Board Members present: Dorothy Anderson, Peter Bartel, Susie Smith, Patrick Lanning, and Sandra Bishop.
Others present: Randy Berggren, JoAnn Andersen, Tom Buckhouse, Dick Helgeson, Roseanna McArthur, Jim Origliosso, Dick Varner, Jim Wiley, and Krista Hince of the EWEB staff; and Joe Sams, City of Eugene Minutes Recorder.
President Anderson called the Planning Session of the Eugene Water & Electric Board to order.
FINANCIAL UPDATE
General Manager Randy Berggren summarized the update as a way of analyzing the impacts of what had been done earlier in the year.
1. Five Year Pro-Forma
A. No New Staffing in Electric
Fiscal Services Supervisor Dick Varner said there was no new provision made for new hires except in EMS which would require some early hires. He noted that there would be retirements in 2003/04 and staff was looking to find replacements for those people.
B. Two New FTE in Water - Source Protection, HB Expansion, SCADA
C. Pay and Benefit Increases
Mr. Varner said that an average four percent in labor costs was expected. He noted that there would be benefit increases in PERS and medical benefit increases.
D. Escalation in Non-Labor at or Below Inflation
E. Low Income Assistance and Provision for Bad Debts
F. BPA Holds Rates Steady Until October 2002
G. Significant Sales Reduction in Electric
Mr. Varner said that the reduction was due to the number one paper machine at Weyerhaeuser not being run in the upcoming year as well as assumptions in "elasticity of demand" totaling approximately five to six percent in reduction in sales from what was budgeted in 2001.
H. Additional Rate Funding for Capital
Mr. Varner said there was additional funding in both utilities. He said the electric side was driven by funding the capital program out of the repayment from Hyundai which held down rate funding of capital. He added that staff were looking for another increment to get funding for water capital up to $3 million dollars.
I. Borrowing for Relicensing
2. April 2001 rate action - Community, Revenues, and Expense
A. Electric Rates
1. Major Increase in 2001 - Average Over 30 Percent
Mr. Varner said that the utility would need to raise rates in excess of 30 percent in the fall.
Mr. Varner said the revenue from the rate increase would be approximately $6.4 million in 2002. He added that the capital from rates would increase approximately $2.4 million.
2. Major Decrease by 2003 - Wind Up 10 Percent Above Current Rates
He opined that some time between the fall of 2002 and Spring of 2003 there would be a rate decrease and estimated that rates would then be approximately 10 percent above their current amounts.
3. Annual Increases of 3 Percent for 2004 - 06
4. Potential for 6 month Adjustments Due to Bonneville Power Administration, (BPA)
5. Potential for Annual Adjustments Based on Power Results
B. Water Rates
1. Major Increase in 2001 - Average Over 10 Percent
Mr. Varner said the planned increase in water rates had been moved up to the Fall of 2001, because it would coincide with the electric rate increase and not be a separate rate increase.
2. Annual Increases of 4 to 6 Percent 2003 - 2006
3. Rate Increase at High End of Range in Year Springfield Utility Board, (SUB), Starts Providing Water to Glenwood
Mr. Varner said that the increase would be approximately six percent in that year because of the loss of the sales to Glenwood.
3. Summary - No revenues for new work
Mr. Varner, referring to the handout entitled, "Key Points for Prioritization Process", summarized the key points.
A. No Funding for New Staffing Outside Targeted Areas
B. No Funding of Non - Labor Other Than Inflation Outside Targeted Areas
C. Targeted Area in Electric is Conservation and Low Income Assistance
D. Targeted Areas in Water Are Source Protection, SCADA, and Hayden Bridge
E. New or Expanded Priorities Funded From:
1. Completion of 2001 Work
2. Elimination of, or scaling back on current priority work
3. Elimination of, or scaling back on business as usual activities
In response to a question from Commissioner Lanning regarding whether there were any programs for conversions to gas, Mr. Berggren said there was nothing to suggest anything major would happen since the market had become much more stable.
