Board Members present: Dorothy Anderson, Peter Bartel, Susie Smith, Patrick Lanning, and Sandra Bishop.
Others present: Randy Bergman, Dean Ahlsten, JoAnn Andersen, Gale Banry, Ken Beeson, Cathy Bloom, Terry Bequette, Marty Douglass, Dick Helgeson, Eric Hiaasen, Jay L'estrange, Jim Maloney, Roseanna McArthur, Mat Northway, Jim Origliosso, Laurie Power, Scott Spettel, Brenda Sirois, Dick Varner, Jim Wiley, and Krista Hince of the EWEB staff, Joyce Ogden, City of Eugene Minutes Recorder; and members of the public.
President Anderson called the Work Session to order.
RESOURCE PLAN UPDATE
Scott Spettel, Power Management and Planning Manager, spoke about the energy crisis in California and how the issue could impact this area. He voiced the importance of the long-term perspective that must be maintained by EWEB. Mr. Spettel referred to Bonneville's 5b9c policy which requested the "first call" on any new resource that the utility developed, at cost plus a reasonable rate of return, and if there was no agreement on that stipulation, Bonneville would have the right to reduce EWEB's allocation. He stressed that was not a favorable negotiating position to be in and the issue could impact all of the resources discussed.
Jim Maloney, Energy Resources Project Manager, presented an update to assumptions in the Integrated Electric Resource Plan. He highlighted the following:
Mat Northway, Energy Management Services Manager, presented an summary of the Energy Management Services Program accomplishments for the year 2000. He said that 2000 was a good year for the program and believed that 2001 would repeat this positive performance as there were some excellent conservation opportunities and the program would continue to expand. Mr. Northway said that staff was conferring with Bonneville to craft a contract for a flourescent light rebate program with the goal to have one added in every home in Eugene within the coming year. He stressed that the potential for rate increases had raised the awareness of customers' use of utilities.
In reply to a question from Vice President Bartel, Mr. Northway responded that all the measures installed were cost-effective for customers. He continued that word-of-month was all that was necessary to spend the existing residential budget amount. Vice President Bartel questioned at what point any market price decrease would reduce the interest level and value for the customer. Mr. Northway responded that the interest from the customers was higher than EWEB's current budget could accommodate. He said that as long as EWEB continued to invest at the current rate, it would be half of the cost of the lowest long-term market price and that he was confident of the cost-effectiveness.
Mr. Maloney reported that in the medium spot market forecast the 20-year levelized cost was $95.00 per Megawatt-hour. He said a major amount of conservation could withstand a significantdecrease in that cost.
Mr. Maloney reviewed the Generating Resource Project Options and Alternatives.
Hydro Projects:
Wind Projects:
Geothermal
Eric Hiaasen, Resource Analyst, presented an overview of the Bonneville Contract. (The following is verbatim due to the technical issues involved.) He stated the following:
"Bonneville Contract
"BPA is still the best choice, or more accurately, it's the least dollar cost.
"Brief history of BPA subscription process.
"Last May BPA release their supposedly Final Decision in the 2002 Rate Case, just as power prices began to scream up. By mid-summer BPA realized their Rate Case was broken, that they couldn't meet their obligations at the rates established in May.
"In a nutshell, BPA's firm system capability has shrunk to about 7,000 aMW of firm capability. But, they are committed to as much as 10,000 aMW of load. This shortage must be made up by purchases from the market. The rate case assumed they could purchase this power at under $28 per MWh.It is this shortage that is driving the rate increases. The new contract starts in October 1. Current market prices for this fall are around $350, peak power for calendar year 2002 is around $200, so base load power is probably in the realm of $170 to $180.
"For politically savvy reasons, BPA had all customers sign firm contracts to purchase power before the November election, but didn't release details of how they would raise rates until after the election. However, as the year has become drier and drier, and prices have gone even higher, even their proposed revision of last December won't suffice.
"The prospect of 100% rate increases has brought together public power and IOUs and state commissions to try to reach a negotiated settlement rather than risk fighting it out in the rate case. There are a number of reasons, but I think everyone believes that if BPA does not meet its Treasury Payment obligations it increases the risk that Congress will act on the agenda of those members of congress that want to dismember BPA.
