5.2 EMRUSR 10-08-2024��i
Elk River ,
Municipal Utilities UTILITIES COMMISSION MEETING
TO:
FROM:
ERMU Commission
Melissa Karpinski — Finance Manager
MEETING DATE:
AGENDA ITEM NUMBER:
October 8, 2024
5.2
SUBJECT:
2025 Annual Business Plan: Electric
and Water Expenses
ACTION REQUESTED:
None.
DISCUSSION:
In preparation for budget submittal in November, staff continues to work through the 2025
budget process. The first draft of the expense portion of the 2025 budget has been completed
for commission review. Items are subject to change as the complete 2025 budget is assembled
and the finalized wholesale power costs and revenues are reflected. Revenues and rates,
wholesale power costs, and Conservation Improvement Program for 2025 will be presented in
November.
Attached is the following information for your review. Additional budget details are available
upon request. Please contact staff for additional information.
Electric Department Expense Budget —The 2025 budget for electric expenses is a 4.4%
increase compared to the current year's budget (excluding purchased power). It is
noteworthy that the 2024 forecast for expenses (excluding purchased power) is a 0.3%
decrease compared to budget. Wholesale power costs make up around 70% of the
operating budget and will be provided in next month's budget with the revenue
projections. Most notable accounts are for other operating expenses due to the disposal
of meters (loss of capital) for the Advanced Metering Infrastructure (AMI) project and
estimated pension expense due to GASB 68 (this entry is prepared at year-end by our
auditors). It is planned to bring in contractors again in 2025 for tree trimming. There will
also be a focus on mapping in 2025. Additionally, there is an expected 12.55% increase
to health insurance premiums. These preliminary expense numbers will likely be
adjusted during the next phase of budgeting when the 2025 rates are designed.
The 2024 budgeted purchased power cost amount was $32,756,447. The 2025
projected wholesale power cost increase has yet to be communicated to ERMU.
Preliminarily we are applying last year's wholesale power rates (may vary slightly when
the rate formula is applied to ERMU's load profile and anticipated growth). When
factoring the preliminary wholesale power cost forecast and the preliminary electric
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department expense budget, the overall preliminary electric department expense
budget increase is 1.2% compared to 2024 budget.
The budgeted Payment in Lieu of Taxes (PILOT) amount for 2025 is $1.934 million.
PILOT is comprised of $1.669 million based off 4% of the city of Elk River sales
calculation, and $265,000 in donated utilities and labor. This preliminary projection will
change when revenue is budgeted for next month.
2. Water Department Expense Budget —The 2025 budget for water expenses is an 8.6%
increase compared to the current year's budget. It is noteworthy that the 2024 forecast
for expenses is a 3.4% decrease compared to budget. Most notable accounts are
depreciation which is due to large capital projects being put into service, maintenance
of wells, and medical insurance due to an expected 12.55% increase to premiums.
3. Both Electric and Water budgets have been built with a wage adjustment of 3.67% on
January 1, 2025. Water is anticipating adding an additional water operator with the
increased workload of the additional wells, treatment plants, and AMI project. An
additional administrative specialist is also slated for 2025.
ATTACHMENTS:
• Preliminary 2025 Electric Expense Budget
• Preliminary 2025 Water Expense Budget
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