person -
Cross Training School 1 person
Apprenticeship 1 person
Chamber Leadership Program 1 person
Additional Training 500.00 1,000.00 2,500.00 2,500.00
6,700.00 5,970.00 6,000.00 6,000.00
TECHNICAL SERVICES
MMUA Locator Workshop person 1,366.00 695.00 750.00
MMUA Staking Workshop person - 750.00 750.00
MMUA Diesel Workshop person 750.00 755.00 750.00 750.00
Engineering seminar person 2,000.00
UMMA Meter Workshop person 1,660.00 842.50 1,806.00 903.00
CAD Workshops/GPS - 750.00 750.00
ESRI User Conference person 2,845.00
Substation School person 890.00
Power Quality training 400.00 750.00
Infrared Camera training - 535.00 700.00
UMMA winter mtg 2 people 850.00 653.00 800.00
UMMA summer mtg 1 person 653.00 400.00
1st Line Supervision 250.00
Electrical Licensing 1 person 360.00 360.00 360.00
Cross Training School 1 person 810.00 890.00
Apprentice Meter Program(2) 2,400.00 2,450.00 4,800.00
Additional Training 1,000.00 1,000.00 1,000.00 1,000.00
7,82R 00 9,797.50 11,472.00 13,088.00
ADMINISTRATION
AWWA Water Certification Continuing Education 1,572.50 1,600.00 1,700.00
MRWA Water Certification Continuing Education 500.00 500.00
Wastewater Certification Continuing Education 500.00 500.00 150.00
MV-RS Meter/Software training 1 staff - 650.00 -
AWWANationalConference 3,000.00 2,100.00
Financial
Publishing and Design Software trng 1 staff 1,000.00 1,000.00
Engineering
MMUA Annual Summer Meeting 3 staff/5 comm 3,750.00 4,525.00 4,525.00 7,090.00
MMUA Legislative Round-up 2 staff/0 comm 3,200.00 2,650.00 1,370.00 870.00
APPA Legislative Round-up 1 staff/1 comm 2,793.88 4,650.00 4,650.00 2,950.00
or Engineering/Operator Workshop
MMUA TOO Conference 4 staff 1,800.00 2,400.00 2,400.00 2,400.00
MMUA Legal Seminar 250.00
Clerk's Conference 519.00 600.00 950.00 950.00
MMUA Leadership Academy 2 staff 1,470.00 3,000.00 6,220.00
APPA 550 Conference 2 staff 6,020.00 4,140.00 4,140.00
APPA National Conference 1 staff/0 comm 4,940.00 1,800.00
lot Line Supervision 2 staff 3,400.00
Member Information Conf(NISC) 2 staff 3,600.00
APPA Training(Mgmt,CS,Fin,Eng,CIP,etc) 7,900.00 5,670.00 2,140.00 2,500.00
Management Training 2,250.00 2,500.00 3,000.00 5,000.00
Additional Training 1,000.00 1,000.00 1,000.00 1,000.00
31,656.88 35,707.50 38,71500 45,820.00
OFFICE
Member Information Conf(NISC) 3staff 6,200.00 7,800.00 9,000.00 5,400.00
Customer Service 3,500.00 3,500.00 3,500.00
Chamber Leadership Program 1 person 350.00 350.00 350.00 400.00
Financial/Accounting(APA,CPA,SHRM 8 General) 2,925.00
Additional Training 1,000.00 1,000.00
6,550.00 11,550.00 13,850.00 13,225.00
SAFETY TRAINING
Safe Driver Training 2,100.00 2,100.00 2,100.00 2,100.00
Hearing Test 500.00 500.00 700.00 700.00
MMUA Monthly Safety Meetings 25,250.00 26,600.00 26,600.00 28,850.00
27,850.00 29,200.00 29,400.00 31,650.00
EDUCATION 3,000.00 3,000.05 3,000.00 3,000.00
110,608.88 120,357.00 130,686.00 144,865.00
Increase 7.7% 8.8% 8.6% 10.8%
Page 1
114
ELK RIVER MUNCIPAL UTILITIES BUSINESS PLAN/BUDGET
DUES/SUBSCRIPTIONS/FEES BUDGET FOR 2018
Budget Budget Budget
2016 2017 2018
MMUA Membership Dues 27,727.68 28,500.00 28,850.00
MMTG Dues 16,000.00 5,942.33 5,942.33
APPA Dues 11,000.00 15,500.00 15,500.00
APPA DEED Program Dues 2,600.00 3,100.00
MCMU Membership Dues 250.00 250.00 -
CRC Membership 250.00 250.00 -
Rotary 250.00 250.00 300.00
Drug and Alcohol Random Testing 825.00 900.00 961.00