WORK STATUS
1. Status of Strategy Work/Issues
Mr. Berggren directed the meeting toward a summary of goal strategies.
A. Goal 7 - Water & Steam Supply - Develop and Preserve Access to Viable Sources of Water and Steam Supply
Director of Water & Steam Divisions Dick Helgeson said that all of the Goal 7 strategies were on track. He said the utility was in the peak of its water conservation season and added that public awareness programs had been put in place to educate the community on conservation issues. He noted there was an eight percent reduction in water demand for the year which he accredited to moderate weather, less commercial water usage, and heightened awareness of conservation by customers.
Mr. Helgeson said that the Hayden Bridge Reservoir and Pump Station construction was under way and would proceed until approximately 2003. He noted that construction bids had come in well below the amounts that were anticipated.
Regarding groundwater, Mr. Helgeson said the project was accelerating, as per board direction. He said site layout work had been done and there were negotiations with property owners regarding locations for an initial six wells. He estimated that the first test well would be producing some time in the next year.
Regarding a water shortage contingency plan, Mr. Helgeson said there had been public outreach and open houses scheduled to educate the public on conservation strategies.
Regarding water rights, Mr. Helgeson said the utility had one large permit up for a renewal at Hayden Bridge. He anticipated that money would need to be budgeted for consultants in 2002 to help with the legal matters of the renewal.
Regarding steam, Mr. Helgeson said staff had put together baseline projections on the steam utility. He said there was no volatility on the non-fuel side of the project but noted that fuel costs were not very predictable. He suggested that with the new federal courthouse being built at a nearby vicinity, the utility might not be able to use its steam assets three to five years into the future and that a back up strategy needed to be put in place.
In response to a question from Commissioner Lanning regarding whether the utility made CILT payments for steam, Mr. Helgeson said that the utility made four percent CILT payments to the city.
Mr. Helgeson noted that Sacred Heart Hospital would continue to use its steam boilers at its present location even after finding a new site. He added that Sacred Heart was working on a back up plan that would allow for the use of EWEB steam.
Mr. Helgeson reported that there had been upgrades in the SCADA hardware that allowed SCADA information available on the desktop so that it could be checked from a variety of locations.
Regarding unforeseen events for the year, Mr. Helgeson noted that the Water Division was paying higher power costs because of the 5.4 percent increase in April and because the division had been put on a general service schedule. He went on to say that the cover on the Santa Clara Reservoir was deteriorating and needed replacing. He noted that it had been in place for 22 years and had not yet failed but there was some concern about maintaining water quality.
In response to a question from Mr. Berggren regarding the cost of replacement, Mr. Helgeson estimated the cost at $1.5 million including the engineering costs already incurred.
B. Goal 6 - Develop and Preserve Access to Viable Sources of Supply
1. Implement the "Integrated Electric Resources Plan" considering the cost of effective and environmentally viable sources of supply and demand side reductions.
2. Implement Demand-Side Management Programs
Jim Wiley, Electric Division Director, said that staff was looking at a residential incentive program but noted that the benefits of such a program were becoming less as the cost of power declined.
Mr. Wiley said that there would be a continuation of the commercial curtailment program. He noted that there was a conservation program for small businesses that was also being reviewed.
3. Acquire Renewable Energy Resources
Mr. Wiley said that the utility was getting proposals from many northwest wind projects. He noted that most of them were expansions of the BPA wind project.
4. Develop Centralized Generation Resources
Mr. Wiley said that the steam project was no longer part of the goal. Mr. Wiley said that the Wanapum project and the EWEB/University of Oregon Co-generation project were the two active projects in the goal.
5. Manage Purchase Power Portfolio
Mr. Wiley said that it was "business as usual" to manage the slice contract. He noted that there was approximately $80,000 - $100,000 of server software that needed to be purchased and installed in order progress but said that the money was already accounted for in the budget.
