City of Columbia, Missouri

Meeting Minutes

Water and Light Advisory Board

701 E Broadway

Columbia, MO

Conference Room

1A/1B

Tuesday, December 16, 2025

1:00 PM

Basic Cost of Service & Key Financial Targets

I. CALL TO ORDER

The meeting began at 1:03 p.m.

Staff: Erin Keys, Acting Utilities Director; Sarah Talbert, Assistant Director

Utilities-Rates and Fiscal Planning; Allison Anderson, Assistant Director

Utilities-Water; Todd McVicker, Utilities Services Manager; Jason West,

Communication and Outreach Supervisor; Earl Kraus, Assistant City Counselor;

Peyton Oliver, City Management Fellowship; Lacey Salazar, City Management

Fellowship; Christina Weaver, Administrative Technician II

Betsy Peters, City Council Member; Don Waterman, City Council Member

Carolyn Amparan, Public; Peter Schneeberger, Public; Maria Oropallo, Public

1 - Jennifer Coleman

Present:

Absent:

4 - Thomas Jensen, David Switzer, Philip Fracica and Ryan Westwood

II. INTRODUCTIONS

None. A round robin wasn’t done for introductions.

III, COURSE OVERVIEW, AGENDA ITEMS, LEARNING OUTCOMES

Dawn Lund with the American Public Power Association went through the agenda for

the training.

IV. CORE FINANCIAL REQUIREMENTS

Dawn Lund explained the core financial requirements. Balance sheets show assets,

liabilities, and net position. The income statement focuses on the revenue expenses

and ultimate income or losses of the utility over a given period. A cash flow statement

provides data regarding all cash inflow and outflows received from its operations and

investment activities; it can show unique cash transactions like borrowing, debt payoff,

and transfers to and from other funds. The analytical steps of setting rates are as

follows: define revenues needed to properly fund the system, equitably allocate the

revenue requirements between the various customer classes, then design rates for

each class of service to meet the revenue needs of the utility.

V. DETERMINING REVENUE REQUIREMENTS

Dawn Lund presented the requirements for determining revenue. The utility basis

methodology combines O&M expense, depreciation, and rate of return to determine

the total revenue requirements. The cash basis methodology combines the O&M

expenses (excluding depreciation expense), capital expenses, and debt service

(principal and interest) to determine the total revenue requirements. The cash basis

attempts to match cash inflows and outflows on a yearly basis, and it’s typically used

in budget preparation. The cash basis tends to result in fluctuations of rate adjustments

because the cash flow follows capital. Depreciation is a fair and equitable way to

measure the consumption of the asset in one year. It fairly spreads out the cost of the

asset over the useful life and places it in the revenue requirements each year for rate

making and leads to more stabilized rates.

VI. SETTING KEY FINANCIAL TARGETS RELATED TO COST OF SERVICE

Dawn Lund explained key financial targets related to cost of service. Debt coverage

ratio identifies cash generated by operations above the debt service payment. Debt

coverage ratios are mandated by covenants and established in bond ordinances.

When setting rates, a safety factor must be built into the coverage ratio for planning

purposes since electric sales are dependent on weather, power supply prices

fluctuate, and unexpected expenses can occur. A safety factor of 0.2 is typically

added to bond coverage requirement. Cash reserve policy should identify a minimum

cash reserve level, and there are at least five factors to consider when determining the

minimum cash: O&M expenses, power costs, historical investment in assets, annual

debt payment, and total five-year capital plan. A formal cash policy should be

developed so future management, boards and councils will continue to maintain

adequate reserve levels. A capital plan involves governing bodies strategic planning,

engineering planning, and financial planning. A power cost adjustment is an automatic

kWh charge that is passed through to customers for increasing power costs, and it

reduces the amount and frequency of rate adjustments. Adequate rate of return on

investment to help ensure current customers are paying their fair share of the use of

the infrastructure and not deferring the charge to future generations. The target

operating rate of return is typically 4-7% for municipals.

VII. COST OF SERVICE

Dawn Lund provided information on cost of service. Cost of service is a method to

equitably allocate the revenue requirements of the utility among the various customer

classes of service. Cost of service ensures rates recover costs to provide service to

customers, defines optimal rate structure, and reduces cross-subsidization between

classes. The steps of a cost of service study are as follows: define revenue

requirements, arrange costs according to function, classify functionalized costs to cost

components, and assign the classified cost to customer classes.

VIII. DETERMINING LONG-TERM RATE PLANS

Dawn Lund explained the importance of determining long-term rate plans. Customer

charges need to be corrected during rate changes. A plan needs to be set to move in

increments over time and impact needs to be looked at by usage and dollar. Surveys

can be used to help guide rate design but not guide necessity for a rate adjustment.

IX. WRAP UP, Q&A, EVALUATION

There was not a quorum so there was no discussion.

X. ADJOURNMENT

The meeting adjourned at 4:30 p.m.

To submit questions or comments to the Water & Light Advisory Board, please email

wlabpublic@como.gov

All media inquiries should be submitted to Matt Nestor at Matthew.Nestor@como.gov or Jason West at

Jason.West@como.gov

Members of the public may attend any open meeting. For requests for accommodations related to

disability, please call 573.874.CITY (2489) or email CITY@CoMo.gov. In order to assist staff in making

the appropriate arrangements for your accommodation, please make your request as far in advance of

the posted meeting date as possible.

USB DRIVES PROHIBITED: A speaker who desires to display a presentation must upload the

presentation, in advance, to the city network using an upload portal. To upload your files and learn

more, visit CoMo.gov/upload.