5.2 ERMUSR 10-12-2021UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission Melissa Karpinski –Finance Manager
MEETING DATE: AGENDA ITEM NUMBER:
October 12, 20215.2
SUBJECT:
2022 Annual Business Plan: Electric and Water Expenses and Conservation Improvement
Program
ACTION REQUESTED:
None.
DISCUSSION:
In preparation for budget submittal in November, staff continues to work through the 2022
budget process. The first draft of the expense portion of the 2022 budget has been completed
for commission review. Items are subject to change as the complete 2022 budget is assembled
and the finalized wholesale power costs and revenues are reflected. Revenues and rates, and
wholesale power costs for 2022 will be presented in November.
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 2022 budget for electric expenses are a 2.6%
increase compared tothe current year budget. It is noteworthy that the 2021 forecast
for expenses is a 1.9% increase compared to budget. Wholesale power costs make up
around70% of the operating budget and will be provided in next month’s budget with
the revenue projections. Most notable increases are for bond interest expense, tree
trimming(contractors), and administrativeexpensedue to the addition of anew general
managerfor a partial year. These preliminary expense numbers will likely be adjusted
during the next phase ofbudgeting when the 2022 rates are designed.
The 2021 budgeted purchased power cost amount was $25,546,479. The 2022
projected wholesalepower cost increase is 2.5% but may vary slightly when the rate
formula is applied to ERMU’s load profile and anticipated growth. Preliminarily applying
the 2.5% projected wholesale power cost increase on the 2021 forecasted amount
resulted in a preliminary amount of $27,035,269. When factoring the preliminary
wholesale power cost forecast and the preliminary electric department expense budget,
the overall preliminary electric department expense budget increase is 4.7% compared
to 2021 budget.
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The budgeted Payment in Lieu of Taxes (PILOT) amount for 2022 is $1.666million. The
PILOT is comprised of $1.436millionbased off4% ofthe City ofElk River sales
calculation, and $230,000indonated utilities and labor.This preliminary projection will
change when revenue is budgeted for next month.
2.Water Department Expense Budget – The 2022 budgetfor water expenses are a 6.2%
increase compared tothe current year budget. It is noteworthy that the 2021 forecast
for expenses are inline with budget. Most notable increases are expenses due tothe
addition of a new general manager for a partial year, maintenance of water mains and
bond interest expense.
3.Conservation Improvement Program Budget – The 2022 budget for CIP includes
$308,607 for rebates, an increase from 2021 of $3,857, as required to meet our energy
savings goal mandate.
ATTACHMENTS:
Preliminary 2022 Electric Expense Budget
Preliminary 2022 Water Expense Budget
2022 Conservation Improvement Program Budget Summary
2022 Conservation Improvement Program Budget Detail
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