5.2 ERMUSR 10-09-2018 Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO: FROM:
ERMU Commission Theresa Slominski—Finance & Office Manager
MEETING DATE: AGENDA ITEM NUMBER:
October 9, 2018 5.2
SUBJECT:
2019 Business Plan/Budget: Water and Electric Expenses; and Conservation Improvement
Program
ACTION REQUESTED:
None
BACKGROUND:
In preparation for submittal in November, staff continues to work through the 2019 budget
process. The first cut of the expense portion of the 2019 budget has been completed for
commission review, as well as the Conservation Improvement Program (CIP)Budget. Items are
subject to change as the complete 2019 budget is assembled and the finalized wholesale power
costs and revenues are reflected. Revenues and rates for 2019 will be presented in November.
DISCUSSION:
Attached is the following information for your review. Additional budget detail is available upon
request. Please contact staff for additional information.
1. Electric Department Expense Budget—The 2019 forecast for electric expenses are a
2.77% increase over the current year budget. Wholesale power costs make up between
70-75%of the operating budget and are estimated here with MMPA's rate structure. As a
point of reference, it is a decrease in spite of an increase in kwh growth of 6%over the
prior year. Depreciation and Amortization are increased largely due to the amortization of
MMPA's intangible asset. Most notable increases are on the administrative side for
increases in health insurance, benefits, and some IT projects.
The budgeted Payment in Lieu of Taxes (PILOT) amount for 2019 is approximately$1.4
million. The PILOT is comprised of$1.19 million with the 4% of Elk River City's sales
calculation, and $215,000 in donated utilities and labor.
Currently, we are estimating a 0%rate increase. Growth through our acquisition is
helping to keep the rates down(as noted above it is approximately a 6% increase over
prior year), as well as MMPA as our new power provider. We will have more
information with the presentation of the final revenue projections in November.
2. Water Department Expense Budget—The 2019 forecast for water expenses are less than
1% increase over the current year budget. Most notable increases are on the
Page 1 of 2
53
administrative side for increases in health insurance, and benefits, as noted above for
electric.
Currently we are projecting a 2%increase to the monthly charge and tier 1 rate for a near
0%reserve impact. As numbers are finalized, and revenue projected,this will be brought
back in November.
3. Conservation Improvement Program Budget- The 2019 forecast for CIP includes
$242,750 for rebates. In the past these costs have been partially funded by GRE,
however MMPA does not have a similar funding mechanism and so these costs will be
born solely by ERMU. Also,there is an amount included(up to $7,500) for the solar
picnic table project with the City. The Landfill Gas Plant(LFGP)has a heat recovery
unit and we are recognizing$19,000 of those operating costs as part of our CIP
renewable energy items, something we have not done previously. All costs presented
here are included in the appropriate Electric and Water Expense Budgets discussed
above.
ATTACHMENTS:
• Proposed 2019 Electric and Water Expense Budget
• Proposed 2019 Conservation Improvement Program Budget Summary
• Proposed 2019 Conservation Improvement Program Budget Detail
Page 2 of 2
54
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2019 CIP Operating Budget
Required Spending and Savings Goals
Total Spending Requirement 1.5% of GOR $ 529,797.21
Low Income .2% of Residential GOR $ 23,784.94
Minimum Conservation Spending Requirement $ 264,898.61
Maximum Load Management Spending Requirement $ 264,898.61
Customer Side of the Meter Savings Goal (kWh) 2,664,162
Distribution Savings Goal (kWh) 1,332,081
Total CIP Budget 2019
Direct Labor $ 107,059
General &Administration $ 47,775
Advertising $ 33,600
Equipment $ 21,125
Contract(Includes$25,000 MN PUC Assessment) $ 59,500
Total $ 269,059
ERMU Rebates $ 264,750
Great River Energy Rebates (Estimated) $ -
Total all Expenses and Rebates $ 533,809
Total Estimated kWh Savings 2,820,287
Total Operating CIP Budget No Rebates Only Direct Costs
Direct Labor $ 107,059
Advertising $ 33,600
Equipment $ 21,125
Contract(Includes$25,000 MN PUC Assessment) $ 59,500
Total ERMU Operating Expenses $ 221,284
*Note: $47,775 is not included in $221,284
Total Rebate Budget
ERMU Self Funded $ 264,750
Great River Energy $ -
$ 264,750
Total Requested Budget
Direct Labor $ 107,059
Advertising $ 33,600
Equipment $ 21,125
Contract(Includes $25,000 MN PUC Assessment) $ 59,500
ERMU Self Funded Rebates $ 264,750
Total Requested 2019 Budget* $ 486,034
*No General and Administrative Included
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