Board Members present: Dorothy Anderson, Sandra Bishop, Peter Bartel, Patrick Lanning, Susie Smith; Members; Randy Berggren; Dick Varner, Roseanna MacArthur, Dick Helgeson, Jim Origliosso, Jim Wiley, Krista Hince, Joanne Anderson, Tom Buckhouse; Staff.
President Anderson called the EWEB Retreat to order at 5:30.
UPDATE ON FIVE YEAR PRO-FORMA ASSUMPTIONS
General Manager Randy Berggren said that the retreat would be handled as an update to the March retreat. He said that staff would inform the Board of changes that had been made in goals and related strategies, and of any progress that had been made.
Mr. Berggren said that he and executive staff would take a hard look at each of the goals, over the next two months, so that expected results would be clearer and easier to define. He noted that Goal 6 had been split into two goals; Energy Supply and Water Supply.
Mr. Berggren said that July 23 had been reserved for a potential work session to check in before budget development in the month of August. He said that it would be a four hour Work Session to bring members up-to-date on Bonneville Power Administration's, (BPA), rate increase and EWEB's financial forecast.
Electricity Pro Forma
Jim Origliosso, Treasurer, provided a presentation on Electric Pro Forma Changes Since March 2001. He listed assumptions made, resulting rate adjustments, and the resulting cash flows. He also provided a graph showing power reserve levels from 2001-2005.
Regarding resulting cash flows, Mr. Berggren stressed the uncertainty of the market. He opined that projected figures would be improved upon in actuality but reiterated that with the uncertainty of the market, there were too many random factors to make an accurate prediction.
As significant issues faced by the Electric Division Mr. Origliosso listed;
1. Additional 10 percent surcharge effective October 2001 through May 2002 would keep a minimum balance in the power reserve of $5 million.
Mr. Origliosso said the surcharge would keep the power reserve from going all the way to zero in January of 2002. He noted that the shown surcharge did not take into account whether BPA would have a low increase or a high increase.
Mr. Berggren added that there would be debt borrowing capability that could be used for an operating reserve. He raised concern over having a zero cash reserve for that month but stressed that the surcharge idea would pay back any debt accrued and still bring back an operating reserve.
Commissioner Smith stressed the importance keeping open minds until there was more certainty about the market. She cautioned that things could change very quickly. She raised concern over the political consequences of releasing projected numbers to the public and having the actual numbers be completely different because of the unpredictability of the market.
Vice President Bartel suggested having a clear line item on EWEB's printed billing statements that showed how much of the bill was going toward BPA's rate increase so that each customer could see how much of their bill was going toward that increase. He stressed the idea of timing EWEB's rate increases with those of Bonneville to make things very clear to the consumer.
In response to a question from Commissioner Bishop regarding how much a $5 million reserve would actually help on the power market, Mr. Berggren said that it could be a drop in the bucket. He stressed that he was focusing on not going into debt for an operating reserve. He remarked that a utility had to have $20-$40 million in reserve for the current market.
2. To what extent will EWEB participate in BPA curtailment? A full 10 percent share would further mitigate BPA's increase and have a retail rate impact as much as $13 million.
In response to a question from Commissioner Lanning regarding what financial impact a 10 percent curtailment would have on the trading floor, Mr. Origliosso said that if EWEB participated in the 10 percent curtailment, the utility could save $13 million over 18 months.
Mr. Berggren added he did not believe that public utilities had a choice other than taking the 10 percent curtailment. He said it was a political quid-pro-quo.
3. Retail increases at indicated levels will have a significant impact on low income residents and marginal businesses.
4. Increasing block rate structure in residential electric would have an unknown elasticity impact that has not been modeled.
Mr. Origliosso remarked that tiered rates would amplify the price signal sent by a rate increase and promote conservation.
Mr. Berggren said that it would take a rate increase of 40 percent before people would start thinking about conservation. He added that an inverted rate structure would increase some customers' bills by over that amount.
