Board Members present: Dorothy Anderson, Sandra Bishop, and Paul Conte. Vice President Patrick Lanning and Commissioner Ron Farmer were excused.
Others present: Randy Berggren, Scott Spettel, Tom Buckhouse, Libby Henry, Lance Roberts, Terry Bequette, Jay Bozievich, Ken Beeson, Jim Maloney, Marty Douglass, Dick Varner, Jim Origliosso, Jim Wiley, Debra Smith, Mark Oberle, JoAnn Andersen, Dick Helgeson, Roseanna McArthur, and Krista Hince of the EWEB staff; and Ruth Atcherson, City of Eugene Minutes Recorder.
President Anderson called the Work Session to order at 5:37 p.m.
CUSTOMER PROPOSAL - BPA POST 2006
Electric Division Director Jim Wiley explained that he was presenting an update on the status of the customer joint proposal and some of the issues that had arisen from it. He outlined the activities that were currently in the works with the aid of overhead projections (also included in the memorandum entitled Joint Proposal of NW Utilities).
Libby Henry, Legislative Representative, discussed the key aspects of the settlement. She noted that all entities involved in the settlement have to make a 20-year commitment to it.
Mr. Wiley noted that some "slice" customers want to be able to purchase a five-year "block" product instead of a 20-year product. He said that EWEB had a block contract that runs through 2011 and this settlement begins in 2006. He commented that "the devil is in the details" at this point and there was much to work through.
Mr. Wiley stated that the residential small customers for investor-owned utilities (IOUs) were the exchange. They enjoyed the ability to sell power to their small farm and residential customers at the same rate that the public utilities purchased power for. He said that the public utilities subsidized that rate. He explained that the issue was how these rates would be calculated and for what quality power over the next contract term. He explained that what had changed was that there had been a settlement agreement as a result of lawsuits that the "publics" had filed challenging the settlement benefits that the IOUs were getting under the current contract. The exchange benefit was increasing the customer proposal in that it had been 2200 MW, but that the IOUs were saying that the residential/small farm load was 4400 MW. He related that in order for the negotiation to go through, it had been calculated at 3300 MW. He related that the exchange rate had also been calculated based on the embedded costs of the IOUs resources. He said that the current proposal had been based on a hypothetical high-efficiency gas turbine and that the biggest influence on that would be the price of gas.
Scott Spettel, Power Management and Planning Manager, stated that in the late 70s there had been a movement to turn the utilities of the entire state of Oregon into publicly owned utilities to get the benefits of the federal-based system. He related that, as part of the compromise with the passage of the regional act in the late 70s, the rural and residential customers of the IOUs were to get power at the same cost that the publicly owned utilities were, with the mechanism being the financial payment from Bonneville to the IOUs based on the difference in cost between the IOUs, resource cost, and the cost to the Bonneville Power Administration (BPA). He said that this was an attempt to regionalize the benefits of the federal-based system beyond the public/private utility.
In response to a question from Commissioner Conte, Mr. Wiley said that he felt this was a move toward wholesale deregulation. Mr. Spettel added that, should the BPA rates go up, the subsidy to the IOUs would be that much smaller because the difference between their average system cost and the BPA rate would be smaller.
Ms. Henry pointed out that EWEB was one of few utilities that opposed the legislation regarding this. Mr. Wiley noted that the State of Oregon was supporting the proposal.
Mr. Wiley reported that the Power Planning Council (PPC) wanted something sustainable over time. He said that the industrial customers did not like the exchange proposal as it stands because there was no benefit to them. He predicted that their rates would likely increase as a result of it. He questioned whether there could be assurances made that the BPA would control costs and remain above market rate. He noted that the proposal required enforceable cost control, but that this would be difficult as the BPA was acting as the administrator. He listed some of the possible solutions to this, including having a customer group to oversee the rate enforcement.
Commissioner Conte expressed reservations in signing a 20-year contract. He felt that it could lower what EWEB would be signing for.
Commissioner Bishop felt that taking on a 20-year contract with the BPA might not be at all prudent. She noted that, among other things, the BPA had violated some of the environmental standards for financial reasons in the past. She wondered who sets the standards for the BPA.
Mr. Wiley responded that the "slice" contract contained an audit provision, but that the audit did not address whether the money had been spent appropriately. Mr. Berggren stated that, based upon his experience with the BPA, it would be difficult to attain any cost certainty in a contract with the BPA.
Mr. Spettel commented that much of the risk of cost over runs of the BPA had diminished because the BPA was not pursuing resource acquisition like they had before.
Regarding conservation, Ms. Henry stated that the Power Planning Council wanted to see the utilities going back to funding the conservation program the way it had been done in the 80s and it would no longer be in the form of a credit on the bill received. She stated that an objection to this change had been made. She noted that the changes would subject EWEB to a GAO audit to ascertain that the conservation measures that EWEB said that it had undertaken had actually been done.
