Board Members Present: Dorothy Anderson, Peter Bartel, Patrick Lanning, Sandra Bishop, and Paul Conte.
Staff members present: Randy Berggren, Lance Robertson, Cathy Bloom, Jean Meyers, Dick Helgeson, Marty Douglass, Jim Wiley, Debra Smith, JoAnn Anderson, and Krista Hince of the EWEB staff, and Ruth Atcherson, minutes recorder of the City of Eugene.
President Anderson called the Regular Board Meeting to order at 7:40 p.m.
AGENDA CHECK
There were no changes to the agenda.
APPROVAL OF CONSENT CALENDAR
1. Minutes of the December 18, 2001, Special Board Meeting, the March 19, 2002, Special Board Meeting, the May 7, 2002, Regular Board Meeting, and the June 11, 2002, Special Board Meeting
Business Service Agreements
Resolution
President Anderson pulled the minutes from the Special Board Meeting of March 19, 2002.
Commissioner Lanning pulled the minutes from the Special Board Meeting of December 18, 2001.
Vice President Bartel moved, with a second from Commissioner Lanning, to approve the Consent Calendar with the aforementioned exceptions. The motion carried unanimously.
ITEMS FROM BOARD MEMBERS
President Anderson reported that she had attended the Northwest Energy Coalition meeting in Walla Walla, Washington over the previous weekend. She noted that she had toured the Stateline project, which includes 399 towers. She related that there had been considerable discussion of the new Bonneville Power Administration (BPA) relationships. She said that BPA is considering a change in their priorities. She reported that the group had broken into caucuses and that, in the course of the caucus that she had attended, an environmentalist had stated that all of the new gas power plants being proposed in Oregon, only the Wanapa plant should be built.
Commissioner Lanning noted that he will be attending the 2050 Region Conference on Livability on Thursday, June 20, 2002. He said that he would report back to the Board.
CORRESPONDENCE
General Manger Randy Berggren welcomed Commissioner Conte to his first EWEB Board meeting.
Mr. Berggren commended the Lane Electric Co-Op for the work it was performing to set up the next All Utility Meeting to be held August 20. He requested that the Board check their calendars and let him know if they could attend.
Continuing, Mr. Berggren stated that Debra Smith and Krista Hince had compiled a new Board orientation manual. He asked the Board to look it over and provide any feedback. He asked Board members to apprise him of any further questions.
Mr. Berggren noted that a memorandum had been sent to Board members on a strategic metering project, adding that this was one of a number of issues identified over the course of the first strategic retreat.
Mr. Berggren proposed holding the next retreat over the evening of July 9 and through the day on July 10. He requested Board members to check their schedules and confer via email regarding whether these dates will work.
Mr. Berggren said that a follow-up memorandum regarding the RTO (Regional Transmission Operations) had been sent to the Board. He said that EWEB has joined with the Public Generating Pool and some of their concerns as well as the Public Power Council about the RTO and are starting to track this. He related that the Washington PUD group and another group of associates on their position of RTO and whether or not EWEB would take a more visible role and possibly elicit Peter DeFazio's support.
Mr. Berggren reported that Jim Wiley, Electric Division Director, relayed information that another payment in the amount of $805,000 has been received from the Federal Emergency Management Agency (FEMA). He said that this brings the total reimbursement to $1 million and it is anticipated that there will be another reimbursement of $100,000. He noted that the total cost of the wind event to the utility was $1.5 million.
Mr. Berggren stated that the noticing issue had been brought before EWEB attorney, Win Calkins, and that he had determined that EWEB notification requirements were adequate and legitimate. He shared a copy of a letter to Jim Seabury regarding the Santa Clara water district and the two major concerns expressed thereof.
Continuing, Mr. Berggren highlighted the agenda for the next Work Session and Regular Board meeting, noting that the Work Session will be focused on the distributed generation work plan and, as part of that, a photovoltaics project update. He added that the Regular Board meeting will include an election of officers. President Anderson noted that she would not be present. Mr. Berggren suggested that the election be moved to July 16, 2002.