Commissioner Smith said that the price signal would help heavier electricity users to think about conservation measures.
5. Electricity crisis is pushing FTE requirements in 2001 and 2002. (steam plant, energy management services, customer services, and resource management)
Commissioner Smith stressed the importance of looking at internal cost management in addition to the things listed in number 5. She said that internal cost management had to be accomplished even if the amount saved did not amount to much.
In response to a question from Mr. Berggren regarding the definition of internal cost management, Commissioner Smith suggested no new furniture, and no extra expenses as examples. She stressed that the utility had to be in "crisis mode" and use every opportunity to save money that could be accomplished.
Water Pro Forma
Mr. Origliosso provided a presentation on the changes to the Water Department since the March retreat. He listed assumptions made, resulting rate adjustments, and the resulting cash flow.
He listed the significant water issues as;
1. Rate structure - seasonal rates; elevation charges; water districts
2. Expansion of the water system will create needs for additional headcount in SCADA administration and water plant operation
In response to a question from Vice President Bartel regarding how the well water reserve project was going and whether it could be accelerated to make up for the anticipated shortage over the summer months, Mr. Helgeson said that the groundwater program had already accelerated its build-out but acknowledged that it would not affect the water supply in the short term. He said that the first phase would be ready by 2004 and the second phase of the project would be producing by 2006.
In response to a concern from Vice President Bartel regarding rate increases added to bond measures to cover the cost of groundwater supply projects, Mr. Helgeson commented that the current drought conditions would show a clear need for alternative sources of water.
In response to a question from Vice President Bartel regarding whether it was possible to start getting water from the groundwater project in 2001, Mr. Helgeson said there was, at best, a year's worth of water rights negotiations and permitting to take care of before the project could supply any water.
Mr. Berggren said the political climate brought on by the drought conditions could be taken advantage of to help get the wells authorized.
Steam Pro Forma
Mr. Origliosso provided a presentation on the changes made to the Steam Plant Plan since the March retreat. He listed assumptions made by staff, the resulting rate adjustments, and the resulting cash flows.
Mr. Origliosso also listed additional (unbudgeted) positions that would be needed for 2001.
Mr. Origliosso said that a separate position would be needed for Residential, Industrial, and Commercial.
Mr. Origliosso said that five Boiler/Turbine operators would be needed to run the steam plant.
Mr. Origliosso said one Real Time Trader and one Energy Resource Planner would need to be added to staff.
Commissioner Smith said that the Demand Side Management positions were an opportunity to use internal cost cutting measures. She opined that in-house employees could temporarily be used to fill those positions as internal stop gap measures.
Mr. Berggren stressed that every functional area of the utility was functioning at a bare minimum of staff. He said that staff could come up with some ideas if they had direction from the Board.
In response to a question from Vice President Bartel regarding conservation demands made to the top ten water use customers of the utility, Mr. Berggren said that no demands had been made.
Mr. Helgeson said 70 percent of water sales, in the summer, went towards irrigation and was sold mostly to residential and some to commercial customers. He said that staff were working diligently with the City of Eugene, The University of Oregon, the school districts, and Lane County to come up with a better way of managing irrigation demands during the summer. He noted that they were moving towards computer operated irrigation systems.
Vice President Bartel commented that since water was so inexpensive that it contributed to its waste.
In response to a question from Vice President Bartel regarding at what point allowing massive use of water would affect required stream flows in the rivers, Mr. Helgeson suggested a seasonal rate design or an inverted rate that would charge more for higher water usage.
In response to a question from Commissioner Bishop regarding when water rates would go up, Mr. Helgeson said the first opportunity to raise the rates would be in October.
Commissioner Smith raised concern over raising water rates for industries dependent on water usage. She commented that if conservation was something that needed to be done it would have to be regulated.
Vice President Bartel suggested a strong communication with customers about water costs. He stressed the importance of sending a strong message. He commented that it would be impossible to enforce conservation measures imposed on the public.
