Board Members present: Susie Smith, Mike Dyer, Sandra Bishop, Dorothy Anderson, and Peter Bartel.
Others present: Randy Berggren, Terry Bequette, Marty Douglass, Dick Helgeson, Eric Hiaasen, Garry Kunkel, Jim Maloney, Roseanna McArthur, John Mitchell, Mat Northway, Jim Origliosso, Scott Spettel, Dick Varner, and Krista Hince of the EWEB staff; members of the public; and Daniel Lindstrom, minutes recorder.
President Smith called the Work Session of the Eugene Water & Electric Board (EWEB) to order at 5:30 p.m.
Resource Planning Analyst Jim Maloney stated that the purpose of the Work Session was to review and discuss the results of a preliminary analysis of the "Composite Strategy" to meet EWEB power supply needs for the next 20 years. He said discussion would focus on two of the fundamental questions:
Mr. Maloney said the third fundamental question would be discussed at a future meeting:
How should the portfolio(s) of market purchases and sales be composed?
Mr. Maloney referred to his memorandum dated March 31 regarding the Composite Strategy distributed with the agenda of the meeting. He noted that it identified assumptions in the strategy analysis. He described the strategy to be considered, as follows:
Mr. Maloney distributed a packet of graphs, spreadsheets, and other data related to the Composite Strategy analysis --"Projected Annual Power Costs," "Average Power Prices," "Average Power Prices with DSM Costs Added," "Power Budgets With and Without Carbon Tax," "Savings from DSM," "CO2 Reductions from DSM," "Working Margin," "Power Budgets," "Average Costs," and "Average Monthly Power Charge." He said the new material reflected more accurate and current data than had been included in his earlier memorandum.
Mr. Maloney reviewed the planning criteria previous discussed by the Board -- the Affordability Objective, the Sustainability Objective, the Environmental Stewardship Objective, the Customer/Owner Responsiveness Objective, the Long-Term Vision Objective, and the Flexibility and Diversity Objective. He referred to diagrams of factors influencing each objective included in the material distributed.
Mr. Maloney reviewed conclusions reached about the Composite Strategy in relationship to the criteria, as follows:
Mr. Maloney invited the Board to comment on the analysis.
Commissioner Anderson asked why the cost of acquiring renewable resources was not incorporated into the non-power portion of the unbundled rates. Mr. Maloney replied that EWEB power customers would pay acquisition costs whether they were included in either portion of the rates. In contrast, he said it was possible to argue that DSM was an investment in the community, no matter who was the power provider. Power Resources and Planning Manager Scott Spettel added that recovered retail marketing costs via a "green power" marketing program allowed the acquisition of additional renewable resources above the one percent acquisition rate.
President Smith pointed out that the decision to not embed the cost of acquiring renewable resources in power rates applied only to the pilot wind generation project. Mr. Maloney added that adding the cost of acquisition incrementally allowed future re-evaluation in the face of uncertainty.
Mr. Spettel reported that a recent study showed that one-half of customers in California who changed power suppliers did so to acquire service from companies providing renewable power. Resource Planning Analyst Eric Hiaasen added that the analysis was attempting to determine the level of renewable resource acquisition possible while adhering to the Affordability criterion.
Commissioner Dyer said he was concerned that the term "Affordability" was relative to individual situations. He suggested that it might be better to ask whether a strategy was "the lowest in cost" compared to the bench mark.
Mr. Maloney responded by saying that if the Board had established "lowest" cost as the only criteria then that would by the case. Since we had identified other factors such as sustainability, environmental impacts, and flexibility we needed to make some trade-offs between costs and the other objectives. He also observed that costs are only a piece of the affordability question and that rate design was crucially important.
President Smith said she was pleased with the way the process and the analysis had brought the Boards' various perspectives together. She said she believed the proposed one percent annual increase in renewable resources allowed consideration of meaningful progress toward an important goal.
Commissioner Bishop said she found it difficult to comprehend the details of the analysis. She said the large number of assumptions reduced its "reality level." She pointed out that energy-related assumptions of the last two decades had not proven accurate.
Mr. Hiaasen said he agreed that assumptions made were uncertain, but suggested that proposing small incremental additions in renewable resources and conservation allowed for correction of the strategy in the future. President Smith added that some kind of assumptions would be made about any type of resource strategy chosen.
