Board Members present: Dorothy Anderson, Patrick Lanning, Paul Conte, and Ron Farmer. Commissioner Sandra Bishop was excused.

Others present: Randy Berggren, Jim Origliosso, Scott Spettel, JoAnn Andersen, Dick Helgeson, Marty Douglass, Charles Dalton, Mat Northway, Bob Lorenzen, John Yanov, Debra Smith, Dick Varner, and Krista Hince of the EWEB staff; and Ruth Atcherson, City of Eugene Minutes Recorder.

TIERED RATES REVIEW

John Yanov, Senior Financial/Rates Analyst, reviewed the tiered rates, which had been implemented in November of 2001 and had increased utility bills by an average if 33 percent. He added that in May of 2002 there had been cost adjustment increases which had brought the average increase in utility bills to 40 percent. He made his presentation with the aid of overhead projections. He reported that time had proven that most residential customers' bills are lower with the tiered rate than they would have been had EWEB implemented the flat rate increase. Mr. Berggren clarified that the tiered rate had only been applied to residential customers.

JoAnn Andersen, Customer Services Division Director, provided an overview of how the tiered rates had affected labor costs. She noted that it had become important to read meters in a timely and even manner so that customers did not find fluctuation in their utility bills. She explained that the customer service area has experienced an increase in phone calls, which has increased the customer service labor force by three FTE positions. She noted that it was unclear as to whether a flat rate would have altered the need for new employees in FTE positions.

President Anderson felt that some extra time would have been required to address the concerns of customers regarding increases in their bills with the flat rate.

Vice President Lanning asked if there had been set-up costs for the tiered rates. JoAnn Andersen, Customer Services Division Director, responded that there had been some testing and some refinement to the billing process. She added that the majority of this work had occurred in the customer service area.

In response to a question from Commissioner Farmer, Ms. Andersen said that she felt that the customer service calls would be similar in volume with a flat rate as they are with the tiered rate. She noted that customer service is now receiving 1600 telephone calls per day whereas one year ago the calls averaged 1200 per day. General Manager Randy Berggren added that the utility would have likely needed to add to the pool of people in customer service who answer the telephone regardless of whether the tiered rate had been implemented.

Ms. Andersen noted, in response to Commissioner Conte, that the calls are timed and that they are lasting one and a half to two times longer than they had prior to the advent of the tiered rate system.

In response to a question from Commissioner Conte, Ms. Andersen explained that reading the meters every other month was not a workable idea for this area as it created fluctuations in utility bills and caused customers to question the accuracy of the meter reading.

Energy Management Services Manger Mat Northway presented an overhead graph entitled Comparison of Average Monthly Consumption Adjusted for Weather. He asserted that the tiered rates, and any rate increase, encouraged energy conservation in customers. He related that the study had looked at eight strata of residential utility usage. He commented that it was not clear that the tiered rate had directly motivated more energy users to conserve.

Commissioner Conte asked if any interviews had been conducted to determine levels of conservation and why they were being employed. Mr. Northway responded that there had been no interviews at this point.

In response to a question from Vice President Lanning, Mr. Northway stated that the tiered rate could be non-motivational to a person who was in the middle of the tier, in that they would not move from one tier to another due to conservative energy usage.

Commissioner Farmer commented that a person can not clearly say whether the tiered rate impacted energy usage in a positive way as there was no clear evidence to support that. Mr. Northway responded that it was absolutely clear that it did make people call the utility on the phone.

Chuck Dalton, Customer Relations Manager, reported that he had been charged with looking at the impact of the tiered rate increases on the cadre of low income customers. He said that two groups had been looked at, the Universal Service group, comprised of 100 customers, and approximately 3500 customers in an energy assistance program. He delineated the differences between the impacts of the rate increases caused by the tiered rate as opposed to what a flat rate would have been. He concluded that 70 percent of the low income customers were better off with a tiered rate approach than the flat rate approach. He noted that low income customers, which comprise 15 to 20 percent of the total utility customers, had paid increases totaling approximately $4 to $5 million in the last year. He felt that low income people, particularly seniors, are doing everything they can to lower their energy consumption.