Mr. Helgeson said that a 10 percent reduction in water usage was an achievable number based on voluntary actions that people could reasonably take without significantly affecting their lifestyle. He estimated that such a measure would save a billion gallons of water.
Commissioner Lanning raised concern over the environmental impacts of enforced conservation.
Commissioner Smith noted that the State of California had less stringent laws regarding the use of reclaimed brown water for irrigation.
In response to a comment from Commissioner Smith regarding using incentives for conservation as a positive rather than a punitive measure to promote conservation, Mr. Helgeson said that the market dynamic was not right for incentives to work.
UPDATE ON GOALS AND STRATEGIES
Roseanna McArthur, Corporate Services Director, began the goal discussion. She said that staff had used the feedback from the last retreat and incorporated it into the stated goals and strategies. She showed where changes had been made.
Goal 1 - Corporate Citizenship
Strategies:
1-1. Raise the awareness of citizens and employees
as to EWEB's role in the community.
about EWEB's commitment to corporate citizenship.
1-2. Implement public telecommunications network.
1-3. Develop Master Plan Implementation
1-4. Demonstrate leadership in working
with public agencies to achieve the most cost effective solutions for
the community as a whole.
Collaborate with public agencies to achieve the best solutions for the community as a whole.
1-5. Improve the Board's GM goal setting process to strengthen the Board's ability to represent the citizen's and community interests.
1-6. Qualify EWEB to be an "employer of
choice."
Create a work environment which promotes outstanding employee performance and alignment with EWEB's goals and values.
1-7. Ensure a consistent EWEB image and
message in all public communications.
(Done.)
Ms. McArthur stressed the importance of good corporate citizenship. She remarked that more and more companies were realizing the need to be socially responsible to the customers, community, and the environment.
In response to a concern from President Anderson regarding how the "corporate citizenship" lost the concept of the original goal, Ms. McArthur said that, by the utility showing that it was a good corporate citizen, it would continue to inform the public about the utility's role in the community.
Commissioner Smith raised concern over the use of the word "corporate" in the goal wording. She remarked that the concept did not need to change but stressed the importance of putting community over institution. She suggested getting down into the actual meaning of corporate citizenship and using that wording.
Commissioner Bishop agreed and commented that the word "corporate" triggered a negative feeling in people's minds.
In response to a prompt from Mr. Berggren for feedback on a replacement word for corporate, Vice President Bartel stressed that EWEB was not the stereotypical public corporation that was slothful and spent a lot of money on a lot of stuff. He said that EWEB was very different from that and suggested that the utility use opportunities to show what good citizenship could be. He suggested emphasizing the fact that the utility was not part of the City of Eugene's administration. He cited the fact that EWEB was not a union shop as an example of how the utility was a good citizen since it strove to be an employer of choice and pay good compensation for work done.
Commissioner Smith reiterated her suggestion of getting to the meaning of good corporate citizenship without actually using the word "corporate." She suggested stressing EWEB's commitment to the community.
Vice President Bartel said it was difficult for the utility to reflect community values when the community was so polemic. He commented that there was no specific set of community values to commit to.
Ms. McArthur said that each company had to have its own definition of corporate citizenship to fit with its specific community.
Mr. Berggren said that staff would explore the definition of corporate citizenship and use wording from that deeper meaning to replace the "corporate" connotation.
Ms. McArthur showed a list of March retreat add ons that had been suggested by the Board. She noted that many of them had been done or were ongoing practices.
Mr. Berggren said there were a lot of things on the list that were already in progress. He said new work would be associated with strategies once it had been decided whether it needed to be done as a priority. He stressed that there would have to be some priority setting before the new budget was planned.
Goal 2 - Environmental Stewardship & Sustainability
Tom Buckhouse, Director of Facilities Services, provided a presentation of how Board feedback from the March retreat had been integrated into Goal 2 and its strategies.
Strategies:
2-1. Define and implement long term
sustainability objectives.
Integrate sustainability ethic into day-to-day operations.
2-2. Broaden implementation of EWEB's environmental policy.
