Board Members present: Susie Smith, Mike Dyer, and Sandra Bishop. Commissioners Dorothy Anderson and Peter Bartel were absent and excused.

Others present: Randy Berggren, Terry Bequette, Cathy Bloom, Tom Buckhouse, Marty Douglass, Cathy Hamilton, Dick Helgeson, Garry Kunkel, Roseanna McArthur, Jim Origliosso, Scott Spettel, Dick Varner, Debra Wright, and Krista Hince of the EWEB staff; and Daniel Lindstrom, Minutes Recorder.

President Smith called the Work Session of the Eugene Water & Electric Board (EWEB) to order at 5:50 p.m.

1999 BUDGET STATUS

Treasurer Jim Origliosso reviewed when a Budget Amendment would be submitted to the Board for approval, as follows:

When projections indicate that any of the following may exceeded the authorized budget:

• Total expenditures of any utility
• Operating/Maintenance or Capital expenditures of any utility
• Total full-time equivalence (FTE) employees
• Total labor and benefits

When expenditures for a major capital project with an estimated cost of $200,000 or more in the Electric Utility or $100,000 or more in the Water Utility are projected to be

• Higher than project budget by 20 percent or more; or
• Higher than project budget by $100,000 in the Electric Utility or $50,000 in the Water Utility

Any new major project not in the authorized budget which has an estimated cost of $200,000 or more in the Electric Utility or $100,000 or more in the Water Utility.

Mr. Origliosso reviewed when a Budget Amendment would not be submitted to the Board for approval, as follows:

Costs which change directly with product sales, such as purchased power costs, generation costs, and in-lieu-of-tax payments.

Such costs will be tracked and recorded separately from non-power costs and reported to the Board quarterly.

Mr. Origliosso reviewed EWEB's established process for Budget Control, as follows:

• Each manager and supervisor gets a budget report by the fifth working day of the month.
• Each manager and supervisor meets with appropriate Utility director before the 15^th working day of the month to discuss the status of the budget and list variances to be taken to the Executive Management Team.
• Directors provided listed variances to Fiscal Services by the third Thursday of the month - Favorable variances are netted against unfavorable variances.
• Emergency Management Team discusses development of supplemental budget requests at its fourth meeting of the month.
• All supplemental budget requests include a funding source - such as unbudgeted reserve, borrowing, and draw-down of reserves.

Mr. Origliosso reviewed information contained in a document entitled "Summary of Projected Reserve Position - August 31, 1999" attached to his memorandum to the Board dated September15 regarding 1999 Budget and Reserve Levels distributed with the agenda of the meeting. He noted that total balances of $20,697,000 in the Electric Reserve and $8,060,000 were projected to be on-hand at the end of the year.

Vice President Dyer asked how much was projected to be spent on Year 2000 projects. General Manager Randy Berggren replied that approximately $2,000,000 would be spent on originally planned work and that an additional $500,000 to $600,000 would also be so identified because Accumulated Assets had been approved for use as the funding source for Year 2000 related elements of cost over-runs in the CAMS 2 and PAPI projects.

President Smith suggested that Accumulated Assets identified in the document discussed by Mr. Origliosso were more appropriately identified as Electric Utility Capital Reserves and should be combined with them. Mr. Berggren replied that the separation had originated when it was anticipated the assets could be designated for special projects.

Commissioner Bishop said that she disagreed because she believed Accumulated Assets indicated resources available beyond what had been budgeted for Capital Reserves and should be maintained.

Vice President Dyer said he believed the need to account for what had come to be known as Accumulated Assets had disappeared, and suggested that it would be easiest to place them in Working Cash. Mr. Origliosso replied that since the funds had been generated through Capital projects, it would be more appropriate to combine it with Capital Reserves. Mr. Berggren said he agreed and that it would be most simple to "collapse back" the Accumulated Assets from the source from which they came. Commissioner Bishop said that she agreed.

Mr. Berggren said that, in order to balance the 1999 Budget, capital funds not anticipated to be spent will need to be used to off-set operations and maintenance expenses, but that there will be more capital savings than operations and maintenance overages, and the budget will be exceeded.

Mr. Origliosso explained that appropriate Budget Amendments would be brought to the Board to enact anticipated changes in reserves described in the document attached to his memorandum and combine the Accumulated Assets Reserves with Capital Reserves in the Electric Utility.

2000 BUDGET/WORK PLAN/STRATEGIC INITIATIVES

Fiscal Services Supervisor Dick Varner reviewed the status of work on the 2000 Budget. He explained how Financial Strategies discussed by the Board at previous meetings were being incorporated into its development. He said major funding assumption changes included the following:

• $1 million would be paid out of reserves for a Land Trust purchase.

Vice President Dyer said that he needed to be shown how the $1 million would protect the McKenzie River Watershed because he would have a hard time supporting such an expenditure at a them when EWEB was being forced into a rate increase/workforce reduction of 20 full time equivalent (FTE) employees. President Smith said that she agreed it would be necessary to establish necessary criteria for the purchase. Electric Utility Director Garry Kunkel said that a Request for Proposals for the purchase/contribution was being developed.

• An Operating and Maintenance expense of $350,000 for painting Leaburg Dam would be covered out of Capital funds.
• Funding for $400,000 in labor costs would be shifted from Capital to Operating and Maintenance.

President Smith said she did not understand the reason for the shift. Mr. Kunkel explained that the shift was periodically required because of the work done by labor crews. President Smith requested that additional information be provided to the Board.

Mr. Varner described additional work in progress regarding Financial Strategies, as follows:

• The 20 FTE reduction was being implemented and expected to result in $700,000 in the Electric Utility in 2000.

President Smith said that she was concerned that staff assumed incorporation of the FTE reduction strategy, when the Board had only suggested that it be considered.

• Non-labor cost reductions were being developed and were expected to produce $700,000 in savings.
• The Power Budget should be reduced by $400,000 through fine tuning.
• Overtime and Premium Pay reductions were anticipated to produce $300,000 in savings.

Mr. Varner discussed Budget planning concerns related to WindPower, as follows:

• The marketing plan should produce 50 percent subscription in 2000, with a $250,000 revenue impact.
• Federal Production payments will be paid on a federal fiscal year bases, creating a six- to twelve-month delay in receipt of revenue.
• Federal Production payment delays will be covered out of Reserves.

Mr. Varner said that the Electric Utility Operating Budget was currently $200,000 from being in balance; the Electric Utility Capital Budget was having no major "bottom line" issues; the Water Utility Operating Budget was in good shape because of "spill over" from Electric; the Water Utility Capital Budget would be covered by the planning bond issue to cover transmission line development; and the Steam Utility Budget was slightly in deficit, but that significant effort would be made to not require a rate increase because of the large increases faced by Steam users because of increases in cost of fuel.

The work session adjourned at 7:00 p.m.

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Assistant Secretary President