PUBLIC INPUT
There were no members of the public who wished to speak at this time.
ANNUAL REVIEW OF THE GENERAL MANAGER'S PERFORMANCE AND COMPENSATION FOR 2002
Jean Meyers, Human Resources Manager, provided an overview of Mr. Berggren's performance review and evaluation.
President Anderson opened the floor for questions. She emphasized that Mr. Berggren has demonstrated an ability to handle complex issues and to manage crises well in the face of a year in which the BPA raised its rates by 60 percent.
Continuing, President Anderson stated that, as she had only voted for a two percent increase in staff salaries, she would not be able to vote for more than a two percent increase in Mr. Berggren's salary.
Commissioner Lanning said that he had reflected a great deal on this issue. He noted that leadership is essential in difficult times. He felt it important to acknowledge the work that Mr. Berggren does, but he remained unconvinced that the Board's objectives have been met with this process. He suggested that, rather than make a decision at this meeting, a subcommittee of the Board should meet, consider further data, and make a recommendation.
Ms. Meyers responded that both approaches stated thus far have merit. She noted that there will be a dilemma at some point in the future as the utility will reach a point at which it will need to compensate Mr. Berggren consistent with salary levels of comparable positions in the United States.
Commissioner Bishop remarked that it could be beneficial to delay this decision until January 1, 2003, and then, at that point, whatever action taken would have to be retroactive. This would allow for the utility to achieve financial equilibrium prior to making this decision. She added that the whole system of evaluation has been changed and, as such, to make a decision at this point felt arbitrary.
Vice President Bartel asked that the undelineated elements of the benefit package be clarified. Ms. Meyers explained that this includes the $35,000 supplemental retirement that is set aside each year, a car allowance of $4,800 annually, and a five percent additional deferred compensation to his base salary.
Vice President Bartel noted that during deliberations on the rate increase he had felt that it would be prudent to hold off increasing compensation for all employees for a year. He stated that business is down and customer complaints are up. He said that he would be unable to give a raise to the general manager that he could not give to all of the employees. Nonetheless, he felt unsure of what the tax implications of waiting a year would be as well. He disagreed emphatically that the process of the evaluation has been capricious, adding that the Board and staff had spent two years forging the process. He expressed discomfort in delaying the decision.
President Anderson summarized the Board position, stating that Vice President Bartel would vote for no salary increase, the other two Commissioners would choose to delay the decision temporarily, and she would vote to provide a two percent increase.
Commissioner Conte remarked that compensation is a difficult task. He noted that there are three elements coming into play, that of the merit, that Mr. Berggren does merit the salary increase, that of the competitiveness of the job market, that it would not be desirable to have Mr. Berggren depart for a better job, and that of the economic and social environment, that it would be difficult to allocate a large increase to the general manager within the economic context that we are experiencing.
Commissioner Lanning said that he was not suggesting a delay until January, but that a subcommittee be developed to look at all of the variables. He stressed the importance of retro-active pay in the event that a delay has occurred. He added that he would be willing to participate in such a subcommittee. Mr. Conte volunteered to participate as well.
President Anderson felt that the Board could delay the action until October, 2002. Ms. Meyers expressed appreciation for the Board's willingness to expedite the process.
Commissioner Bishop moved to appoint a subcommittee consisting of Commissioner Conte and Commissioner Lanning to gather further data on a compensation package for the general manager, that whatever the result of the decision to be made, it will be retro-active, and that the decision will be rendered at the end of September, 2002. Commissioner Lanning provided the second.
Commissioner Conte offered a friendly amendment to strike 'retro-active' from the motion as it prejudges the outcome. Commissioner Bishop accepted the friendly amendment.
The motion carried unanimously.
