Board Members present: Jeff Osanka, Mike Dyer, Sandra Bishop, and Dorothy Anderson. President Smith was excused.

Others present: Randy Berggren, Cathy Bloom, Tom Buckhouse, Garilyn Crowley, Terry Eberline, Dick Helgeson, John Mitchell, Laurie Power, Scott Spettel, Dick Varner, and Krista Hince of the EWEB staff; and Don Haagensen, Special Council.

In the absence of President Smith, Vice President Osanka called the meeting to order.

1999 BUDGET ASSUMPTIONS

Referring to a memorandum included in the meeting agenda packet and materials distributed to the Board, Fiscal Services Supervisor Dick Varner and Power Management & Planning Manager Scott Spettel presented an overview of EWEB's 1999 Budget assumptions and constraints specific to the Electric, Water, and Steam Divisions and labor and benefits.

Mr. Varner reported that labor and benefits is predicted to impact the budgets of all three utilities by 2 percent. He explained that the increase in labor and benefits cost is the result of several factors, including

1. EWEB's new compensation system
2. PERS increase
3. increase in medical insurance costs

With regard to the projected Electric Utility budget, Mr. Spettel predicted no increase in non-labor O&M, reduced production from Priest Rapids and Wanapum due to fish issues, spot prices for electricity significantly above 1998 budget, and contractual increases in prices for five-year contracts. Mr. Spettel noted that budget assumptions include that half the costs associated with EWEB's wind power project are paid from current revenues and half from a combination of green power subscriptions and public purposes money, and load growth in residential and general service is offset by reductions at Weyerhaeuser and Hyundai.

Mr. Spettel presented a brief overview of the EWEB 1999 Purchase Power Budget Executive Summary and supplemental graphs, comparing 1998 budgeted power purchase totals with those of 1999.

With regard to the 1999 Water Utility budget, Mr. Varner predicted a three percent increase in non-labor O&M costs, increased revenue due to customer and sales growth and full-year effect of 1998 rate increase, ability to balance the budget with no rate action, and slowing in system development charge (SDC) collections due to slowing in development. Noting that work on EWEB's Water Supply Plan will begin in the near future, Mr. Varner said the plan will likely be financed by SDC revenue and will therefore have no impact water rates.

With regard to EWEB's 1999 Steam budget, Mr. Varner predicted a three percent increase in non-labor O&M. He said budget assumptions include

1. staffing reduction taken in early 1998
2. no generation credit
3. pass through of fuel cost increases
4. reduction in sales to EWEB due to headquarter-area improvements

Commissioner Bishop said she does not think EWEB can justify retaining its accumulated assets given the pending rate increase. Commissioners Dyer and Osanka agreed.

The meeting adjourned at 7:40 p.m.