Ms. Henry said, regarding renewable resources, that there was no agreement on acquiring cost-effective renewable resources as the environmental community was concerned that if it was so constrained it might limit the development of renewable power resources. She added that the environmental community had related that the Power Planning Council had estimated that there would be 350 MW per year within this four-state region and it had asserted that all of that load-growth should be met with conservation and renewable resources. She noted that the cost would be approximately $98 million. She stated that the customers had refused to go along with this. She reported that, currently, the BPA was funding renewable resources at approximately $21 million a year. She said that the proposal would increase that to $23 million per year.
Ms. Henry explained the following:
Commissioner Conte asked what the IOUs get out of really low rates for their customers. Ms. Henry responded that they are being subsidized by the publics. Mr. Wiley felt that they were looking for low-cost power to provide for their customers.
Ms. Henry stated that the large publics, EWEB, Seattle, and Tacoma, had been supporting the "slice" proposal because they did not want to rely on the purchase decisions of the BPA, and wanted to be responsible for their low growth. She added that they wanted to get the BPA out of the market. She related that the small publics did not want the system to change nor did they want to subsidize the growth or the investment into the renewable resources of the large publics.
In response to a question from President Anderson, Ms. Henry said that the environmental community and others are weighing the benefits of protecting the system for 20 years and engaging in this kind of proposal which limits the DSIs, gets Bonneville out of the market, requires a 20-year contract, and looks at the cost controls which may or may not be to the liking of the involved parties. She said that customers have to look at "the whole thing and ask, am I better off or not."
GROUNDWATER UPDATE
Jay Bozievich, Senior Water Engineer, provided the update on the groundwater project, as outlined in the attachment entitled EWEB Confluence Wellfield, accompanied by overhead projections. He explained that the Hayden Bridge Filtration Plant was the sole source of water for the City of Eugene and sundry other customers and that the reservoirs are gravity fed from there. He said that, should the filtration plant go down, the reservoirs would be out of water in one to three days, depending upon whether it was winter or summer. This had caused enough concern that research on a possible back-up source had been conducted. He related that at the end of the year 2000 it had been determined that well-drilling was a viable resource to develop and the board had passed resolutions authorizing money to be spent and a bond issue.
Mr. Bozievich reported that three deep wells and one shallow well for monitoring had been drilled, in addition to two wells that had been drilled several years earlier. He noted that there had been a lot of data points, as a result. He showed slides of the process of drilling that the project had gone through. He discussed the geologic strata that had been encountered.
Continuing, Mr. Bozievich discussed the performance of the wells. He explained that the production rate had been lower than had been expected at a 60 percent efficiency on one of the wells and as a result more work would be required on it. He said that the production profile had indicated that it may be tapping into a confined aquifer. He reported that the water pumped out of the test wells had affected another municipal user that used water from the aquifer.
Dick Helgeson, Water Division Director, asserted that it was not unexpected to see another well affected by the draw-down from the EWEB well. He said that they would work to reduce the impact on the two other users. Mr. Bozievich stated that the water resources division had always known that there would be some impact. He noted that none of the wells of the other two users were as deep as the EWEB wells (which went to the bedrock). He said that EWEB was screening approximately 100 feet below other users. He felt that this raised a question of whether EWEB was legally obligated to be concerned with the effect of the draw-down on the others.
Mr. Bozievich, noting that originally it had been planned to drill seven wells in close proximity, recommended that the wellfield sites be spread further apart, adding that this could provide for a higher individual yield. He said that nine wells were currently planned and would be located in closer proximity to Gilham Road in order to reduce the impact to others.
In response to a question from Mr. Berggren, Mr. Bozievich stated that some easements would have to be attained and some were already in place.
In response to a question from Commissioner Bishop, Mr. Bozievich related that a consultant had formed the assumption that the aquifer was unconfined, but that EWEB had determined that it was, in fact, confined, or at least had a very slow flow.
Commissioner Conte asked how, given the nature of a confined aquifer, a well could achieve a steady rate of output. Mr. Bozievich replied that eventually the cone of influence would extend out from the leakage from the upper aquifer so that the leakage rate balanced with the rate of gallons per minute. He added that the long-term impacts are not known at this time. Commissioner Bishop commented that this was a common water rights issue, that the entity that could draw from the deepest well had the most legal right to the water.
In response to another question from Mr. Berggren, Mr. Bozievich said that EWEB could take a hard line approach as it was not legally required to mitigate its impact on the adjacent users, but that he felt it would be wise to negotiate with them.
Mr. Bozievich stated that the Ph and the iron and manganese contents of the well had been as expected, and that arsenic levels were below the proposed MCL. He reported that it was a "high-quality aquifer" and, as such, would not need a lot of chlorination. He recommended that the water be chlorinated at the wellheads, which would reduce costs by eliminating the need for a water treatment plant.
In closing, Mr. Bozievich reported that the project was on schedule and currently below budget.
The meeting adjourned at 7:23 p.m.
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Assistant Secretary President