5.2 EMRUSR 10-11-2022UTILITIES COMMISSION MEETING
TO:FROM:
ERMU Commission Melissa Karpinski –Finance Manager
MEETING DATE: AGENDA ITEM NUMBER:
October 11, 20225.2
SUBJECT:
2023 Annual Business Plan: Water and Electric Expenses; andConservation Improvement
Program
ACTION REQUESTED:
None
DISCUSSION:
In preparation for budget submittal in November, staff continues to work through the 2023
budget process. The first draft of the expense portion of the 2023 budget has been completed
for commission review. Items are subject to change as the complete 2023 budget is assembled
and the finalized wholesale power costs and revenues are reflected. Revenues and rates, and
wholesale power costs for 2023 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 2023 budget for electric expenses are a .5%
decrease compared to the current year budget (excluding purchased power). It is
noteworthy that the 2022 forecast for expenses (excluding purchased power) is a 2.2%
decrease compared to budget. Wholesale power costs make up around 70% of the
operating budget andwill be provided in next month’s budget with the revenue
projections. Most notable increases are for administrativeexpenses due to the addition
of anew administration director and depreciation expense due to thenew fieldservices
building. A noteworthy change from 2022 is the retirement of the landfill gas plant.This
is a reduction of $613,131 from the 2022 budget. It is planned to bring in contractors
again in 2023 for tree trimming. These preliminary expense numbers will likely be
adjusted during the next phase ofbudgeting when the 2023 rates are designed.
The 2022 budgeted purchased power cost amount was $27,017,920. The 2023
projected wholesale power cost increase has yet to be communicated to ERMU.
Preliminarily applying last year’s rate increase of 2.5% (may vary slightly when the rate
formula is applied to ERMU’s load profile and anticipated growth) power cost increase
on the 2022 rates resulted in a preliminary amount of $27,676,608. When factoring the
preliminary wholesale power cost forecast and the preliminary electric department
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expensebudget, the overall preliminary electric department expense budget increaseis
1.5% comparedto 2022 budget.
The budgeted Payment in Lieu of Taxes (PILOT) amount for 2023 is $1.714 million. The
PILOT is comprised of $1.474 million based off 4% of the city of Elk River sales
calculation, and $240,000 in donated utilities and labor. This preliminary projection will
change when revenue is budgeted for next month.
2. Water Department Expense Budget – The 2023 budget for water expenses are a 4.4%
increase compared tothe current year budget. It is noteworthy that the 2022 forecast
for expenses are in line with 2022 budget. Most notable increases are administrative
expenses due to the addition of a new administration director. Other expense increases
are very minimal, but we have seen an increase in our costs from our suppliers.
3. Conservation Improvement Program Budget – The 2023 budget for CIP includes
$307,753for rebates (residential, commercial, and low income), a slight decrease from
2022 of $854, as required to meet our energy savings goal mandate.
ATTACHMENTS:
Preliminary 2023 Electric Expense Budget
Preliminary2023 Water Expense Budget
2023 Conservation Improvement Program Budget Summary
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