Board Members present: Mike Dyer, Sandra Bishop, Dorothy Anderson, Peter Bartel, and Susie Smith.
Others present: Randy Berggren, JoAnn Andersen, Louise Bangs, Terry Bequette, Ken Beeson, Tom Buckhouse, Sandy DeLung, Marty Douglass, Cathy Hamilton, Dick Helgeson, Garry Kunkel, Roseanna McArthur, Janet McClennen, Jean Meyers, Mat Northway, Jim Origliosso, Dick Varner, Pat Ventura, and Krista Hince of the EWEB staff; Kim Kunkel, Minutes Recorder; and various members of the public.
Noting the anticipated late arrival of President Dyer and Commissioner Smith, Vice President Bishop called the Work Session of the Eugene Water & Electric Board (EWEB) to order.
HYUNDAI POWER AND WATER SALES AGREEMENTS UPDATE
Referring to a memorandum, copies of which were included in the meeting agenda packet, and a series of overhead displays, Tom Buckhouse, EWEB Director of Facilities Service, presented an update on the status of EWEB's negotiations with Hyundai Semiconductor America, Inc. (HSA) regarding modifications to the power and water sales agreements. Mr. Buckhouse explained that the proposed modifications were reflective of: 1) increases in the wholesale electric markets; 2) the actual water demands placed upon the EWEB system now that Phase 1 has operational history; 3) the results of the 1998 Water Supply Plan; and 4) the results of the most recent water and electric Cost of Service Study.
Referring to Exhibits "C," "D," and "E," copies of which were included in the meeting agenda packet, Mr. Buckhouse presented a brief overview of the proposed modifications to the water sales agreement related to 1) maximum water demands; 2) water rates and charges; and 3) debt service component.
With regard to the proposed modification to the water sales agreement related to water demands, Mr. Buckhouse explained that HSA's determination of its water demands for the operation of Phase 1 (1.8 million gallons per day) represents a significant reduction from the original maximum daily demand estimate of 3.2 million gallons per day.
(President Dyer joined the meeting at 5:55 p.m.)
With regard to the proposed modification to the water sales agreement related to water rates and charges, Mr. Buckhouse explained that the Schedule of Rates and Charges has been updated to reflect the Debt Service Component based upon the revisions to Exhibits "C" and "E" and the results of EWEB's new water Cost of Service Analysis (COSA). He said HSA has asked whether there was a way to level the monthly water bills and to identify the debt service for capital investment portion of the bill as a separate line item. Mr. Buckhouse said a proposed mechanism to accomplish this has been incorporated into the rates and charges. He said it is based upon the contract amount of the Maximum Daily Demand and has provisions for Excess Facilities Charges should Hyundai exceed the 1.8 MDD contract demand. Mr. Buckhouse said this Excess Facilities Charge would continue for 12 months after the 1.8 MDD. He said the rates and charges were reflected in Draft Exhibit "D."
With regard to the proposed modification to the water sales agreement related to debt service, Mr. Buckhouse said the 1998 Water Supply Plan projects and their associated costs for the next increment of capacity for treatment, transmission and storage facilities have been incorporated into Draft Exhibit "E."
Referring to a draft document entitled Power Sales Agreement Modifications, copies of which were distributed to the Board, Mr. Buckhouse presented a brief overview of the proposed modifications to the power sales agreement related to: 1) term of agreement; 2) power factor correction; 3) market purchase; 4) generation; and 5) electric rates.
With regard to the proposed modification to the power sales agreement term, Mr. Buckhouse explained that HSA has requested that the agreement be extended for 15 months to provide three-year price certainty to Hyundai.
Concerning the proposed modification to the power sales agreement related to power factor correction, Mr. Buckhouse explained that due to recent changes in power delivery accounting for power factor correction from BPA, staff felt it was important to signal to HSA that it must correct its internal power factor to 95 percent. He said EWEB has proposed language that requires HSA to have this power factor correction in place by April 1, 2003, or sooner if significant electrical load additions occur prior to that date.
With regard to the proposed modification to the power sales agreement related to market purchase, Mr. Buckhouse said staff has proposed that EWEB purchase a block of power from the wholesale market for a three-year period, from April 1, 2000, to March 31, 2003, to supply power to HSA. He said the power purchase would be based upon HSA's megawatt hour load projections for both peak and off-peak hours. He said HSA would contract at a fixed price for this amount each month and would pay indexed rates for any additional power over this contract amount. Mr. Buckhouse said HSA would also be credited indexed rates for any unused power below the contract amount. He said EWEB would purchase any additional power that was required and sell any excess power that remained unused. He said EWEB would provide an accounting on a daily basis. Mr. Buckhouse noted that EWEB would be reimbursed for the accounting and transaction activities of buying or selling the difference in power consumption.