CONTRIBUTIONS-IN-LIEU-OF-TAXES SCOPE
Cathy Bloom, Assistant Treasurer, said that she would provide the overview on this topic, as outlined in the memoranda entitled Contributions-in-lieu-of-tax and Attorney/Client Privilege re: Declaratory Judgement Regarding Contributions In-lieu-of-tax. She noted that Mr. Origliosso had formulated alternatives, as outlined on the second page of the first memorandum.
Vice President Bartel asked how the alternatives had been developed. Mr. Berggren said that the alternatives were a result of Board input and staff. He noted that there were still significant legal questions.
Commissioner Conte asked if EWEB had any leverage. Mr. Berggren responded that it did not have much leverage. He said that EWEB could take back the responsibility for the hydrant maintenance. He sensed that, even with the narrow agenda of CILT, when a conversation was begun with the City, other dimensions to the equation will arise.
Commissioner Conte asked what the argument for paying the CILT was. Mr. Berggren said that within the context of City ownership of public entities, whether under City jurisdiction or a separate entity, that it was a standard practice in the public sector for there to be some payment between the operating utility of a municipality and the City itself. He related that he had not recently looked into what the range of the payments are. He suggested that the utility should research what contemporary payments are, adding that there is value in maintaining financial ties and a relationship with the city.
Commissioner Bishop reiterated her concern that the CILT payment is theoretically based on surplus earnings and there is no surplus at this time. She opposed renegotiating the amount, stating that it should remain at six percent and that the utility should pay it if it has the money. She commented that (b), (c), and (d) under alternative (1) were non-negotiable without a clear Board position.
Commissioner Lanning thought that alternative (1)(a) most closely reflects his feelings as to how the utility should proceed. He said that he would consider (1)(c) because the partnership between the City and the utility was in question due to the City's lack of response in the recent rate crisis.
Vice President Bartel wondered what the property tax burden would be if the utility was privately owned. He noted that something is paid to the City regardless of whether it is paid through rates or paid through property tax. He recommended negotiating under a time constraint, i.e. giving it a limit.
Commissioner Conte moved to instruct staff to negotiate an amendment to the Contributions In-lieu-of-tax agreement with the City that attempts to accomplish a clarification of the application of surplus earnings provisions of ORS 225.070 and report results back to the Board by January 1, 2003. Commissioner Lanning provided the second.
Vice President Bartel offered a friendly amendment, recommending that the process be curtailed to November 15, 2002. Commissioner Conte accepted the friendly amendment.
Commissioner Bishop requested that the application of surplus earnings be clarified. President Anderson concurred, stating that it would be beneficial to the process to have a common definition of surplus earnings.
Ms. Bloom noted that 'surplus earnings' is not an accounting term. Vice President Bartel reiterated that a definition is necessary in order to proceed.
Commissioner Lanning asked that a vote be taken. The motion carried unanimously.
ARROWROCK HYDROELECTRIC PROJECT FEASIBILITY
Scott Spettel, Power Management and Planning Manager, provided the staff presentation on the proposed hydroelectric facility at Arrowrock with the aid of overhead projections, copies of which were included in a hand-out. He said that the presentation was to determine whether or not the Board supports staff working with legal counsel and five irrigation districts in Idaho to develop a power purchase agreement for the output of the proposed Arrowrock Hydroelectric project. He noted that these same five irrigation districts developed the Lucky Peak hydroelectric project which sells power to Seattle City Light. He related that he had visited that project in the late 1980s, and that at that time EWEB had considered the project not to be financially feasible. He said that due to a smaller design, a new operating regime to be implemented by the Bureau of Reclamation, and a reservoir draw-down scheduled in 2004 that will reduce construction costs, the project may be a prudent investment for the utility.
Mr. Spettel highlighted the information presented on the slides and the hand-out. He noted that the project is a proposed retro-fit on an existing facility. He said that the project is located just outside of Boise, Idaho.
Jim Maloney, New Resource Projects Manager, stated that the project would likely be structured with a high proportion of fixed costs. He said that the pricing is driven by how much output is generated from the project. He noted that, as the project is subject to hydro-risk, ten hydro scenarios were used to capture this uncertainty.
