Board Members present: Dorothy Anderson, Patrick Lanning, Sandra Bishop, Paul Conte, and Ron Farmer.
Others present: Randy Berggren, JoAnn Andersen, Cathy Bloom, Tom Buckhouse, Dick Helgeson, Roseanna McArthur, Jean Meyers, Janet McClennen, Jennifer Joule, Jim Origliosso, Scott Spettel, Dick Varner, Jim Wiley, and Krista Hince of the EWEB files; and Kimberly Young, City of Eugene Minutes Recorder; and Tim Hays, Consultant with AON Consulting.
President Anderson called the Special Board Meeting to order at 1:00 p.m.
AGENDA CHECK
President Anderson determined there were no changes to the agenda.
APPROVAL OF CONSENT CALENDAR
The Consent Calendar was presented as following:
Business Service Agreements
1. North Creek Analytical - Drinking Water Source Protection Monitoring Environmental Management - Corporate Services - $28,202
2. Account Temps - Customer services - Customer Services Division - $35,000
3. Northwest Youth Corp - Water Division - $5,000
4. University of Oregon - Solar Resources - Energy Management Services - Customer Services - $25,000
Vice President Lanning, seconded by Commissioner Bishop, moved to approve the Consent Calendar. The motion passed unanimously.
Vice President Lanning indicated he would have to leave the meeting at 2:45 p.m. due to a prior commitment. President Anderson indicated she would have to leave for a prior commitment by 4 p.m.
CORRESPONDENCE
General Manager Randy Berggren reported there was no correspondence.
PUBLIC INPUT
President Anderson called for public input.
Bobbie Miller, 2515 Chuckanut Street, said she represented the retirees of the Eugene Water & Electric Board (EWEB). She said she had been prepared to address the question of what hardships proposed changes would mean to some of the older retirees, but could not because she was not sure what the final proposal was and what would be accepted. The impact would depend on the scope of what was proposed. She asked that there be time provided at a future meeting for retirees to speak to what was actually proposed.
Ms. Miller provided the Board with copies of written statements from several retirees, including both those who could not be present and some who were present.
Edie Warner, 1320 Skyline Park Loop, said that retirees had been treated with integrity and honesty by past general managers and she would like to have that continue. She said that when employed, retirees were given the impression that benefits were life-long. She did not want to let down those she supervised when employed by EWEB. Ms. Warner asked where retirees would go for financial assistance if their expenses were not covered by PERS or Medicaid.
Marilyn Ballard, 1580 Tyler Street #3, an EWEB retiree, expressed appreciation for the benefits retired employees received, and noted that they were given to employees in lieu of a salary increase. The retired employees trusted EWEB to honor those commitments. She acknowledged EWEB's financial problems but said they should not be solved at the expense of the retirees. She believed EWEB had been aware of escalating health care costs in the 1980s and suggested that they were an expense that should have been planned for. Ms. Ballard called for internal reductions that allowed EWEB to maintain its commitment to its retirees.
George Partridge, 88585 Partridge Lane, Springfield, said the retirees were promised the benefits they received. He said that as part of management before he retired, he had told many employees that the benefits were part of their compensation in return for lower wages. The retirement package was a reason he stayed at EWEB when he could have made more money elsewhere. He said that past general manager Keith Parks had promised retirees their benefits would not change.
Wesley Goodrich, 1080 Patterson Street, #1103, retired personnel manager at EWEB, noted his participation in creating the benefits package the retirees received. The package was competitive with other utility companies in the northwest and were designed to attract and retain the best employees available. He had not anticipated that the retirees' benefits would be threatened so EWEB could pay its unfunded liabilities. He said that older retirees had very limited ability to adjust for reduced benefits and they would be hurt the most by the changes being contemplated. Mr. Goodrich said that older retirees left EWEB with lower retirement pensions because of lower past salaries. He noted that a recent accident had meant he had to see a dentist; EWEB proposed to eliminate its dental coverage. He asked that no changes be made to the retirees' benefits.
Del Matthews, 38127 McKenzie Highway, Springfield, an EWEB retiree, said he was told that if he retired before the end of 1993 he would be grand fathered into the old medical plan. He did not see how EWEB could change the agreement past Boards and management had made with its retirees. The Board could not change any other contract EWEB had made in the past. He asked the Board to maintain the promises made by past managers and Boards.