"The settlement still involves three CRACS, just like before, but everything else has changed. The first CRAC, that goes into effect on October 1, is a twice a year power cost adjustment. BPA will adjust the prices for ALL products evey six months based on:
"1. A forecast of its power purchase costs, and
"2. A true-up of the prior six months.
"The second CRAC kicks in if BPA still thinks it is going to miss a Treasury Payment.
"The third CRAC is essentially another mini rate case, in which BPA can raise rates to whatever it takes to cover its costs. This CRAC triggers if either:
"1. BPA forecasts a 50% chance it will miss its Treasury Payment, or
"2. BPA has actually missed a Treasury Payment.
"In summary, we are buying cost based power from BPA. And whatever their costs are, we will pay. One benefit of BPA going with the twice a year adjustment is that we have a low level of risk that BPA power will be above market in a few years. If they had less frequent adjustments then we might see BPA accrue a lot of uncollected costs just in time to see market prices fall.
"So, where is EWEB in all of this. We have a Slice/Block contract for approximately 2/3 slice 1/3 block. Because BPA made us sign the contract before they set the rates they gave us an option to change contracts. We specified 100% Block as our alternative product. John Lebens' has verbally told me that we could switch to Partial Requirements it we really wanted to, so I plan to analyze that choice in the coming weeks.
"BPA gave us a deadline to choose whether to keep the Slice/Block contract or switch. Originally, we thought that deadline was March 23, so we are currently on the March 20 Board meeting for a decision. However, last week John Lebens told me we have until 20 days after March 23 to make a decision. So maybe the March 20 meeting will be an update.
"At the 30,000 foot level here are the key issues.
"The proposed settlement treats Slice and non-Slice fairly--everyone shares in the pain. With current market prices the potential gains and losses for Slice are magnified. I expect the average and wet years will be more profitable, while the dry years will be more expensive. So, the cash flow worries are worse now than the analysis Cathy Gray and I completed last summer.
"On the other hand, with rate adjustments every six months, there is no escaping the impacts of dry years or higher market prices. The all Block or requirements products only smooth out the cash flow a little bit.
"Just how bad the BPA rate increase will be next summer depends on how dry it stays in the NW this year, and how much power they really need to purchase starting next fall. Analysis shows that with a 100% rate increase the DSI's buying power from BPA will not be economic. If they close up shop, then that will reduce the amount of power BPA has to purchase from 2,500 to about 1,000 aMW. This will dramatically reduce the size of the rate increase, so the actual increase we see next fall will depend on how much load goes away in response to higher prices.
"Even the east side utilities now see reduced loads as beneficial to them, so they may stop griping about BPA spending money on conservation. The more conservation that happens anywhere, the lower their rate increase will be."
Commissioner Smith arrived at 6:52 p.m.
Mr. Maloney continued with the review of the Generation Resource Project Options and Alternatives. He noted that the Umatilla Project would be discussed in detail at the Regular Board Meeting.
Thermal
Mr. Maloney concluded his presentation and stated that Curt Bagnall of CH2M-Hill would assist staff with some of the thermal projects. He requested that Commissioners advise staff if they had further questions on the projects.
Mr. Spettel indicated he was inclined to seriously study the merits of refurbishing the older plants. However, he requested that the Board provide feedback if it did not concur with this potential plan.
UPDATE ON LEABURG-WALTERVILLE RELICENSING/OUTAGE WORK
Gale Banry, Energy Resource Projects Manager, provided an overview of the Leaburg-Walterville Relicensing/Outage Work. He said the projects began in 1988, and had been in a constant mode of change. Mr. Banry highlighted the following:
In response to a question from Vice President Bartel, Mr. Banry replied that the cost of the power would total $18.00. He said the biggest concern at this time was the delivery of the turbines. He emphasized that the projects were extremely cost-effective. Mr. Banry said there was not a large amount of funds spent during the delays, and that the total costs to date were $5 million for the two projects.
Mr. Banry was hopeful that a report could be presented to the Board in May outlining the accomplishments with the agencies.
In response to a question from Commissioner Bishop, General Manager Randy Berggren replied that as long as termination was consistent with biological opinion, there would be protection.
President Anderson thanked staff for their presentations.
The meeting adjourned at 7:35 p.m.
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Assistant Secretary President