Vice President Lanning noted that 58 percent of the customers had benefitted from the tiered rate and that the sample being looked at used 1500 kilowatt hours per month. He wondered why the usage was somewhat high. Mr. Dalton replied that people with higher energy consumption typically have the worst housing stock. He added that these customers are the most vulnerable, the most at risk, and have the worst houses of the people in the Universal Service Group.

In response to a question from Commissioner Farmer, Mr. Dalton explained that at least half of the low income customers in this group were senior citizens that were juggling the maintenance of a degree of comfort versus being able to pay the utility bill.

Mr. Berggren explained, in response to Commissioner Farmer, that the direct impact of the tiered rate system had been an unknown quantity prior to its implementation.

Mr. Dalton related that he had heard anecdotally that many of the seniors feel that the "game has been switched on them." He said that these people have raised children and are in large houses with energy technology from the 70s.

In response to a question from Commissioner Conte, Mr. Dalton said that there are no firm answers to the increase in people needing energy assistance. He related that 80 percent of the people that are applying to St. Vincent DePaul for energy assistance are coming for assistance for the first time. He noted that some utility companies have created a discounted rate for senior citizens.

Marty Douglass, Public Information Manager, discussed the public reactions to the tiered rate structure. He said that the increases had generated more public response than any action the utility had undertaken in more than ten years. He recapped the process by which the Board had arrived at the tiered rate structure, adding that the public had, at the time, largely supported this type of rate increase if an increase was mandated. He said that the public support had continued until the first bills when dramatic increases had arrived. He related that the commentary had been very angry. He noted that people had been encouraged to purchase all-electric homes in the 60s and that they now felt victimized by the utility bills. He commented that the complaints had died down at the beginning of the summer and that it was projected that there would be an increase again in complaints with the fall.

Commissioner Conte suggested that there be a portion of the bill that delineates what the tiered rate saves an individual customer in utility costs. Mr. Berggren responded that it would not be statistically valid information.

Mr. Northway stated that approximately 50 percent of the homes built in the last ten years use gas heating.

Mr. Yanov explained the Board's options for possible changes in rates. He said that the Board could accelerate the process and meet on September 17, 2002, and adopt a new rate schedule or the Board could meet on November 1, 2002, to make a rate determination with noticing and a public hearing. He noted that another consideration is low income funding and where the funding for it will come from. He said that the Board would also be reviewing wind power in November. He added that rates could be altered annually in a power cost recovery adjustment. He noted that the BPA will likely institute the cost recovery adjustment clause in April or May of 2003 and that this will play into how EWEB will need to adjust its rates.

President Anderson expressed concern that some of the industrial customers were being hit at a level that was above what it should be, but she felt that it was good to help support the low-income energy users. She added that she would be opposed to adjusting the tiered rates at this time, but that she would consider it if it would help the low-income people.

Mr. Dalton reiterated that there had been a dramatic increase in people seeking energy assistance.

Commissioner Conte said that he would not support tiered rates until he saw that they were achieving their goal of conservation. He felt that the affect that the rate increases have had on low income utility customers should be scrutinized. He advocated for waiting a season to make a determination regarding rates.

Commissioner Farmer asked what management would recommend. Mr. Berggren responded that he would change back to a flat rate or he would move to a more attenuated tier structure. He harkened back to his experience with tiered rates at the Springfield Utility Board, noting that SUB had reverted to a flat rate structure after three months. He felt that the tiered rates jeopardized customer loyalty.

President Anderson agreed with Commissioner Conte that the Board should wait for a season prior to making another determination about the rate structure.

Vice President Lanning recommended looking at the tiered rate structure to determine if it is meeting the utility's financial needs and achieving the desired results. He agreed that waiting would be a good idea.

Commissioner Farmer said that he had no definitive position on the matter at this time. He commented that he was leaning toward reverting to a flat rate structure but that he could be convinced to agree to either rate structure. He concurred that waiting to make a determination was best.

Vice President Lanning felt that the utility needed to re-earn the trust of its customers, stating that he valued having a high level of trust.

Mr. Yanov summarized the Board feedback by saying that it seemed that a possible determination regarding a change in the rate structure should wait until spring. Mr. Berggren agreed, stating that there are a number of unknowns at this time.

Vice President Lanning stressed the importance of addressing the issue of the needs of the utility's low income customers.

The meeting adjourned at 7:24 p.m.

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Assistant Secretary President