4.5 ERMUSR 12-13-2022��i
Elk River
Municipal Utilities UTILITIES COMMISSION MEETING
TO:
FROM:
ERMU Commission
Theresa Slominski - General Manager
MEETING DATE:
AGENDA ITEM NUMBER:
December 13, 2022
4.5
SUBJECT:
Competitive Rates Policy
ACTION REQUESTED:
Approve proposed ERMU Commission Policy G.5b - Competitive Rates.
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. 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 procedures, forms, and specifications that should fall
under the responsibility of management. A consultant, Collaboration Unlimited, was utilized for
phase one of this project, to develop the core governance policies. In February 2017, the core
governance policies were developed and approved 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. G.5 items remained to be completed.
DISCUSSION:
Section 5 of the Commission Policies is Goals and Results, G.5, and had 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 the Commission and staff parameters for determining
appropriate margins and rates that are reasonable and justifiable to our customers, allowing for
the emotion to be removed from decision making, and provide consistency year to year.
The first of these policies, G.5a Margins, was presented in October. The second policy, G.5b
Competitive Rates is presented this month. The intent of this policy is to provide information,
ideally prior to budget preparation, for analysis of how our customers may perceive our rates
compared to our surrounding communities. Information will be obtained from state and federal
agencies and so will lag a year but can still provide good context for upcoming current year
budget decisions. Ideally, there will be ten years of data to compare, and the policy is written to
accomplish that. Electric information was available to present a ten-year history to start,
however, water information was only available to present a five-year history. We will have to
increase to a ten-year water history over the next five years. The tiered data for water will not
Page 1 of 2
57
be updated annually, it will be updated when rate studies are conducted as an annual source is
not available.
The full policy is attached for reference and approval. Also attached are sample graphs that
would accompany the annual presentation to the Commission.
ATTACHMENTS:
• Proposed ERMU Policy- G.5b -Competitive Rates
• Sample Report including Electric and Water graphs
Page 2 of 2
m
%/
Elk River
Municipal Utilities
COMMISSION POLICY
Section:
Governance
Category:
Results Policies
Policy Reference:
Policy Title:
G.5b
Competitive Rates
PURPOSE:
Competitive rates play a critical role in customer satisfaction, economic development
opportunities, and business retention. The organization's Mission includes the statement that the
services provided are "cost effective." And the organization's Fundamentals and Values both
specify "competitiveness." These defining organizational position policies reflect the expectations
of the customers, the consumer -owners. With this policy, the Commission recognizes the
importance of remaining competitive through strategic short-term and long-term planning,
budgeting, and rate design.
Consistent will all Results Policies, the Commission shall establish clear expectations for
producing the right results for the right people in the right way. With this policy the Commission
affirms their commitment to the Organization Fundamentals Policies prioritizing financial and
organization health by establishing reporting requirements regarding the competitiveness of rates.
POLICY:
To provide the Commission with the information needed, in a timely manner, for evaluation of rate
competitiveness, the General Manager annually provides a rate competitive analysis report to the
Commission prior to rate setting for the following budget year. The report shall include the
following information:
1. Electric
a. Report the blended $/kWh effective electric rate data (total revenue collected/total
kWh sold) as available through the U.S. Department of Energy, Energy
Information Administration, Form EIA-861. The report shall include ten-year trend
data graphing ERMU electric rates compared to neighboring competitor electric
utilities. Recognizing that the data release lags one year, the intent of the report
shall be to provide graphical trend data for long term planning rather than short
term comparisons. The report shall be provided to the Commission annually prior
to rate setting for the following budget year.
Page 1 of 2
59
ERMU Commission Policy — G.5b - Competitive Rates
b. Report customer class rate analysis comparing ERMU electric rates to neighboring
competitor electric utilities. The report shall include ten-year trend data graphing
ERMU electric rates compared to neighboring competitor electric utilities. The
intent of this is to show, from a customer perspective, how rate competitiveness
would be perceived currently. The report shall include all rate classes or other
unique customer types within rate classes.
2. Water
a. Report tiered water rate comparisons, as available locally sourced. The report shall
include data graphing ERMU water rates compared to neighboring water utilities.
The intent of the report shall be to provide trend data for long term planning rather
than short term comparisons.
b. Report customer class rate analysis comparing ERMU water rates to neighboring
communities, as available through regional AE2S survey reports. The report shall
include ten-year trend data graphing ERMU water rates compared to neighboring
competitor water utilities. The intent of this is to show, from a customer
perspective, how rate competitiveness would be perceived currently. The report
shall include all rate classes.
POLICY HISTORY:
Proposed December 13, 2022
Page 2 of 2
.0
Elk River Municipal Utilities
Competitive Rate Comparisons
2012-2021
61
Electric Residential Rates
Electric Residential Retail Rates for the state of Minnesota are represented in the graph below with ten
years of history from 2012 to 2021. All information is obtained from the EIA annual reports. The rate is
represented in cents per kWh and compares the minimum, maximum, 25th percentile, 501h percentile,
and 75th percentile (represented in the line graphs) to Elk River Municipal Utilities (represented in the
vertical bar graphs.) Since 2018 ERMU has been moving from above the 75th percentile to below the 75th
percentile, and closer to the average and 501h percentile.
Residential� Re -tad Rates MN
ren Year History
2.012 2.013 2.01A 2 015 2.016 2.017 2.018 2.019 2020 2.021
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII EIlk Ri ver Avg Max Min
_7 th percentHe 50th percentile
Electric Residential Retail Rates for peer utilities (selected for population size and meter counts, as well
as the two neighboring Coops and the one IOU) in the state of Minnesota are represented in the graph
below with ten years of history from 2012 to 2021. The rate is represented in cents per kWh and
compares the rates of peer utilities to ERMU. Since 2018 ERMU has been moving from the top of the
rates to more the mid -range of rates.