Commissioner Bartel asked what kind of small renewable resources were available. Mr. Maloney said that examples could include purchases of "green power" resources from the Bonneville Power Administration (BPA) and purchase contracts with newly developed or expanded renewable generating sources.
Commissioner Bartel asked what was the "weirdest" effect of sensitivity testing the assumptions. Mr. Maloney replied that the imposition of a carbon tax had the greatest single effect. He said the actual effects of all assumptions would be better understood as the plan to implement the strategy was developed. He said he would add development of such a plan to his "to do" list.
Mr. Spettel also mentioned that the recommendation of the citizen involvement committee to build natural gas power generating resources along with new renewable resource was surprising to him.
President Smith asked what stress factors would be considered in further analysis of the strategy. Mr. Maloney replied that it would be possible to test whether there was sensitivity to low rates of local growth, what would need to happen to increase the difference between the strategy and the base line scenario to ten percent, and what if assumptions made about the cost of renewable resource development were too low.
Commissioner Bartel asked what a one percent increase in renewable resources would cost. Mr. Maloney replied that such an increase would cost approximately $600,000 in the year 2000. Financial Services Supervisor Dick Varner said that such a cost could be expensed as operating costs or be debt financed. Treasurer Jim Origliosso suggested that use of rates to acquire revenue for expanding renewable resources simply as operating costs would be less expensive than issuing debt because the use of bonds involved payment of interest.
President Smith said she appreciated the Composite Strategy because it was "target focused" and provided a long-term vision with "ultimate control." She said adoption of such a strategy would not be an unchangeable commitment, but would allow reevaluation and adjustment through the annual budget process.
Commissioner Bartel said he was concerned that an annual one percent investment in renewable resources was too cautious of an approach. He asked what the result would be of a higher commitment to such purchases. Mr. Maloney replied that such an approach would result in exceeding the benchmark cost. He pointed out that while the one percent increase was low, its incremental and cumulative nature resulted in a significant commitment to renewable resources in 20 years.
Commissioner Anderson asked how re-licencing costs for the Carmen Smith generating resource had been incorporated into the analysis of the strategy. Mr. Maloney replied that $500,000 had been incorporated in 2000 and $1.5 million in each year thereafter. He said it had also been assumed that its generation capacity would continue at current levels, despite the potential of required changes.
Commissioner Bishop asked if it would be possible to consider the effects of adding generation capacity which did not completely rely on renewable resources. Mr. Spettel replied that such a contingency could be reflected in the market purchase element of EWEB's portfolio, had not yet been fully analyzed, and would be discussed at a latter Work Session.
Commissioners Anderson and Bishop expressed appreciation for the work of staff in providing analysis of the Composite Strategy.
Commissioner Dyer said he was disturbed at the large difference between the projected cost of the Composite Strategy and that of buying power off the market.
President Smith said the community appeared to support addition of renewable generation resources.
Commissioner Bishop said she believed adjustments to EWEB's commitment to increasing renewable resources needed to be more detailed and immediate than was possible through the budget process. She said staff would need to be aware of changes required on a daily basis. Mr. Hiaasen said renewable resource power purchases would likely be in the form of long-term contracts and would be reviewed by the Board. He said short-term purchases would be discussed at the next Work Session.
President Smith determined that there was no objection to asking staff to continue analysis of the Composite Strategy with the assumption of an annual one percent increase in the use of renewable generation resources. Mr. Maloney said "sensitivity analysis" of major uncertainties in the strategy would be undertaken. He said a similar analysis would be made of EWEB power purchases.
General Manager Randy Berggren said that he believed the Composite Strategy was a responsible approach to resource planning. He went on to express his greater level of comfort with this strategy than with what was adopted in the 1992 Resource Plan. He said that while he had agreed with the goals the nature of the acquisition rate - large blocks instead of gradual accumulation - had seemed a little risky. He thought this proposed strategy was sound.
Commissioner Bartel said he would appreciate if a two percent increase in renewable resources would also be considered.
The Board discussed general intended outcomes of continued analysis of the Composite Strategy.
Mr. Maloney said the next Work Session on the Integrated Electric Resource Plan was scheduled for June 1.
The Work Session adjourned at 7:15 p.m.