Board Members present: Susie Smith, Mike Dyer, Sandra Bishop, Dorothy Anderson, and Peter Bartel.
Others present: Randy Berggren, Tom Buckhouse, Mel Damewood, Marty Douglass, Brad Edwards, Cathy Hamilton, Dick Helgeson, Everett Jordan, Dave Koski, Garry Kunkel, Mike Logan, Mat Northway, Jim Origliosso, Dick Varner, Debra Wright, John Yanov, and Krista Hince of the EWEB staff; Bob Brady, Black & Veatch, EWEB's Independent Engineer, Roxie Cuellar, and John Van Landingham, members of the public, and Daniel Lindstrom, Minutes Recorder.
President Smith called the October 5 Meeting of the Eugene Water & Electric Board (EWEB) to order at 7:35 p.m.
AGENDA CHECK
President Smith determined that there were no requests for changes to the distributed agenda.
CONSENT CALENDAR
President Smith noted that items presented for approval on the Consent Calendar included the following:
General Manager Randy Berggren explained that the proposed Contract with Arbor Tree Service continued to be questioned by another bidder, but that approval of the contract was required before an appeal could be filed.
Vice President Dyer requested that the Arbor Tree Service Contract Award be removed from the Consent Calendar to enable the Board to engage in additional discussion regarding it.
Vice President Dyer moved, seconded by Commissioner Bartel that the October 5, 1999, Consent Calendar be approved, without the Contract Award to Arbor Tree Surgery. The motion was adopted unanimously, 5:0.
ITEMS FROM BOARD MEMBERS
Commissioner Bartel reported that he and Commissioner Bishop had attended the Northwest Energy Coalition conference in Seattle and had found it to be interesting and have general value for EWEB. He expressed appreciation for the opportunity to attend.
Commissioner Bishop reported that she had also found the conference to be interesting and enlightening, especially regarding renewable energy resources and conservation. She said requiring agreement to certain principles before becoming a member was a major reason the coalition was effective. She reported that Electric Division Director Garry Kunkel and Legislative Representative Libby Henry had also attended.
Commissioner Bishop reported that she and other Commissioners had held discussions with staff regarding budget shortfalls and staff reductions being considered. She requested that the issues involved be considered in a public meeting to allow a report of the discussions. She said she preferred to have the matter placed on the agenda at a later meeting. Mr. Berggren stated that the matter would be added to the agenda of the meeting scheduled for October 19.
CORRESPONDENCE
Mr. Berggren noted that he had distributed information at the beginning of the meeting regarding EWEB's observance of Public Power Week.
Mr. Berggren reported that a memorandum had been circulated among Commissioners from Risk Manager Debra Wright regarding a request to make a contribution to pay attorney's fees for an arbitration and the EWEB decision to not do so. He noted that Vice President Dyer had raised questions in the past regarding practices which had generated the arbitration - requiring that fees be paid in advance, not providing for deposits and postponed payments.
Vice President Dyer said fee payment was part of his broader concern about how EWEB did business - scheduling of work, timely completion of work, how to better serve customers, and how EWEB can get security while allowing developers or contractors adequate flexibility to pay for work. He said he was anxious that EWEB services be provided to customers in a positive way. Mr. Berggren replied that he would prepare a background report on the issues involved for consideration by the Board.
Commissioner Bartel said he was convinced that EWEB should not take customers' money without doing work.
Commissioner Bishop said she would have preferred that a less formal response to the concerns of the customer had been provided in the matter referred to in the memorandum of Ms. Wright. Ms. Wright replied that EWEB's relationship with the contractor in question had been strained for some time and that the attorney's letter attached to the memorandum had been intended to carefully state issues from the EWEB perspective.
Commissioner Bishop said she believed the parties involved in the issue needed to be informed that the matter had been presented to the Board and that it intended to follow the advice of its attorney.
President Smith said she believed customer perception of EWEB services was important and that if similar concerns were raised again, a negative situation could result. She said she wanted the Board to consider EWEB business practices. Mr. Berggren replied that he would provide background on the issues involved for the Board's consideration.
Mr. Berggren determined there was consensus to hold a three-to-four hour Board Work Session on Financial Strategies on October 22 at 5:30 p.m.
Mr. Berggren discussed items to be included on the agenda of the Board Work Session and Special Meeting scheduled for October 19. He noted that a thirty minute Executive Session would be held at 7:30 p.m. Commissioner Bishop reported that she would arrive late for the Work Session.
PUBLIC INPUT
President Smith determined there was no one present who wished to address the members of the Board.