Gordon Galbraith, 1504 Green Acres Road, introduced himself as a recent retiree. He discussed the retirement planning process he had gone through in 2000, and said he made his decision to retire on the basis of the information he had received at that time. Medical benefits had been a major concern for him in reaching his decision. He agreed with others that commitments made in the past were being broken and that was wrong. Mr. Galbraith said it was not the fault of the retirees that EWEB locked in insurance premiums in the past, but rather that of senior managers. He questioned how anyone could plan effectively for the future under the circumstances. He suggested that the outcome of the proposal be decided in the court system.
Robert Carter, 2947 Darrien Street, said that the retirees were told when employed at EWEB that they would receive better benefits in return for less money. He suggested that if the problem would have been taken care of in the past, the benefits of the retirees would not be threatened. He said that the retirees were on fixed incomes and there was nothing they could do about that. He asked that any changes made to the benefits package by the Board be fair and equitable.
Lloyd Lindley, no address given, concurred with the remarks made by Mr. Carter and Mr. Partridge regarding EWEB's past practice of having lower wages and higher benefits.
Steve Hill, no address given, a current EWEB employee, said he came to EWEB in 1979 in part because of the good benefits package being offered by the utility. He recommended to the Board that it consider making its changes effective for any new hires rather than retroactive for past and current employees.
Paul Johnson, no address given, an EWEB retiree, said that EWEB jobs were good jobs because of the benefits employees received. He said that benefits were negotiated by past managers and approved by the Board. He asked the current Board to honor those commitments.
Fred Stuart, no address given, an EWEB retiree, concurred with others who wanted the Board to maintain past commitments. He asked that the benefits package remain "as is."
George Mason, 2663 Quince Street, an EWEB retiree, said the Board was contemplating premium increases for the retirees at a time when they were under increasing economic pressure. He said retirees were very concerned about the final plan and its impact on them. He said that PERS was under pressure, and the retirees were concerned that the State legislature would be making changes to the system in the next session. He also noted potential reductions in Medicare that would affect prescription benefits received by the retirees. Mr. Mason warned the Board that if necessary, the retirees would take EWEB to court for a judicial resolution of the situation.
President Anderson thanked those who provided public input.
Commissioner Farmer recalled that when he met with the retiree group he had asked for suggestions for solution. He said that if the unfunded liability facing EWEB was not addressed, it might be a question of there being no benefits at all. At this point, he had heard nothing in terms of a solution from the retirees. In response, Mr. Mason said that the retirees had submitted several proposals that were rejected because they did not save enough money. For example, a one- percent increase in electric revenues would pay off the Unfunded Accrued Liability (UAL) completely in ten years, providing the money was dedicated strictly to benefits. He did not know if that information was presented to the Board. Commissioner Farmer asked that the information be provided to the Board.
RETIREMENT BENEFITS
The Board was joined by project team members Jean Meyers, Human Resource Manager; Janet McClennen, Benefits Specialist; Cathy Bloom, Assistant Treasurer, Jennifer Joule, Communications Specialist; and Jim Wiley, Electric Division Director. Ms. Meyers acknowledged the work of project team leader Laurie Muggy, who could not be present at the meeting. She thanked the Board for the time it had taken to understand the issues involved. She also acknowledged the contribution of the retirees group, saying that the project team had learned a great deal from the group.
Ms. Meyers reviewed the details of the past staff recommendation.
Ms. Joule provided details about the proposed contribution caps.
President Anderson called for a brief meeting break to allow Ms. Joule to calculate the answer to a question asked by Commissioner Farmer. Upon the meeting reconvening, Ms. Joule responded to the question of why, in 2012, Tier I and Tier II employees paid more than Tier III retirees. She attributed it to the Rx supplement; it was added into the Tier I and II payments and not to the Tier III payments, causing those employees to have a higher premium. Commissioner Conte reminded the Board that the actual answer depended on the cap selected; if the cap was 100 percent of the UAL, EWEB would continue to pick up the full amount. He did not want to give the impression that the Tier I and II retirees would be paying higher premiums. Ms. Joule concurred, saying everything depended on the cap and trends.
Staff emphasized that the cap scenarios being used this evening were only examples of how caps could be applied. Board direction would be sought in the future on what type of cap and how to apply caps.
Ms. Joule reviewed the cap Scenario 4, being recommended to the Board. She shared examples of how the proposed cap would work. Board members asked questions clarifying the trend assumptions presented by staff and how they affected retirees.
Ms. Joule called the Board's attention to a comparison of average annual contribution caps per member to show how EWEB's comparison looked next to the average published in the Watson Wyatt 2002 survey.