INI
IN
IN
A
I
I
Residential� Re -tad Rates MN
ren Year History
2.012 2.013 2.01A 2 015 2.016 2.017 2.018 2.019 2020 2.021
.:.Ilk R$ ver Al(-'XuarerdHa -Anoka
Chaska -Shakopee
Con nexus Mgh�t..V.iennepin Xcel
Austin
VVit IIIrnar
63
Electric Commercial Rates
Electric Commercial Retail Rates for the state of Minnesota are represented in the graph below with ten
years of history from 2012 to 2021. All information is obtained from the EIA annual reports. The rate is
represented in cents per kWh and compares the minimum, maximum, 25th percentile, 501h percentile,
and 75th percentile (represented in the line graphs) to Elk River Municipal Utilities (represented in the
vertical bar graphs.) ERMU has consistently been just above the 75th percentile.
30.00
28.00
2.0.00
2.4.00
2.2..00
2.0.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2..00
0.00
oirnirn it it ll Rend Rats MN
rein Year History
2.012 2.013 2.01A 2 015 2.016 2.017 2.018 2.019 2020 2.021
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Elk River Avg; _Max Mii J
_7 th percentile 50th percere Lillle-2 ,th percentile
Electric Commercial Retail Rates for peer utilities (selected for population size and meter counts, as well
as the two neighboring Coops and the one IOU) in the state of Minnesota are represented in the graph
below with ten years of history from 2012 to 2021. The rate is represented in cents per kWh and
compares the rates of peer utilities to ERMU. ERMU has consistently been near the top of the rates for
commercial.
EM
NM
mm
MM
'Oirnirn it it ll Re -tad Rats MN
rein Year History
2.012 2.013 2.01A 2 015 2.016 2.017 2.018 2.019 2020 2.021
OEM Ilk Ri ver ....n... AlexandHa -Anoka
Chaska 0uvsL o n n Shakopee
Care nexus VVrght V-iennepin Xcei
Austin
W IIIIrentsr
65
Electric Industrial Rates
Electric Industrial Retail Rates for the state of Minnesota are represented in the graph below with ten
years of history from 2012 to 2021. All information is obtained from the EIA annual reports. The rate is
represented in cents per kWh and compares the minimum, maximum, 251h percentile, 501h percentile,
and 751h percentile (represented in the line graphs) to Elk River Municipal Utilities (represented in the
vertical bar graphs.) ERMU has consistently been at the 751h percentile.
ISM
em
Om
mm
lin uMustiril ll Re -tad Rats MN
ren Year History
2.012 2.013 2.01A 2 015 2.016 2.017 2.018 2.019 2020 2.021
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Elk River Avg; _Max Mii j
7 'th percentile 50th percer Lillle-?,'th percentile
Electric Industrial Retail Rates for peer utilities (selected for population size and meter counts, as well as
the two neighboring Coops and the one IOU) in the state of Minnesota are represented in the graph
below with ten years of history from 2012 to 2021. The rate is represented in cents per kWh and
compares the rates of peer utilities to ERMU. Since 2018 ERMU has moved from near the top of the
rates to the middle of the range for industrial.
9M
lndustirial� Rend Rates MN
ren Year History
2.012 2.013 2.01A 2 015 2.016 2.017 2.018 2.019 2020 2.021
ERM Ilk Re ver ........AlexandH ioua0000000rAnoka -Austin
>Chaska amiouuuuuuuuuuuuuuuuuud,.)Vva't'C)nna-Shakopee WHIrnar
Care nexus VVrght V-iennepin Xcel
67
Water Rate Tiers
The graph below compares the tiers charged by Metro Cities in the state of Minnesota, with information
gathered internally. The cities represented are St. Louis Park, Eden Prairie, Minnetonka, Maple Grove,
Lakeville, Plymouth, Bloomington, Burnsville, Woodbury, Apple Valley, Edina, Chaska, Shakopee, Anoka,
and Elk River. Some cities have four and five tiers, while ERMU only has three tiers. ERMU is near the
average in the first tier and third tiers and is near the maximum in the second tier.
rier Compairison with Metro Cities
$6.00
$ .00
$4.00
$3.00
$2.00
$:b..00
$0.00
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Water Residential Rates
Water Residential Retail Rates for peer utilities (selected for population size and meter counts) in the
state of Minnesota are represented in the graph below with five years of history from 2018 to 2022. All
information is obtained from the Advanced Engineering and Environmental Services (AE2S) annual
survey reports. The rate is represented as the charges for 6,000 gallons of residential water use per
month. ERMU has consistently been near the bottom of the rates.
35.00
33.00
31.00
29.00
27.00
25.00
23.00
21.00
19.00
17.00
15.00
Hive Year History
2018 2019 2020 2021 2022
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII EIlk Ri ver .n...... Alexa rorNHa-Aus'tin
Chaska WHIIrnar muuuuuum Owatonna
Water Commercial Rates
Water Commercial Retail Rates for peer utilities (selected for population size and meter counts) in the
state of Minnesota are represented in the graph below with five years of history from 2018 to 2022. All
information is obtained from the Advanced Engineering and Environmental Services (AE2S) annual
survey reports. The rate is represented as the charges for 18,000 gallons of commercial water use per
month. ERMU has consistently been near the bottom of the rates.
75.00
70.00
65.00
60.00
.00
0.00
45.00
40.00
35.00
30.00
o irn irn it it ll Wateir Rates
Five Year History
2018 2019 2020 2021 2022
IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII E Ilk Ri ver .....�.. Alexa rdHa Austin Chaska VVfilI nar
70