4.1 ERMUSR 10-11-2022UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission Theresa Slominski - GeneralManager
MEETING DATE: AGENDA ITEM NUMBER:
October 11, 20224.1
SUBJECT:
Margins Policy
ACTION REQUESTED:
Approve proposed ERMU Commission Policy G.5aMargins.
BACKGROUND:
In 2017, with the increase to a five-member Commission from a three-member Commission, it
was determined to be beneficial to develop and update core governance policy to serve as a
guide for the expanded Commission. This process was started in 2016. Previously the policy
manual was a combination of management and governance policies, as well as procedures,
forms, and specifications. One of the goals of this project was to update the policy documents
the Commission is ultimately responsible for and separate out the procedure, forms, and
specifications that should fall under the responsibility of management. A consultant,
Collaboration Unlimited, was utilized for Phase 1 of this project, to develop the core
governance policies. In February 2017, the core governance policies were developed as G.1 –
G.3 items. In 2017-2019, additional work was done to identify and delegate the appropriate
items to management as policy, as G.4 items. The Table of Contents of these policies is in your
Commission Policy Manual and is attached for reference.
DISCUSSION:
Section 5 of the Commission Policies is Goals and Results, G.5, and has two intended policies to
be developed. Those two policies are G.5a Margins and G.5b Competitive Rates. The purpose of
these two policies is to provide commission and staff parameters for determining appropriate
margins and rates that are reasonable and justifiable to our customers, can take the emotion
out of decision making, and provide consistency year to year.
The first of these policies, G.5a Margins, is presented this month. Our Electric Revenue Bond
covenants determine a certain margin for the organization at 110% to 125% of bond
convenance. Staff proposes that we use the conservative margin of 125% of bond convenance
for electric. If bond convenance is not required, then a 1.5% revenue minimum to a 2.5%
revenue maximum calculation be used to determine the margin.
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Our Water General Obligation Bond covenants determine a margin by statute at 105% of bond
convenance. Staff proposes that we use the margin of 105% of bond convenance for water. If
bond convenanceis not required, then a 1.5% revenue minimum toa 2.5% revenue maximum
calculation be used to determine the margin.
The full policy is attached for reference.
ATTACHMENTS:
ERMU Commission Policy Manual Index – Revised 8.11.2021
Proposed ERMU Policy - G.5a Margins
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