Board Members present: Dorothy Anderson, Peter Bartel, Susie Smith, Patrick Lanning, and Sandra Bishop.

Others present: Randy Berggren, Jim Bemis, Dean Ahlsten, Tom Buckhouse, JoAnn Andersen, Marty Douglass, Dick Helgeson, Steve Hill, Mat Northway, Jean Meyers, Roseanna McArthur, Scott Spettel, Jim Origliosso, John Yanov, Jim Wiley, and Krista Hince of the EWEB Staff; Joe Sams, City of Eugene Minutes Recorder; Frank Nearing, KLCC-Radio, and members of the public.

President Anderson called the Work Session Meeting of the Eugene Water & Electric Board (EWEB) to order.

LARGE LOAD CONTRACTS AND ISSUES

John Yanov, Senior Rates/Financial Analyst, began the panel discussion. He said that the main issue EWEB was facing was the abrupt changes in the wholesale power market prices. He said that this required an extensive review of EWEB policy around large electric loads.

Speaking to power costs, Mr. Yanov said that recent exponential price changes in the power market had a large impact on the costs of supplying electricity to large customers. He said that the incremental cost of supplying load growth was now based on the market price of power. He noted that, in August 2000, incremental power costs were around $27 per megawatt hour, and were currently anywhere from $150 to $300 per megawatt hour. He said that estimates for upcoming years were not much better.

Regarding Hyundai contract pricing, Mr. Yanov said that EWEB had entered into a five year contract with Hyundai in 1996 and there were discussions about a contract renewal expected in 2001. He said that the current power prices could affect that contract.

Mr. Yanov said that EWEB was looking at a potential for large load growth. He noted that the past price of a 5-10 megawatt average load growth was no longer valid and recent information had indicated that new loads would increase $5-$10 million annually. He said that this would mean rate increases for all customers excepting those under special contract where conditions could vary. He said that Hyundai alone might have 80-90 megawatts of new load.

Mr. Yanov said that the University of Oregon and Willamette Industries warranted decreased rates and were discussing contracts. He noted that incremental load growth, above a certain point, could be charged with incremental rates.

Mr. Yanov said that there had been extensive staff discussion over how to treat customers. He said that goals were;

1. that new large load growth would pay its own way.
2. that there would be appropriate pricing for customers using the market as a price signal.
3. to equitably allocate cost for public purposes. (Meaning that all loads would still help pay for conservation efforts as part of the rate.)

He said that those were the guiding principles that guided staff when considering current issues.

To make sure that new large loads were not a financial drain on the utility, Mr. Yanov said that staff were proposing that the loads be served with incremental sources; either dedicated contract purchases or from the wholesale power market. He stressed the importance of limiting the size of the facility's large general service rate class. He noted that customers under that class could currently use up to ten megawatts and that staff was proposing limiting that use to five megawatts.

In response to a question from Vice President Bartel regarding new loads for the telecommunications program, Mr. Yanov said that the telecommunications program would get the melded power rate since they had announced their arrival when the facility was still under contract negotiations with BPA.

In response to a question from Commissioner Bartel regarding the difference between the telecommunications program and Hyundai, Mr. Spettel said the major difference was that Hyundai had a new load growth higher than ten megawatts.

Commissioner Bartel said that telecommunications was a smaller, but still significant load. He suggested that new loads not be eligible for melded power because of the potential for the facility to lose money.

Mr. Berggren said that lowering the limit from 10 to five megawatts was aimed at just that.

In response to a question from Commissioner Smith regarding preventing cross subsidization across classes, Mr. Yanov said that if there was more rapid load growth and wholesale prices were sustained at the same level, then customer rate increases would become necessary.

Dean Ahlsten, Electric Engineering Manager, provided a presentation on contracts with the University of Oregon and Willamette Industries. He said that staff had worked hard to be consistent in both cases. He said that staff was looking at a contract length of five to ten years with some certainty around the future. He said that the contracts would be effective retroactively to the first of the year.

In response to a question from Vice President Bartel regarding leverage in the contracts to promote conservation, Mr. Spettel said that the contract reserved a certain percentage for conservation efforts. He added that the conservation track records of both potential contracts were pretty good.

Mr. Spettel provided a presentation on informational issues regarding BPA subscriptions, potential legal contract implications, and how to cover potential Hyundai contract negotiations. He explained the Bonneville Power Administration's 5(b)9(c) policy. He said that it was a section of the regional act that held facilities to their original power resource and limited exports of resources. He noted that the EWEB facility used two non declared resources which were the Stone Creek Hydroelectric project and its share of the Weyerhaeuser Cogeneration Project.

Mr. Spettel said that BPA's definition of export had recently changed to say that if a resource was not being used to meet a firm load in the Northwest then it was considered an export. He said that staff had agreed to use the output of Stone Creek and the Weyerhaeuser Cogeneration Project to serve EWEB's new large single load demand from Hyundai and thereby preserve the amount of power received from BPA.

In response to a question from Commissioner Smith regarding the difference between committing to load and selling power, Mr. Spettel said they were two independent decisions that the Board would make. He noted that the current contract with BPA made it clear that Bonneville had no power over EWEB's rate setting authority.

In response to a question from Commissioner Smith regarding the material difference between being de-cremented by BPA and having to buy power to meet Hyundai's load megawatts and continuing to view Hyundai as separately provided for, Mr. Spettel said that, conceptually, EWEB was at the beginning of contract negotiations with Hyundai. He said that staff realized that the existence of Hyundai's load on the facility's system had kept it from losing 20 megawatts of power priced at BPA's cost. He said that this was a benefit that Hyundai had brought to the utility and that should be incorporated into the power rate for Hyundai. He stressed that if Hyundai's load was not being served then BPA would have de-cremented the facility for exporting power from Stone Creek and the Weyerhaeuser Cogeneration Project.

In response to a comment from Commissioner Smith regarding making sure that Hyundai paid their own way, Mr. Spettel reiterated that EWEB wanted the 20 megawatts of power that their load requirements brought from the BPA.

In response to a question from Commissioner Smith regarding the rate Hyundai would pay, Mr. Spettel said that it would depend on how the long the contract was for. He noted that they had already had a 70 percent rate increase and estimated that the new contract would keep them at, or slightly below, the same amount after that increase.

In response to a question from Commissioner Smith regarding alternatives in terms of future growth, Mr. Spettel said that the power from Stone Creek and Weyerhaeuser would have to be sold to Bonneville or sold to another large load increase. He stressed that the output of the two resources needed to go to meet firm Bonneville loads or else EWEB would be de-cremented.

In response to a question from Commissioner Bishop regarding the timing for a new contract with Hyundai, Mr. Buckhouse said that staff was shooting for the first of October which would place it about two months before the expiration of the existing contract.

Commissioner Smith stressed the importance of making the public aware of why the Hyundai contract was being renegotiated and that Hyundai had a recent 70 percent rate increase.

The meeting adjourned at 7 p.m.

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Assistant Secretary President