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

Others present: Randy Berggren, JoAnn Andersen, Marc Anderson, Gale Banry, Terry Bequette, Tom Buckhouse, Marty Douglass, Dick Helgeson, Jerry Hohman, Bob Jossis, Jim Origliosso, Roseanna McArthur, Mark Oberle, Jim Wiley, Dick Varner, and Krista Hince of the EWEB files; Kimberly Young, City of Eugene Minutes Recorder; and members of the public.

President Anderson called the Work Session to order at 5:30 p.m.

LEABURG/WALTERVILLE CONTRACT AWARDS

Energy Resource Project Manager Gale Banry provided a presentation on the Leaburg/ Walterville contract bid awards for the construction of the Walterville fish screen and diversions, Leaburg right and left fish ladders, and the Walterville tail race excavation and velocity barrier.

Mr. Banry reviewed the schedule for the projects, describing the work to be done in the different project phases.

Mr. Banry used a series of schematics to illustrate for the benefit of the Commissioners the work to be done in conjunction with the project.

Mr. Banry introduced members of the project team present, Jerry Hohman, Marc Anderson, and Bob Jossis.

Responding to a question from President Anderson, Mr. Banry said that staff was still trying to determine how to salvage the fish in the channel.

Responding to a question from Commissioner Smith, Mr. Banry said that the changes made for mitigation purposes must be assessed in the license to address any problems that arise. Commissioner Smith asked how one took care of that. Mr. Banry said that the drain field may have to be relocated, and pumping may be required at certain times of the year.

Mr. Banry reviewed a series of concerns expressed by the public about the project and noted the staff response to concerns regarding 1) de-watering the power canals; 2) the lake raise, and 3) the new boat landing near Leaburg.

Commissioner Lanning asked about the period of de-watering. Mr. Banry said that it would occur between May 1 and October 31, 2002. He confirmed that the de-watering was needed because the contractors needed dry conditions to pour concrete, and the divergent structure work needed to be done at low flow conditions, and could not occur until the summer months.

Commissioner Bishop asked if EWEB was obliged to mitigate for improvements not done through a legal process, such as an illegal structure located close to the river. Mr. Banry said that EWEB would have to work with the County on such issues and address those issues as they arise.

Jerry Hohman, Facility Services Engineering Manager, briefly discussed the bid evaluation and award processes. He reviewed the bids received and reported that the low bidder receiving the award was McDougal for Schedule A (Walterville fish screen and diversions); Wildish Paving for Schedule B (Leaburg fish ladders); and McDougal for Schedule C (Walterville tail race excavation and velocity barrier). The total cost was $8,938,000. The engineers' estimate was $11,400,000, so the cost was considerably under that. He said that staff would ask the Commissioners to approve the contract awards later in the evening during the regular meeting.

There being no other questions, President Anderson moved to the next agenda item.

TELECOMMUNICATIONS

Debra Smith, Project Manager, provided a PowerPoint presentation on the status of MetroNet. She briefly noted what had occurred over the last six months, including the design work, the issuance of an Request for Proposals for electronics, a visit to the Grant County PUD, development of a marketing plan, and a capital plan and business plan update. She said that during the last six months, the economic picture had worsened and staff was recommending that the Commissioners put the project on hold for the time being. She said that postponing the project was fiscally prudent and consistent with the Board's position that it would only pursue telecommunications if it was financially feasible. She said that did not mean there was a change in the long-term vision of a publicly owned telecommunications network with universal access for all customers.

Ms. Smith discussed the reasons behind the staff recommendation, which included insufficient capital to successfully launch the project, the softening economy and the concerns over its impact on sales and revenue projections, and a change in the ten-year return on investment from a positive 28 percent to a negative 9 percent. She called attention to revised income and revenue projections provided to the Board.

Ms. Smith said that if the Board accepted the recommendation, staff proposed to develop a set of signals to trigger an evaluation of MetroNet, to develop an interim strategy to bridge to a more positive outlook, and to continue working with PAN and the school districts. She anticipated staff would return to the Board with that work within 60 days.

