5.2 ERMUSR 11-13-2018Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO:
FROM:
ERMU Commission
Theresa Slominski — Finance & Office Manager
MEETING DATE:
AGENDA ITEM NUMBER:
November 13, 2018
5.2
SUBJECT:
2019 Business Plan/Budget: Rates and Review
ACTION REQUESTED:
No action required at this time.
BACKGROUND:
In preparation for budget approval in December, staff continues to work through the 2019 budget
process. Based on the wholesale rate increase and projected expense increases and capital
expenditures, a preliminary balanced budget and rates have been drafted.
Electric Department Budget
Overall, the electric department expenses increased approximately 3%. Historically,
wholesale power costs have been within an expected range of 70% - 75% of operating
revenue and this is approximately 65% for 2019 with our new purchased power provider,
MMPA's, wholesale rates. As a note, we are participating in MMPA's Clean Energy Choice
program in 2019, which will have an impact of approximately $700. This proposed budget
represents a 0% increase in ERMU rates, and still has a sizable contribution to reserves. The
2019 retail rates will be proposed for final approval with the 2019 budget in December.
Water Department Budget
Overall, the water department expenses decreased 2.5%, largely due to a change in
depreciation calculations for a misclassified asset, and a reduction in well maintenance
projections. As a note, we are participating in MMPA's Clean Energy Choice program in
2019, which will have an impact of approximately $1,100. Consistent with prior years'
planning for the short and long term water capital project projections, the 2019 water budget
reflects an overall 1.8% increase in revenue through water sales, with a reduction in reserves.
The allocation of the increase will be collected through an increase in customer charge and 1't
tier water use rates. The result for the proposed rate increase for a typical residential water
customer would be 1.72%. This would result in an approximate increase of $5 annual for 2019
compared to 2018. The 2019 retail rates will be proposed for final approval with the 2019
budget in December.
Page 1 of 2
65
ATTACHMENTS:
• Proposed Summary of 2019 Budgets
• Proposed 2019 Electric and Water Revenue and Expense Budget
• Proposed 2019 Electric Capital Budget
• Proposed 2019 Water Capital Budget
• Proposed 2019 Administration and Technical Services Capital Budgets
• Proposed 2019 Conservation Improvement Program Budget
Page 2 of 2
ELK RIVER MUNICIPAL UTILITIES
SUMMARY OF YEAR 2019
BUDGETS
ELECTRIC BUDGET SUMMARY
2019
ELECTRIC REVENUE $
41,301.580
ELECTRIC EXPENDITURES
(37,916.633)
ELECTRIC NET FOR CAPITAL
3,384,947
DEBT RETIREMENT
(975,000)
PROMISSORY NOTE TO COUNTY
(200,917)
LESS DEBT PRINCIPAL PMTS
2,209,030
CAPITAL EQUIPMENT/CONSTRUCTION
(3,851,915)
FUND FROM RESERVES
100,000 '
699,735 '
250,000 '
NET
(593,150)
DEPRECIATION
2,895,535
NET TO RESERVES
2.302,385 '
WATER BUDGET SUMMARY
2019
WATER REVENUE $
2,652,441
WATER EXPENDITURES
(2,906.927)
WATER NET FOR CAPITAL
(254.486)
DEBT RETIREMENT
(260,000)
GROSS
(514,486)
CAPITAL PROJECTS
(1,270,320)
FUND FROM RESERVES
FUND FROM WATERTRUNK FUND
25,000
BONDING
-
NET
(1,759,806)
DEPRECIATION
1,175,214
NETTO RESERVES
(584,592) '
'Currently, target reserves are met.