6. Complete Relicensing of McKenzie River Hydroelectric Projects
7. Research Distributive Generation Technologies
Mr. Wiley said that the net metering policy was in place. He said that approval of the procedures would be a consent calendar item during a Board meeting.
Mr. Wiley said that Ken Beeson was writing a position paper about distributive generation. He said that Mr. Beeson's paper would probably change the scope of the goal and added that it would be coming before the Board in August.
8. Obtain Distribution System Efficiencies
Mr. Wiley said the scope of the goal had been preliminarily sketched out. He said the work was centered around transformer load management, phase balancing, power factor correction, and voltage control.
Mr. Wiley said that an additional $100,000 - $150,000 would be needed if the Board wanted the goal to be implemented in the following year. He noted that the payback period would be ten years. He recommended progressing as before and not trying to implement in the following year.
Regarding operating initiatives, Mr. Wiley cited the tree trimming program and noted that the climbable trees had all been trimmed. He noted that the number of crews would be reduced and the remainder would be started on a cycle of trimming.
Mr. Wiley said that staff was following developments in Hydro Licensing Reform. He said that some final funding might be needed in the following year depending on developments in the State's senate and house.
In response to a question from Commissioner Lanning regarding possibilities in wave generation projects, Mr. Wiley acknowledged that there had been a project but noted that he had not heard any new information recently. He said that he would look for more data under the goal of renewable resources.
C. Goal 5 - Customer Products and Services - Provide the highest level of customer service aligning with customer expectations
1. Create a Customer Billing Infrastructure in Accordance With Questions of Authority
Customer Services Director JoAnn Anderson noted that the leading strategy had changed to include language that helped the customer to understand what it took to be a good customer and what it took for EWEB to provide good service.
In response to a question from Vice President Bartel regarding the definition of "questions of authority", Mr. Berggren said that the customer billing infrastructure needed to be consistently aligned with Board policy and had authority as required to work with customers. He stressed the need to make sure that the policies had been approved by the Board.
Vice President Bartel stressed the need for fairness to both the recipients of the policy and those applying the policy. He raised concern that the leading strategy did not appear customer friendly.
Mr. Berggren said that fairness would be judged when the board approved its policies. He reiterated the importance of Board approval of the actions taken by the utility.
2. Expand and Explore Metering, Data Collection and Customized Billing Capabilities to Meet Future Business Needs
Ms. Andersen estimated that there would be a more mechanized process for data collection and billing in place by the following Spring.
3. Enhance Low Income Support with the Universal Service Plan
Ms. Andersen said that staff had been very active in enhancing low income support in the Universal Service Plan. She said that the first year of the plan would extend support to seniors and by year two the plan would be extending support to seniors and disabled persons.
4. Support Customer Outreach Needs for Products and Services
Ms. Andersen said that the process was continuing. She cited the "Employee Ambassador Program" as an example of the progress being made.
5. Reposition Successful Product and Services Development and Delivery
Ms. Andersen stressed the importance of going back and examining the successes of the utility in this area, analyze the reasoning behind the successes and then building future products and services from those models.
D. Goal 4 - Improve Our Ability to respond to ... in the Business Environment.
1. Keep the Board Continually Updated about Financial Matters
Jim Origliosso, Director of the Finance Division, said that staff got new financial information to the Board quickly through the means of the financial forecast. He noted that the forecast was continually being updated.
2. Power Supply
Mr. Origliosso said that strategy had been rewritten with the idea of reducing the uncertainty of financial risk management. He said that the related strategy had been broken out into three pieces.
Mr. Origliosso said the most progress was being made in updating procedures and the line of credit.
Mr. Origliosso said that price caps had raised legal and financial issues that had put the utility off of its forecasted track. He estimated that the utility was halfway between its expected case and its worst case scenario. He said that the there would be an impact from price caps in the 2002 rate adjustment in that caps were not covered by the rate action to be taken in October.