2-3. Implement McKenzie River Land
Trust. (Done)
Address Endangered Species Act listings.
2-4. Seek partners to further
sustainability.
Provide community and industry leadership to further sustainability.
2-5. Implement drinking water source protection program.
Mr. Buckhouse said there were extra items added by the Board at the March retreat.
Mr. Buckhouse said that he had added the item under strategy 2-4. He said it was a business as usual item since EWEB did it on an ongoing basis.
Commissioner Smith suggested adding language about seeking grant opportunities in strategy 2-4 as well.
Mr. Buckhouse said that seismic planning was being integrated into emergency action plans. He said that staff was doing ongoing capital improvement work in both electric and water facilities. He noted that the Master Plan had gotten started because of the seismic assessment done on several of the utility's buildings. He said the idea was integrated as business as usual.
Mr. Buckhouse said the assessment had a similar answer to the seismic planning.
Goal 3 - Improve Efficiency
Mr. Origliosso provided a presentation on Goal 3 and its strategies and the reflected changes as suggested by the Board during the March retreat. He also provided a list of suggestions, made by the Board, from the March retreat. Each suggested strategy's progress had been noted under the specific item.
Strategies:
3-1. Implement E-Model
Integrated Performance Management Process.
3-2. Improve Construction Processes.
3-3. Use Computers.
Apply technology to improve efficiency of major functions.
3-4. Improve customer processes.
3-5. Improve administrative processes.
Goal 4 - Reduce Financial Uncertainty
Mr. Origliosso provided a presentation on Goal 4 and its strategies. He also provided a list of suggestions for Goal 4, provided by the Board at the March retreat, with updates on how each item had been addressed by staff. He noted that there had not been much revision required.
Strategies:
4-1. Financial Forecast
4-2. Power Supply
4-3. Pensions
4-4. Telecommunications
Vice President Bartel said that employee benefits and retiree benefits was a high priority item. He said that it was very important to the goal of reducing financial uncertainty.
Mr. Berggren said that benefits and retirees were going to be looked at in the next budget process.
Commissioner Smith raised concern over the question of how benefits were going to be paid for and how the question would be perceived by employees so soon after a benefits study.
Vice President Bartel raised concern over the difficult position the Board would be put in when presenting options to employees.
Goal 5 - Customer Products and Services
Joanne Andersen, Director of Customer Services, provided a presentation on Goal 5 and its strategies and the revisions made since the March retreat.
Strategies:
5-1. Customer billing and collection enhancements
5-2. Improve AMR systems to support expanding business needs.
5-3. Implement Universal Service Plan.
5-4. Establish Competitive Service Standards.
5-6. Develop Products and Services.
Referring to the extra suggestions given by Board members at the March retreat, Ms. Andersen called attention to the last page of the Goal 5 document. She said there were four items. Three of the suggested ideas fell under the leading strategy and the fourth fell into a future timeline and would be discussed later.
Regarding further knowledge on auto bank drafts to customers, Ms. Andersen said the item will be brought to the public's attention again with the upcoming Banner enhancements of automatic credit card payments.
Regarding the idea of separating "won't pays" from "can't pays", Ms. Andersen commented that people who had paid a billing deposit were more likely to continue paying their bills than people who had not paid a deposit. She noted that there had been 499 people who had left unpaid bills and were unable to be found since January 2001 with a total amount of $143,000. She said that the amount of "bad debt" could approach $1 million by the end of the year. She added that the utility received notice of 7 to 10 bankruptcies a week which were legal ways that people stopped paying bills. As an example she cited a department store which had left a large unpaid bill.
Ms. Andersen outlined a deposit requirement plan. She related an actual case of a business (left unnamed) that had a problem with paying a deposit.
Ms. Andersen said that a deposit would be required from a customer in the absence of satisfactory credit information or whenever there was concern over a financial risk. She said a credit rating would be maintained by the EWEB credit department to provide fair and equitable consideration for customers.