With regard to the proposed modification to the power sales agreement related to generation, Mr. Buckhouse explained that HSA has requested the ability to produce electricity at its facility. He said HSA believes that reliability advantages exist for its process environment to be able to operate a co-generation plant. He said the market purchase proposal and daily accounting mechanism described above would be revenue neutral to EWEB, should HSA install a co-generation plant at its facility.
Concerning the proposed modification to the power sales agreement related to electric rates, Mr. Buckhouse said the electric service rate to HSA would continue to be determined based upon the market cost of power and an allocated share of EWEB's non-power costs as indicated in the electric Cost of Service Analysis. He said Exhibit "C," the Schedule of Rates and Charges, would change significantly. Mr. Buckhouse said HSA has been paying for the actual costs of the capital improvements made on its behalf. He said the Monthly Facilities Charges portion of Exhibit "C" would be updated to reflect the actual completed costs and the actual amounts HSA has been paying.
Mr. Buckhouse stated that HSA will incur an estimated 1/3 increase to its bill as the result of non-power cost increases.
Mr. Buckhouse stated that, following a review of the draft exhibits by HSA and EWEB counsel, staff would request Board approval of the proposed power and water sales agreement modifications. He said Board action was scheduled for March 7.
EMPLOYEE BENEFITS VALUATION SURVEY
Referring to a memorandum included in the meeting agenda packet, and series of overhead projections, copies of which were distributed to the Board, EWEB Human Resources Operations Supervisor Jean Meyers explained that the purpose of this presentation was to update the Board on the Employee Benefits Valuation Survey Project planned for year 2000.
Ms. Meyers recalled that in 1997, the General Manager requested the redesign of EWEB's compensation system. She stated that as a result, the Compensation Project Team developed and implemented a "total compensation approach" at the Board's direction. Ms. Meyers noted that total compensation reflects the "complete pay package for employees including all forms of pay, benefits, and services," and said that given EWEB has adopted a total compensation philosophy and has not had a benefits review since 1994, staff believes the need to conduct a benefits survey is timely.
Ms. Meyers said the Compensation Project Team would work with EWEB's Board and Executive Management Team to define the approach by which to best position the team to assess EWEB's competitive position with respect to other organizations and evaluate its benefit design in light of its current cost structure. In addition, she said the team plans to survey employees concerning their perceptions of EWEB's current benefits offerings, and their needs for the future.
Louise Bangs, Employee Benefits Valuation Survey Project Manager, and fellow Project Team members Janet McClennen and Jim Origliosso, presented a high-level overview of: 1) elements and results of EWEB's 1994 benefits survey; 2) current benefits element cost and structure; 3) project scope/survey approach; and 4) proposed project time line.
With regard to the proposed scope of the project, the project team explained that it believes the most effective way to fulfill the Board's 1997 direction involving a "total compensation philosophy," is to conduct a benefits survey designed to measure total compensation. Following a brief overview of the relative advantages and disadvantages of measuring total compensation, Ms. Bangs reviewed the recommended project approach, as follows:
Ms. Bangs reviewed the proposed time line of the project, noting that completion of the survey was scheduled for fall of 2000.
Commissioner Smith inquired as to the Board's role in the project. Ms. Bangs said the project team would bring forward to the Board the consultant's findings. Ms. Meyers explained that the project involved both short- and long-term objectives. She said Phase 3, which represented the long-term objectives of the project, would be implemented if it was deemed to be of value to EWEB. This decision would be made after EMT and Board review.
President Dyer inquired as to the estimated cost of the consultant. Ms. Bangs said consultant services for this project work would cost approximately $75,000.
Commissioner Bartel expressed support for the direction proposed by staff.
Vice President Bishop inquired as to when employee benefits would be impacted. Mr. Berggren responded that some changes would likely be implemented in 2001 but he was unsure given that the project has not been completed and he would need to evaluate benefits changes or impacts at the appropriate milestones.
Vice President Bishop requested a memorandum reviewing the total compensation philosophy. General Manager Randy Berggren agreed to provide the requested information.
Commissioner Bartel requested that the project time line include a formal notation of Board involvement.
The meeting adjourned at 7:10 p.m.
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Assistant Secretary President