Software Support 132,000.00 135,600.00 135,600.00
Bond Administrative&Management Fees 1,300.00 1,350.00 98,350.00 -1%fees on$9.7 million bonding for MMPA final buyin
Miscellaneous 1,000.00 1,000.00 1,000.00
SCADA OSI Fee(GRE) 4,874.00 7,000.00 24,000.00 Increased per agreement review(undercharged previously)
800 Mhz Radio Licensing 2,700.00 2,700.00 3,675.00
Publications 600.00 600.00 387.00
Quarterly MN Dept of Health Water Connection Fee 30,200.00 32,000.00 32,000.00
MRWA Annual Fee 235.00 235.00 250.00
AWWAAnnual Fee (Dues and Updates) 310.00 1,050.00 1,082.00
Annual Report on Water Use-DNR(WTP) 150.00 11,000.00 11,260.00
MPCA Permit Fee-WTP 500.00 345.00
MPCA Permit Fee-Engines 500.00 586.00
Homeland Security(Hazardous Chemical Fee) 700.00 700.00
SUSA Membership 125.00 125.00
Annual Report on Water Use-DNR(Engines) 140.00 140.00
1-94 Chamber Membership 475.00 500.00
Elk River Chamber Membership 500.00 500.00 500.00
Economic Development Association 250.00 295.00
GASB Subscription 250.00 250.00
BNSF Railway Crossings 2,250.00 -
ArcGIS Maintenance Support 1,900.00 2,281.00 additional licenses purchased 2017 increases cost 2018
AutoCAD Maintenance Support 1,590.00
Itron Software for Metering Billing 4,086.77 12,705.00 Did not include hardware and software updates previously
Vistapoint Phone System Support 776.00 new in 2017
Charging Station Warranty&Service 1,000.00 new in 2017
Adobe Creative Cloud software 900.00 new in 2017
Border States Electric Barcoding Support 550.00 new with inventory system scanning implementation
Resource Training&Solutions membership 190.00 not included previously
Munici-pals Membership 25.00 not included previously
Survey Monkey 300.00 new in 2017
Iframap software maintenance 3,200.00 new in 2018
Mobile Workforce-implementation 2018 tbd tbd
App Suite-potential implementation 2018 tbd tbd
iVue Connect(one time purchase) 9,000.00
Mosaic(one time purchase) 7,744.00
230,646.68 275,173.10 388,715.33
44.9% 19.3% 41.3%
Page 1
115
2018 CIP Operating Budget •
Required Spending and Savings Goals
Total Spending Requirement 1.5% of GOR $ 502,220.24
Low Income .2% of Residential GOR $ 22,711.64
Minimum Conservation Spending Requirement $ 251,110.12
Maximum Load Management Spending Requirement $ 251,110.12
Customer Side of the Meter Savings Goal (kWh) 2,547,256
Distribution Savings Goal (kWh) 1,273,628
Total CIP Budget 2018
Direct Labor $ 105,069
General &Administration $ 50,445
Advertising $ 32,600
Equipment $ 2,500
Contract(Includes$139,500 LM Transition) $ 177,500
Total $ 368,114
ERMU Rebates $ 121,250
Great River Energy Rebates (Estimated) $ 164,887
Total all Expenses and Rebates $ 654,251
Total Estimated kWh Savings 2,623,672
Total Operating CIP Budget No Rebates Only Direct Costs
Direct Labor $ 105,069
Advertising $ 32,600
Equipment $ 2,500
Contract(Includes$139,500 LM Transition) $ 177,500
Total ERMU Operating Expenses $ 317,669
Total Rebate Budget
ERMU Self Funded $ 121,250
Great River Energy $ 164,887
$ 286,137
Total Requested Budget
Direct Labor $ 105,069
Advertising $ 32,600
Equipment $ 2,500
Contract(Includes$139,500 LM Transition) $ 177,500
ERMU Self Funded Rebates $ 121,250
Total Requested 2017 Budget* $ 438,919
*No General and Administrative Included
N:\Office\CIP and Key Accounts\GRE Rebates\2018 Budget\2018 Budget\2018 Rebate and Operating
Budget.xls2018 Rebate and Operating Budget.xls2018 CIP Summary
116