WATER UTILITY SYSTEMS DEVELOPMENT CHARGE PROPOSAL
Senior Rate/Financial Analyst John Yanov said the Board was about to hold the first of two public hearings regarding proposed changes to the Water Utility Systems Development Charge (SDC). He referred to his memorandum regarding the proposal dated September 30 distributed with the agenda of the meeting.
Mr. Yanov stated that the SDC was a fee levied on new development to cover the cost of new system facilities. He said SDC allocated the cost of increased demand to those who caused the demand. He reminded Commissioners that the SDC reserve was currently funding improvements to the water system.
Mr. Yanov reviewed the use of SDCs by the Water Utility and explained that the proposed rates would use the methodology of the past, but incorporated anticipated costs of the Water Supply Plan, Capital Improvement Plan, and the reduction in available excess capacity from 8.7 percent to 3.1 percent. He reviewed the process and schedule being followed which would lead to the proposed rates becoming effective January 3, 2000.
Mr. Yanov discussed consultant review, load projections, Capital Improvement Plan, SDC components, draft revised charges, and a public opinion survey regarding the proposed rate changes.
Water Division Director Dick Helgeson referred his memorandum regarding Water SDC dated September 30, distributed at the beginning of the meeting. He reviewed policy considerations included in the proposed rates, as follows:
Commissioner Bishop stated that she had expressed concern about the timing of the payment of SDC. She referred to a September 29 memorandum from Treasurer Jim Origliosso, regarding the financing of SDC. She said the memorandum was a deeper investigation of the topic than she had anticipated because she had only intended to consider later payment of fees by developers.
Commissioner Bishop stated that she was being "converted" to believing later payment did not give significant advantages to developers and "played havoc" with EWEB financing processes. She said she was now convinced postponing SDC payments had few advantages and that developers currently had a great deal of flexibility in payment of them. She said she did not believe the topic was worth further consideration.
PUBLIC HEARING
President Smith determined Commissioners had no further questions or comments and opened the Public Hearing.
Roxie Cuellar, 1255 Pearl Street, Eugene, stated that she was Director of the Lane County Home Builders Association. She said her association had determined their previous opposition to SDC on the basis of their increasing the cost of new housing had not been effective and opposed the proposed fee changes because their uses were inappropriate.
Ms. Cuellar said her Association did not believe that using SDC to develop wells as a back up resource to be used in the case of disaster was an appropriate charge to new development because doing so did not increase the capacity of the system.
Mr. Helgeson replied that only 13 percent of the cost of the development of wells which was attributable to new development was being proposed for payment by SDC. Vice President Dyer said he understood that well development was planned as a secondary source to be used only in the case of an emergency. Mr. Berggren replied that wells might also be used to meet needs of peak usage times.
Ms. Cuellar pointed out that if the cost of well development were removed from SDC, the proposed cost increase would be reduced by $123.
Ms. Cuellar said her Association did not believe that using SDC to provide for staff improvements was related to capacity increases because there was no correlation between the number of single family units reported to be developed in the SDC proposal and the additional capacity indicated by the recently completed Eugene-Springfield Residential Land Study.
Ms. Cuellar said her Association did not believe that using SDC for administrative fee increases was appropriate because the change raised the cost of administering the program to $116,000 a year.
Ms. Cuellar said her Association did not believe automatically increasing SDC fees based on a published construction cost index was appropriate because Oregon construction costs were lower than national averages.
Ms. Cuellar said that residential construction in Lane County was slowing and that basing completion of Water Supply Plan projects on SDC income was a risky assumption.
Ms. Cuellar said her Association believed that any delay in the SCD fee payment timing would be positive for developers because it would decrease the costs passed on to home buyers. She said payment at the time of the sale of the home or on occupancy by purchasers were more advantageous because they would reduce interest developers would be required to pay on loans developers took to pay fees at the time permits were secured.
Commissioner Bishop asked when home builders added a "margin" to the purchase price of a dwelling unit. Ms. Cuellar replied that such a profit was added after all expenses involved in construction were calculated.
President Smith thanked Ms. Cuellar for her testimony, determined there were no other persons present wishing to testify, and closed the public hearing.
Commissioner Bartel requested that staff reply to issues raised by Ms. Cuellar.
PROPERTIES AND OPERATIONS REPORT
Mr. Origliosso introduced Mr. Robert Brady, who he said was EWEB's Independent Engineer and representative of Black & Veatch. He said the purpose of the report he had prepared was to assure bond holders of the ability of EWEB to pay its debt service.
Mr. Brady distributed copies of a document entitled "Properties and Operations of the Eugene Water & Electric Board for the Period 1994-1998 - Presentation" and stated that it was a summary of his full report which had previously been distributed to the Board. He reviewed information contained in the document.
