4.2 ERMUSR 04-13-2021UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission Melissa Karpinski –Finance Manager
MEETING DATE: AGENDA ITEM NUMBER:
April 13, 2021 4.2
SUBJECT:
2020 Year-End Reserve Balances
ACTION REQUESTED:
Approvethe unrestricted reserve balance above the target level for the Electric Utility
fund be designated for electric service territory transfercosts, capital infrastructure
costs, and the Energy Adjustment Clauseto be capped at $500,000.
Approvethe unrestricted reserve balance above the target level for the Water Utility
fund be designatedfor future capital infrastructure costs.
BACKGROUND:
The purpose for reserves to a public utility is to meet bond covenants and provide a financial
buffer to mitigate unforeseen or volatile operational costs. In 2010, the commission adopteda
financial reserves policy that defined the structure and formula on how financial reserves will
be calculated for the Electric Utility and Water Utility funds. This provides transparency to the
public on the purpose and levels of utility reserves. Additionally, this policy is consistent with
Governance Policy G.4i2 Financial Reserves which was adopted by the commission in 2017.
DISCUSSION:
As defined by policy, the year-end reserve balances are to be reviewed after the completion of
the audit. These balances, if above their target levels, shall be unrestricted with a defaulting
designation as working capital. The commission shall then consider optimal use of these
unrestricted reserves.
Staff recommends that unrestricted reserve balances above target levels for the Electric Utility
fund be designated for electric service territory transfer costs, capital infrastructure costs, and
the Energy Adjustment Clause (EAC) to be capped at $500,000; and for the Water Utility fund to
be designated for future capital infrastructure costs.
FINANCIAL IMPACT:
None
ATTACHMENTS:
ERMU Policy – A.10 – Financial Reserves Policy
ERMU Policy – G.4i2 – Financial Reserves
Electric Reserves Policy Calculation
Water Reserves Policy Calculation
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