Ms. Joule highlighted the revised staff recommendation, noting changes made in response to concerns raised by the Board at its meeting on August 16.
Commissioner Conte, seconded by Vice President Lanning, moved that the new EWEB post- retirement medical benefit structure have four tiers.
President Anderson questioned if there was a need to make a decision now, saying she was having a problem adding to the UAL without more information about the whole picture and what would happen to the different tiers in the long-term.
Commissioner Conte indicated support for the motion, saying that he did not view a fourth tier as adding to the problem, but rather avoiding something that should never have been introduced into the plan in the first place, which was discriminating amongst current employees.
The motion passed unanimously, 5:0.
Vice President Lanning was excused from the meeting.
Ms. Meyers reported that, at the direction of the Board, staff sought information about the potential of revising the Rx drug supplemental plan to a three-tiered plan; subsequently, the insurance carrier indicated it would not underwrite such a plan because it had too many administrative complexities. She called attention to Exhibit 6, a comparison of how drug costs work under the group plan.
Tim Hays referred the Board to graphs provided in the meeting packet and provided details on the projected UAL for the post-retirement medical insurance plan. He compared the plan funding strategies.
In response for a request for comment from Commissioner Conte, Commissioner Farmer indicated he would think about the issue in terms of what interest rates were now, not where the Board hoped they would be. He said that the issue was not whether the rate went up, but when it went up, because that raised the issue of the value of compound interest, which would have more of an impact than anything, including inflation. He said that he would not be uncomfortable with the funding level rate of three percent figure, noting that the current figure was two percent.
Commissioner Bishop suggested that the Board error on the conservative side and employ the three percent figure. She also suggested that the 20-year horizon be changed to 25 or even 30 years.
Commissioner Conte requested a table showing the three percent smoothed over 20 years for the amount in the proposal.
A member of the audience questioned why the retirees should be responsible for the costs of the UAL. Another member of the audience suggested that other programs being funded by EWEB be asked to pay for the costs involved, or a smaller reduction in rates be considered.
Ms. Bloom reminded the Board that in 1989, EWEB had a UAL of $32 million. A staff team was put together to reduce that amount, and it successfully reduced it to about $16 million. That amount grew by $500,000 annually. EWEB staff had worked with the Board to attempt to fund the UAL since that time. She recalled that in the 1990s, staff came to the Board and asked to have it funded; at that time, the Board determined that the UAL was a "soft" number that would not be put on the books, but that would be addressed on a "pay as you go" basis. The funding picture changed over the late 1990s, and subsequently EWEB decided to fund other unfunded priorities. Ms. Meyers added that both EWEB retirees and active employees were partially responsible for the UAL because of the way that they, as consumers, had utilized their medical coverage. She said that all parties were invested in finding ways to reduce overall costs. She said that the UAL was the difference between the amount of funding EWEB had on hand presently, and the amount EWEB would need in the future to fund its future retirees' benefits. She suggested that everyone was "in this together."
Ms. Meyers acknowledged that it appeared the Board would not be prepared to act on the staff recommendation without the Board having more time for consideration. Given the changes to the project scope she asked the Board to provide staff with some direction such as: is staff's recommendation consistent with and on target to the Board's general goals and objectives, is the Board's preference that the project to be completed in the current year, does the Board want the UAL funding schedule set at 20 years or less than 20 years, and at what funding level rate - three or five percent. Ms. Meyers stated she was asking these questions to gauge the Board's support for the project' direction. If staff where not meeting Board's interests then a new project would need to be redefined in 2003.
Responding to a question posed by President Anderson, Board members expressed some support for the cumulative cap approach, although Commissioner Farmer indicated he could also support a year-to-year approach and Commissioner Bishop was unsure the Board would had taken the position it would have with a cap.
In response to a question from Ms. Meyers, Commissioner Farmer said he did not need any more information. He commended the work done by staff to this point. He advocated for more Board discussion about which cap to choose.
Commissioner Bishop requested information about EWEB's liability if no changes were made.
Commissioner Conte requested a 20-year chart showing the funding trend for the status quo.
Commissioner Conte called for more Board discussion of the contractual issue raised by retirees, and in response to a question from Ms. Meyers, said that at the previous Board meeting the Board's wanted to reserve time to discuss any moral or social contract that EWEB had with its retirees rather than a legal contract. EWEB has already received legal counsel concerning EWEB's ability to make retire benefits change. President Anderson concurred with Commissioner Conte.