President Anderson asked if providers were unable to afford bigger systems, or was there no market. Ms. Smith said both; there was less of a market than was predicted, and a glut of long-haul fiber as a result. She said that businesses were being very conservative about what they spent money on.

Commissioner Bishop asked who developed the original revenue projections. Ms. Smith responded that she had done the revenue projections and staff developed a capital forecast that it hired Black & Veach to validate. EWEB staff actually created the model. She termed it a collaborative process. When revisiting that data, staff had adjusted some of the cost projections because more had been learned. She said that she did not have the numbers, kept secret by the consultant.

President Anderson said that one benefit was that when EWEB reached implementation, it would reach out to more than one area and avoid the favoritism charge.

Commissioner Bishop said her research indicated that other telecommunication businesses were built with revenue from the electric parts of company, any community found where a utility has set up telecommunications service without relying on the electric utility. Ms.Smith said that there was a spectrum; in some cases no cross-subsidization, and EWEB was about as far in that area as the consultant had seen. In the case of EWEB, contractual requirements to ensure. Also, cities where the utility may be managing, but the municipality wants to see it happen, generally in smaller communities that sees no other way to provide the service to citizens. The experience was not the same in Eugene.

Commissioner Lanning asked for information about the communication plan. Ms. Smith responded that staff had discussed how to discuss the recommendation. It was not the utility's desire to walk away from MetroNet, but to honor the intent and acknowledge that things outside the utility's control affecting the situation. Staff had made contacts with the various elected officials regarding the change, but that seemed to go alright. People had expressed disappointment but understanding.

Vice President Bartel expressed disappointment with the situation facing the Board but said that other companies got caught up in the same vision of the future and were experiencing financial difficulties. There was a price point and a threshold at which people were willing to purchase the service, and he questioned whether people always needed to have state of the art. He asked if EWEB was building a Ferrari when it needed a Volvo. He suggested that something that got the job done be attempted. He said there was a perceived lack of service in the community. ATT was not delivering according to its franchise agreement, and now out of business. He did not think that Comcast bought ATT to serve communities like Eugene, but rather to serve larger communities. He anticipated Comcast would bring larger markets to a technological standard that other communities would not enjoy, and he questioned where that left Eugene. He recommended that staff figure out another level of service for the project. He anticipated a more comprehensive discussion of the project in the future.

Commissioner Bishop noted her continuing support for universal access. She was concerned about how long-term a view EWEB could take when investing for the future. She believed that to continue to do MetroNet, EWEB had to demonstrate that telecom services were financially independent. She emphasized the importance of considering the financial status of EWEB ratepayers.

Commissioner Lanning agreed that a more comprehensive discussion was needed. He said that he needed to have more information about the successes and failures of other public utilities attempting to provide such services. Ms. Smith said that in some cases, that information was very difficult to secure; for example, repeated requests for information to Tacoma had not been answered. Vice President Bartel said that very few of the people he had spoken to wanted to share their trade secrets or were forthcoming with information.

Ms. Smith indicated support for the staff recommendation, saying it was consistent with the business plan and appeared to be the prudent thing to do. There was general Board concurrence.

Responding to a question from Commissioner Lanning, Ms. Smith said that the next steps would include the development of economic indicators that would help staff determine when the project projections appeared to be viable again. At the same time, staff would recommend some interim steps that would add no risk to the utility, such as the extension of current PAN-related activities or responding to specific requests for service. She suggested that the Board might also wish to discuss the options raised by Vice President Bartel.

General Manager Randy Berggren outlined possible next steps, saying staff would give the Board a sense of when the plan was viable in the form of the economic indicators. He anticipated further exploration of the questions raised by Vice President Bartel and suggested that the issue of the long-term economic viability of MetroNet and its scope could only be resolved by the voters. That was a long-term conversation the Board must have with the community.

The meeting adjourned at 7:25 p.m.

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Assistant Secretary President