Mr. Spettel stated that this project should not have an adverse affect on rates. He said that, should the Board give direction to go forward, staff would work with counsel over the summer to develop the power sales contract and the districts would work to develop financing documents for the project. He noted that the districts need a 70 percent majority vote in order to move forward with participation in the project and this vote will occur in November of 2002. He anticipated that staff would be working on contracts, completing due diligence to bring more detailed information on environmental impacts and assessments of project economics and would then bring it for Board consideration in late September or early October of 2002.
Mr. Maloney said, in response to a question from President Anderson, that the draw-down is being looked upon as a one-time window of opportunity and that all of the environmental elements will be dealt with by the districts and by the bureau.
Mr. Spettel noted that transmission is an open question, as at times there are constraints on moving power from Boise, Idaho, to the mid-Columbia region or the Eugene area. He said that one of the first things that would be looked into in terms of due diligence would be to find firm transmission or develop a contractual alternative.
Commissioner Lanning asked what the level of confidence was in the forward pricing structure for the analysis. Mr. Maloney responded that the market prices are driven by the forwards that they get in the first few years. He added that after this point the utility makes a transition that says the marginal resource on the system is a combined cycle gas combustion turbine and this will be the technology of choice for the next ten to fifteen years. He noted that the forecasts are somewhat driven by the price of natural gas.
Commissioner Lanning reiterated that diversification is very important to the Board philosophy.
Mr. Spettel, in response to a question from Commissioner Bartel, stated that the projects may be staffed by the people who are staffing the Seattle hydroelectric project.
In response to another question from Vice President Bartel, Mr. Spettel said that the project output will bring value to the utility's customers even if it was not needed immediately to serve retail loads.
Commissioner Bishop asked what the lifetime of the project would be. Mr. Spettel stated that EWEB would have a contract through 2039 with a first right of refusal after 2039. Mr. Maloney noted that any hydro-electric facility will eventually have a siltation issue. He said that the siltation would be looked into as part of the due diligence.
Mr. Spettel clarified for Commissioner Lanning that, should EWEB not be interested in the project, it will likely not be developed into a power source. Commissioner Lanning felt that the utility should view the project as an asset and an effort to use a renewable resource.
In response to a question from Commissioner Bishop, Mr. Maloney stated that the utility does hold royalty-based contractual agreements with other entities, citing the owners of land on which wind facilities are located as an example.
In response to another question from Commissioner Bishop, Mr. Maloney said that the dam is made of concrete and has no history of flooding. Mr. Spettel added that the bureau is responsible for maintaining the integrity of the dam.
President Anderson clarified that there was no formal motion desired at this point in time. Mr. Spettel reiterated that staff was interested in hearing any reservations that the Board might have at this point in time as the preliminary work would cost thousands of dollars. Should they have reservations, it would not be wise to make the initial investments in legal fees, etc. Commissioner Bishop responded that she had no reservations.
Vice President Bartel expressed two reservations:1) That there is not enough money to invest at present; and 2) That the project represents a risk.
In response to a concern expressed by Vice President Bartel, Mr. Spettel said that staff would be prepared to "check in" regarding the progress in the Arrowrock project in the latter part of July. He stressed that the utility has looked at "a lot of projects" and this one represents the best investment and the least amount of risk. He felt it would be a "money saver" in the long run.
President Anderson conveyed to staff the approval of the Board to carry on with the initial development of the Arrowrock project.
ITEMS REMOVED FROM THE CONSENT CALENDAR
Commissioner Lanning recommended the following change to the minutes from the Special Board Meeting convened on December 18, 2001:
President Anderson recommended the following changes to the minutes from the Special Board Meeting convened on March 19, 2002:
Vice President Bartel moved, with a second from Commissioner Lanning, to approve the two sets of minutes removed from the Consent Calendar as amended. The motion carried unanimously.
The meeting adjourned at 9:52 p.m.
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Assistant Secretary President