3. Pensions
Mr. Origliosso reported there had been progress. He said that reforms and borrowing authority had been obtained through the legislature. He noted that there was a provision to allow local governments to join the state pool if desired. He said the 2002 work would focus on retiree medical benefits.
4. Telecommunications
Mr. Origliosso reported that the business plan had been completed and added that financing alternatives were being developed and evaluated.
Mr. Berggren said that the implementation of the business would become a separate strategy under Goal 1 since the goal of developing the business plan had been completed.
E. Goal 3 -
Mr. Origliosso commented that the strategies in this goal were "a little off track" due to other priorities. He cited the power crisis and the Master Plan as examples of other priorities.
1. Implement the Performance Management System
Mr. Origliosso said that this strategy would be introduced into the budget process to provide performance indicators for people to respond to in their budget submissions.
In response to a question from Vice President Bartel regarding who developed the benchmarks for productivity, Mr. Berggren said staff was trying to establish "Metric Views," (measurements), of results of business as usual. He said that each division was reviewing its policies and assessing what was working well.
2. Improve Construction Processes
Mr. Origliosso said that this strategy was behind schedule but noted that staff would be bringing changes in procedures regarding estimates in construction work to the board in October. He said that EWEB did not have a work order management system for all the construction work that was done. He stressed the need for focusing on the scope of the problem so that it could be addressed.
Commissioner Bishop raised concern that staff was over analyzing its self. She wondered at what the net benefit of all the analysis would be and raised concern over the extra costs.
3. Apply Technology
Mr. Origliosso said that all the planned work for 2001 had been completed and staff was now involved in re-scoping the strategy for work done in 2002.
4. Improve Customer Processes
Mr. Origliosso said that the Banner System had been upgraded successfully. He said that bill printing and credit card payment enhancements would be implemented in September. He added that there was progress in outsourcing of the checks and remittances from residential customers. He noted that outsourcing the remittance process would save the utility money.
Mr. Berggren added that outsourcing would free three FTE's for other duties.
In response to a question from Commissioner Lanning regarding what differences the customer would notice, Mr. Origliosso said that there would be a different mailing address on the envelope the bill was sent in.
In response to a concern from Vice President Bartel over the complication of payment disputes, Mr. Berggren said that payment disputes would be handled locally.
5. Improve Administrative Processes
Mr. Origliosso said there were two processes for this strategy
1. Time Keeping
2. Budget/Budget Monitoring.
Mr. Origliosso said that staff was scoping in 2001 and would implement the strategy in 2002.
There was general discussion regarding the outsourcing of residential checks and remittances.
F. Goal 2 - Conduct All Aspects of our Business as Responsible Stewards of the Environment and Champions of a Sustainable Future
1. Integrate Sustainability Practices into Day-to-Day Operations
Facilities Services Director Tom Buckhouse said that work was in progress, and would continue into the next year, focusing on testing and refining sustainability mechanisms. He added that employees were receiving sustainability training and said that implementation of the strategy was going according to the planned time line.
Mr. Buckhouse said that the next year would see the implementation of sustainability benchmarks to measure progress.
2. Address Endangered Species Act Listing
Mr. Buckhouse commented that staff was a little behind in competing the Section 7 consultation. He said the strategy was progressing again and would be wrapped up by the end of the year.
Mr. Wiley added that there was considerable research work involved with the implementation.
Mr. Buckhouse reported that there was also work going on to address the riparian edge in the Master Plan.
3. Provide Community and Industry Leadership to Further Sustainability
Mr. Buckhouse noted that there were ongoing relationships with local organizations that were being continued and broadened. He noted that staff were working with the University of Oregon Business School on sustainability issues.
Mr. Buckhouse said that staff was working to build interest of the Western Energy Institute to broaden the regional sustainability business ethics to other regions. He said that this would be an ongoing/long term effort that would take internal labor resources over the next year.
In response to a question from Vice President Bartel regarding the nature of the Western Energy Institute, Mr. Buckhouse said that the institute was a group of electric and gas utilities that spanned all of the western states.