8.20% 1,109,893 110% annual avg debtsvc
-9,59%
Territory Acquisition Areas 7&8 Plant and Reintegration
Territory Acquisition Areas 1&2, 3&4 Loss of Revenue
Equipment storage building at west sub
Note that this is separate from above funding of draw on tea
2019 BUDGET SUMMAPY 019
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ITT
Elk River Municipal Utilities Business Plan/Budget
2019 Electric Department Capital Budget
Construction Projects - Non -Recurring Normal Distribution, Feeders, and Substations
$ 200,000 Downtown Street Lights
$ 250,000 Equipment storage building at west sub Reserves
$ 100,000 Edison street rebuild
$ 150,000 Jarvis street rebuild
$ 50,000 Area 5&6 rebuild
$ 180,000 Area 7&8 prep
$ 50,000 Otsego Street Lights
$ 500,000 Miske Meadow Feeder
$ 100,000 199th rebuild
$ 175,000 185th Ave rebuild
$ 75,000 Cty Rd 13 Roundabouts
Subtotal $ 1,830,000
Capital Construction Projects - Recurring
Cost
Description
$
200,000
Transformers and Meters
$
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)
$
30,000
Street Lighting Replacement
$
500
Territory Acquisition - Loss of Revenue payment (1991 contract)
$
699,735
Territory Acquisition - Loss of Revenue payment (2015 contract - Area 1&2, 3&4) Reserves
$
100,000
Area 7&8 Acquisition Reserves
$ Additional Feeders
Subtotal $ 1,530,235
Administration Noteworthy Non -Recurring Expenses
Cast Description
$ 1,200 Sit/Stand Desk
$ 5,000 Chairs in plant breakroom
Capital Equipment Needs
Cost Description
$ 9,000 Laptop Computers, (pads, Software, Accessories
$ 2,000 SCADA equipment
$ - Pickup Trucks None for the electric department this year.
Replace Digger Truck #10 with new 2020 $275,000
$ 250,000 Replace Bucket Truck #8 with new
$ 75,000 Vactron
$ 4,200 Frostchain
20,000 Multi -purpose utility vehicle(80%) 20%water dept
$ 125,280 80 % share of Administration and Technical Services
Total $ 3,861,915
71
Elk River Municipal Utilities Business Plan/Budget
2019 Water Department Capital Budget
Water Capital Construction Needs
cN,c c
$ 20.000 Sandblast/Paint Freeport Booster Station
$ 12.000 Wash Freeport Tower
$ 700,000 Recondition Auburn Tower Reserves
$ 10,000 New Fall Protection for Johnson Tower
$ 300,000 Well M8 building
$ 100,000 Facility Repair
$ 15,000 Gary Street reconditioning plans and specs
Subtotal $ 1,177,000
Water Noteworthy Non -Recurring Expenses
Cost Descnption
$ 7,000 Computers
$ 10,000 Meters/ERT
$ 15,000 Miscellaneous Tower RepainuMaintenance
$ - Jackson Water Tower $90,000 Reserves
$ 25.000 Urban Services District Study (funded from trunkfunds)
Subtotal $ 57.000
Capital Equipment Needs
Cost Description
$ - Trucks None forthe waterdepartment this year.
$ 5,000 Multi -purpose utility vehicle(20%) 80%electric dept
$ 31,320 20% share of Administration and Tech nical Services
$ - Field Services Facility site work
Subtotal $ 36.320
Total $ 1,270,320
72
Elk River Municipal Utilities Business Plan/Budget
2019 Administration and Technical Services Departments Capital Budgets
Administration Capital Equipment Needs
Cost Description
$ 7,000 Computer, Software, Accessories - Upgrades
$ 5,000 Network upgrade for frewall failover
12,000
Administration Noteworthy Non -Recurring Expenses
Cost Description
$ 25,000 Office Furniture (includes a tech upgrade for the commission room)
$ 1,000 printers/scanners
$ 15,000 Handicap accessibility front entrance
Total $ 53,000
Technical Services Capital Equipment Needs
Cost Description
$ 10,200 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
upgrade tanks per inspection issues $25,000 Deferred until 2020 or later
20,000 Fiber Extension Buildout
45,000 replace truck #14
6,000 radio upgrades
Subtotal
Technical Services Noteworthy Non -Recurring Expenses
Cost Description
$ 2,400 Sit/Stand desks
? Mobile Access Software 10,000 deferred until 2020 or later
$ 20,000 AMI Pilot testing
58
Subtotal $ 22,400
Total $ 103,600
73
2019 CIP Operafing Budget
Required Spending and Savings Goals
Total Spending Requirement 1.5% of GOR
Low Income .2% of Residential GOR
Minimum Conservation Spending Requirement
Maximum Load Management Spending Requirement
Customer Side of the Meter Savings Goal (kWh)
Distribution Savings Goal (kWh)
Total CIP Budget 2019
529,797,21
23,784.94
264,898.61
264,898.61
2,664,162
1,332,081
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
`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
Advertising
Equipment
Contract (Includes $25,000 MN PUC Assessment)
ERMU Self Funded Rebates
*No General and Administrative Included
107,059
33,600
21,125
59,500
264.750
74