Commissioner Smith raised concern over requiring deposits from residential customers, especially low income families. She opined that there would be a certain amount of shock reaction from people who were hit with the deposit. She suggested that the deposit be broken down over a number of months to make it easier for low income families to pay.
Vice President Bartel agreed on a residential basis. He stressed that commercial customers needed to pay up front.
Commissioner Bishop stressed the importance of keeping the policy clear for customers. She suggested that the policy be reviewed regularly during the power crisis being faced in the region.
Commissioner Smith suggested communicating with the City Council and re-examine the use of the funding EWEB currently uses for Systems Development Charge to help low income families with power costs.
There was general agreement to stay with the current policy but work with residential as much as possible to help with breaking down deposits over a number of months.
Vice President Bartel suggested a press release explaining EWEB's billing situation and the problems faced by the utility. He stressed the importance of communication with the community.
Goal 6 - Electric Supply Strategies
Jim Wiley, Electric Division Director, provided a presentation on Electric Supply strategies. He noted that Goal 6 had been broken down into two goals (6 & 7). He went over the strategies and how they had been revised since the March retreat. He included a handout updating the Board on how their ideas added at the March retreat had been addressed. He noted that there were few changes to the actual goal.
Strategies:
6-1. Implement Demand-Side Management Programs
6-2. Acquire Renewable Energy Resources
6-3. Develop Centralized Generation Resources
6-4. Manage Purchase Power Portfolio
In response to a question from Commissioner Lanning regarding the BPA 10 percent allocation, Mr. Wiley said that the analysis was based on a 200 percent increase in rates without any DSI reductions.
6-5. Complete Relicensing of McKenzie River Hydroelectric Projects
6-6. Research Distributed Generation Technologies
6-7. Obtain Distribution System Efficiencies
Mr. Wiley said that the IERP was still applicable and allowed staff to develop action plans while still delivering needs. He complimented staff for their work in this area.
Goal 7 - Water & Steam Supply
Dick Helgeson, Water & Steam Divisions Director, provided a presentation on water and steam supply and reviewed changes that had been made during the March retreat. He also distributed a list of additions that had been made by the Board at the march retreat with updates on how they were being addressed. He said there was a similar concern to the electric side that customers would respond to the price signal and implement more conservation.
Leading Strategies:
Implement EWEB's 1999 Water Supply Plan to assure reliable, cost effective, and high quality source(s) of supply to meet growing community demands.
Evaluate the status of EWEB's Steam District Heating System to identify future operating scenarios and business direction.
Trailing Strategies:
7-1. Expand water conservation programs
Mr. Helgeson said that he added a new task under this strategy that addressed the question of whether to use an inverted block rate.
Mr. Helgeson said that three items had been added under 7-1;
1. Promote water efficient codes and standards
As an example Mr. Helgeson cited model standards for irrigation systems that would include design elements like timers and sensors.
2. Implement inverted seasonal rates
3. Establish conservation plan requirements
7-2. Implement planned capacity additions
7-3. Develop groundwater backup source
Mr. Helgeson noted there was some capability to bring the ground water program online more rapidly.
7-4. Prepare shortage contingency plan
7-5. Maintain existing water rights
7-6. Update steam system strategy
7-7. Enhance gas procurement capability
Mr. Berggren called for round table feedback on how the process for the retreat was viewed.
President Anderson commented that the discussion had gotten off on too many tangents. She suggested not getting into so much specific detail at the next retreat. She expressed her frustration with getting to involved with specifics before looking at the larger picture.
Commissioner Smith said that the discussion was too limited. She expressed a desire to see the creation of a forum for Board members to raise issues.
Commissioner Bishop said the retreats needed to be more of a team effort. She suggested a retreat facilitator to help keep the meeting on track.
Vice President Bartel commented that the Board's dialog had improved over time. He added that he liked a little levity in a meeting and said that serious work needed a little humor.
Mr. Berggren thanked the Board members for their comments.
The meeting adjourned at 12:45 p.m.
________________
Assistant Secretary President