Mr. Berggren noted that it was formerly the Western Energy Power Institute and did not include gas utilities. He said that the institute did training for electric and gas, private and public, utilities and developed curriculums that were responsive to current business climates.
4. Implement Drinking Water Source Protection Plan
Mr. Buckhouse said that a staff member had been added to establish the Phase One Protection Program which examined the high risk areas close to water intakes.
Goal 1 - Be an Excellent Citizen of the Community
1. Tell EWEB's Story of Excellent Community Citizenship
Roseanna McArthur, Director of Corporate Services, said the strategy was the work of the Public Affairs Department. She said the item was kept as a strategy to keep track of major community issues that might arise.
Ms. McArthur said that staff was in communication with the editorial staff of The Register Guard, on a regular basis, to give them background information and context on events happening in the community that concerned EWEB.
Ms. McArthur cited the Employee Ambassador Program as another example of how EWEB employees helped to tell the community about the utility.
2. Implement Community Owned Public Telecommunications Network
Ms. McArthur said that the implementation of the public agency network was essentially completed. She noted that 11 agencies had already signed up.
Ms. McArthur said that the next major milestone implementation of the MetroNet was the revision of the joint resolution with the City Council which would be addressed in September.
3. Implement Master Site Plan
Ms. McArthur said that the main issue was planning. She said that Andrea Mason would be presenting her findings to the Executive Management Team on August 2, and noted that there would be an item on the August 14, Work Session.
Ms. McArthur said that over the transition phase there would need to be another site from which employees could operate from while the site plan was being implemented. She noted that this was an issue because it had not been planned for in the pro-forma budget.
Mr. Berggren said that it was still not clear whether the additional property would be a transition piece or an alternative site.
Commissioner Smith commented that an alternative site for operations in the transition needed to be included in the Master Plan.
Commissioner Bishop commented that any land purchase would have a net financial gain for the utility.
4. Collaborate with Public Agencies for Community Benefit
Ms. McArthur noted two discussion items for the strategy.
1. Board discussion with the City Council over Contributions In Lieu of Taxes, (CILT), and whether the City would give back some of that money to help with aid to low income customers.
2. Monitoring the city charter review process.
Mr. Berggren said that the utility should ask its self whether it wanted to get involved in the charter process to separate its self from the City.
Commissioner Bishop stressed the need to complete any proposals for the charter review process and communicate them to the Charter Review Committee.
5. Align Board's Governance Structure with EWEB's Goals
Ms. McArthur noted that the Board was a little behind on by-laws around the governance structure.
6. Create a Respectful and Productive Work Environment
Ms. McArthur stressed the desire to have a work environment that was respectful to the individual and conducive production of good work. She noted that there was good progress toward this goal.
7. Increase Employee Involvement in Community Events
Commissioner Bishop noted that the Board could increase its involvement in community events.
Mr. Berggren called for discussion over strategy issues, particularly the City Charter Review Process and the possibility of acquiring some land for operations during the implementation of the Master Plan. He said that he was getting more and more troubled by the way the City Council interacted with EWEB regarding its issues. He opined that financial review, that the Council performed to make sure that the utility did not damage the City financially, was being used as a lever to tell the utility what it could do with its rates. He noted that rates were a part of EWEB's charter and expressed concern that the Council would continue to lever more control over the utility.
Vice President Bartel commented that each City Council, progressively, had more of a desire to involve its self in the day-to-day activities of management of city government. He opined that this desire to micromanage City activities was a level of interest that far exceeded what the City Council was required to do and added his concern that the Council had no qualms about dismissing expert information that had been submitted to it by staff and committees.
Vice President Bartel said that the telecommunications work with the City Council had been very unpleasant because of the council questioning the authority of EWEB to move forward with the project. He stressed that EWEB was responsible for its rate payers and not the City Council and went on to say that there was a distinction between the domain of the rate payer and the tax payer. He said that EWEB had consistently met its financial commitment to rate payers and expressed his discomfort about EWEB business decisions be questioned by the City Council.