Mr. Brady stated that his report addressed management of the utility; sufficiency of rates and charges; operation and maintenance; and repairs, renewals, and replacements. He said its overall conclusion was that EWEB had performed commendably and complied with the covenants, agreements, and conditions set forth in bond resolutions with respect to each of the areas.
Mr. Brady reviewed notable findings of his report, as follows:
Management
Financial Operations
System Operations
Rates
Vice President Dyer asked if there were professional guidelines and practices followed in preparation of the report of Mr. Brady. Mr. Brady replied that such standards were set at the discretion of each firm involved. He said Black and Veatch sought to ensure that all aspects of a utility were studied and that due diligence was used to form opinions about its viability.
Commissioner Bishop asked what would indicate that a utility should not be rated highly. Mr. Brady replied that declines in debt service capacity, operating rations, and bond ratings would provide such an indications.
Ms. Bishop said that she appreciated the clarity of the report of Mr. Brady.
President Smith expressed appreciation to Mr. Brady for his report.
INDUSTRIAL AND LARGE COMMERCIAL CUSTOMERS WINDPOWER RATES
Energy Management Services Manager Mat Northway reviewed WindPower rates available to residential customers. He also reviewed development of the $31 per month per 1,000 kilowatt rate proposed for EWEB's industrial and largest commercial customers as presented at the September 21 meeting of the Board.
President Smith asked how the proposed rates would be publicized to appropriate customers. Mr. Northway replied that a direct mail approach would be used.
Commissioner Bishop asked when WindPower rates would be reviewed. Mr. Northway replied that such a review was planned every three years. Mr. Varner added that it would be possible to also review the rates at any other time.
Commissioner Bartel asked what was the goal for WindPower subscription. Mr. Northway replied that it was hoped that 50 percent of the WindPower power would be purchased by 2000.
President Smith asked what action was planned if the subscription goal was not met. Mr. Northway said rates would be reviewed and additional alternatives considered, such as determining if the WindPower could be sold on the wholesale market.
President Smith determined that Commissioners had no further questions and opened the public hearing. She determined that there was no one present wishing to testify and closed the public hearing.
Vice President Dyer moved, seconded by Commissioner Bishop, that the Board establish a WindPower monthly rate of $31 per 1,000 kilowatts units for industrial and large commercial customers. The motion was adopted unanimously, 5:0.
MAJOR CUSTOMER MEETING
Commercial/Industrial Programs Section Manager Mike Logan referred to his memorandum dated September 29 regarding a major customer reception scheduled for October 13. He described the event and stated that 12 of the largest 20 EWEB customers had already indicated they were sending representatives. He reviewed the topics of interest as indicated by attendees and encouraged Commissioners to be present.
ITEMS REMOVED FROM CONSENT CALENDAR
President Smith reminded Commissioners that the Contract Award to Arbor Tree Surgery had been removed from the Consent Calendar to enable it to be further discussed.
Commissioner Bishop referred to the memorandum from Electric Operations Manager Dave Koski related to the contract dated September 30 distributed with the agenda of the meeting. She asked which of the other bidders for the contract were local and which were unionized. Mr. Koski replied that all companies bidding for the contract were from out of state and that all were non-union operations.
Vice President Dyer replied that he was concerned that the proposed Contract Award to Arbor Tree Surgery was for $240,000 more than the bid of another company. He asked if each of the bidders had a similar quality assurance program and whether EWEB had ever done business with other bidders for the contract. Mr. Koski replied that the lowest bidder for the contract had responded to EWEB's request for a quality assurance program with a one-page description, whereas Arbor Tree Surgery had submitted a full notebook describing its established program. He said that when EWEB had previously changed to Arbor Tree Surgery, the quality of the service greatly improved. He said he believed Arbor provided superior value in comparison to other services.
Vice President Dyer asked how payments were made on the contract under consideration. Mr. Koski replied that payment was based on services provided. Electric Division Director Garry Kunkel added that the contract cost was an annualized expense.
Commissioner Dyer said that he had been unaware of issues related to quality of work involved in the recommendation to award the contract to Arbor Tree Surgery and that he appreciated the comments of staff. He said he believed it was important to get the job done right and to maintain customer satisfaction.
President Smith said that she believed tress were a sensitive issue in Eugene and that she did not want to have EWEB contract for poor quality tree trimming services.
Mr. Berggren stated that if the proposed Contract Award were approved, an appeal of the bidding process might be filed.
Vice President Dyer moved, seconded by Commissioner Bartel, that the tree trimming Contract Award to Arbor Tree Surgery be approved. The motion was adopted unanimously, 5:0.
The meeting adjourned at 9:30 p.m.
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Assistant Secretary President