President Anderson asked if staff could determine the impact of the staff recommendation on individual retirees such as Mr. Goodrich. Ms. Meyers said that staff would not know that unless Mr. Goodrich was willing to share that information. Mr. Goodrich indicated his willingness to provide that information.
Commissioner Farmer suggested that information on individual retirees requested by President Anderson be compared to non-EWEB retirees. He also wanted to know the immediate impact of the recommendation on retirees, not the impact a decade from now.
Commissioner Bishop thanked the retirees and their representatives for attending.
BONNEVILLE POWER ADMINISTRATION'S FINANCIAL REVIEW
Scott Spettel, Power Management and Planning Manager, reported that the customer comments to the Bonneville Power Administration (BPA) have recently taken on a harsher tone because of the agency's internal cost overruns and its apparent indifference to the problem. The customers have met with Energy Northwest regarding cost-cutting around the WNPII nuclear plant, and he characterized those meetings as productive and resulting in specific and tangible cost reductions over the next few years.
Mr. Spettel reviewed a memorandum provided to the Board in its packet, entitled Preliminary Reaction to Joint Customer Comments on BPA Finances. He requested the Board's input on the policy objectives that staff proposed to present to the BPA to follow in its 2003-2006 financial management and rate setting processes. Those objectives were outlined in the memorandum.
Mr. Spettel noted EWEB's concerns about the BPA's conservation efforts given potential funding reductions, and said that staff recommended that Objective #8 be changed to read: "Continue to invest in conservation that can be shown to be cost-effective to BPA's customers over the life of the conservation investments."
President Anderson endorsed the staff recommendation.
Mr. Berggren said that a great deal of work had gone into developing the joint customer proposal, including consultation with environmental groups and groups interested in renewables and conservation. EWEB was interested in ensuring that its credibility with those stakeholders was retained, and would work, at the direction of the Board, to maintain and enhance future funding levels.
Responding to a question from Commissioner Bishop, Mr. Spettel said that EWEB would advocate for an increase in the BPA transmission rates if it took an increase in those rates to fund some of the reliability projects. Staff believed the investment was worth it. He added that was contrary to the position taken by most of the public power groups, who he did not think had gone into the issue in sufficient detail.
President Anderson left the meeting. Commissioner Bishop assumed the chair.
Commissioner Bishop asked why the BPA was paying more than the minimum payment on its Treasury repayment. Mr. Spettel responded that it appeared to have become a practice over the past five to eight years when Congress had focused on the agency and questioned the federal government's role in power marketing. BPA wanted to be current with its obligations so it could demonstrate it was not a drain on the taxpayer. Another reason was that prepayment of the debt opened up some additional borrowing flexibility in other areas.
Commissioner Bishop was not comfortable with recommending that the BPA consider an increase in transmission rates. She acknowledged the reliability concerns and said that it was the right thing to do, but she did not want to do it. She wanted to say something about reliability without encouraging the BPA to raise its rates. She believed that the BPA had money within its budget it could re-prioritize to complete the needed projects without violating the biological opinion, and suggested that the memorandum be worded that way. Mr. Berggren reminded the Board that the BPA's transmission business line and power business line were separate and could not be mixed. He said he understood Commissioner Bishop's concern, but he feared that a major blackout in the northwest from the agency's failure to do the right projects would have major political implications for the agency.
Responding to a question from Commissioner Bishop, Mr. Spettel said that the issue could be omitted from the letter to be sent to the BPA and the immediate concerns incorporated into the TBL rate case.
Commissioner Conte said he was confident that staff would represent the utility's interest. He said that if staff perceived the issue as crucial, he wanted to ensure that it was brought to the forefront.
Commissioner Bishop, seconded by Commissioner Farmer, moved to accept Mr. Spettel's memorandum, excepting the discussion about transmission rates, which would be left out of the letter that forwarded customers concerns to the BPA, and that EWEB not lose track of the concern but that it be raised in the context of the transmission rates case.
Responding to a question from Commissioner Conte regarding the action that would occur if the motion was adopted, Mr. Spettel said he would write a memorandum supporting the northwest customer group comments including the eight objectives in the memorandum as modified. He would not include any discussion about transmission investment-related rate increases.
Commissioner Farmer said he did not believe EWEB was pushing hard enough on any of the issues raised in the memorandum. He did not have much faith in how hard the BPA was working to keep costs under control.
The motion passed unanimously, 3:0.
ITEMS PULLED FROM CONSENT CALENDAR
There were no items pulled from the Consent Calendar.
The meeting adjourned at 4:13 p.m.
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Assistant Secretary President