President Anderson commented that there were councilors who wished to see EWEB totally separate from the City.
Vice President Bartel commented that there could not be two governing bodies running the utility. He stressed the need for the Board to make its own business decisions and be responsible to the rate payers.
Commissioner Bishop commented that part of the problem was confusion over the role of the EWEB board. She stressed the need for a clear understanding with the City Council about the role of the Board.
Vice President Bartel opined that the City Council wanted to direct where EWEB's telecommunications network was going to be constructed and stressed that it was EWEB's decision and not the City Council's. He added his concern that if the City Council were allowed to direct the utility's telecom work there would be precedent set for micromanaging into other areas. He said there was legal precedent for EWEB to separate its self from the City and expressed his belief that EWEB should do so. He suggested that EWEB budget money for legal work exploring the issue.
President Anderson noted that the Charter Review Committee would complete its work in December and commented that it would be good to have that committee make a recommendation concerning EWEB to the City Council. She stressed that for such a recommendation to happen there would need to be a lot of data collected in a short time.
Commissioner Bishop commented that EWEB's attorneys had been working on the issue for months. She stressed that the Charter Review Process was a rare opportunity for EWEB to act. She said that the Board would continue to have a relationship with the council and stressed the importance of not injuring that relationship while at the same time setting clear boundaries.
Commissioner Smith raised concern over the number of political issues the utility was involved in and questioned whether the utility would be able to actually strengthen its self by such a separation. She suggested talking to the city manager to find out how much opposition there would be.
Vice President Bartel commented that there was risk in any venture and stressed that the situation had moved beyond being strictly political. He said the question that should be asked was whether the utility ran better if it was separate from the city. He opined that the utility's relationship with the City was becoming unhealthy.
There was general consensus to move forward with legal work exploring the issue.
Mr. Berggren moved the discussion to putting Board meetings on public access television.
Commissioner Lanning raised concern over the costs involved with the recording equipment. He suggested that the utility could cooperate with the University of Oregon and do a live web broadcast or something else that was more aligned with Board goals.
Vice President Bartel commented that the costs were relatively low and added that there would not be much money saved by Commissioner Lanning's idea.
Commissioner Bishop stressed that many people in the community watched public access television.
Vice President Bartel cited his own experience in public access television from when he was on the Lane County Budget Committee and agreed that many people watched Metro TV. He said that it was a well established venue for citizens who followed local politics.
Commissioner Smith commented that televising meetings fit with the Board's goal of visibility to the community.
There was general consensus with moving forward on televising Board meetings.
Mr. Berggren moved the discussion on to land acquisition. He noted that there were 22 acres, near first and Seneca Streets that had no wetland issues and was a good location to run operations from during the transition phase of the Master Plan.
Commissioner Lanning was in favor of moving to investigate options.
Commissioner Smith said that it was a necessary step toward moving forward with implementation of the Master Plan.
Mr. Berggren said that he would investigate some options and bring them to an Executive Session of the Board.
Mr. Berggren moved the discussion on to the topic of Contributions in Lieu of Taxes, (CILT).
Commissioner Bishop distributed a written proposal to the board regarding a request to the City of Eugene to return some of the CILT money it received to put towards low income energy assistance.
In response to a question from President Anderson regarding whether Board members should go to councilors with a specific proposal, Commissioner Bishop suggested asking for a donation from the windfall that would be a direct result of the October rate increase.
In response to a question from Vice President Bartel regarding where the request amount came from, Ms. Andersen said that $5 million would be needed for the utility to reach all 15,000 of its low income customers.
Commissioner Smith suggested tying the request to data from Ms. Andersen showing the impacts of the rate increase on low income customers.
There was general consensus to try to get an agenda item scheduled at a City Council meeting to discuss the request.
The meeting adjourned at 9:50 p.m.
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Assistant Secretary President