Board Members present: Dorothy Anderson, Patrick Lanning, Sandra Bishop, and Ron Farmer.

Others present: Randy Berggren, Jim Wiley, Marty Douglass, Cathy Bloom, Dick Helgeson, Ken Beeson, Roseanna McArthur, Jim Origliosso, JoAnn Andersen, Tom Buckhouse, Dick Varner, Libby Henry, Leslie Monk, Dean Ahlsten, Debra Smith, Dave Koski, and Krista Hince of the EWEB staff; and Ruth Atcherson, City of Eugene Minutes Recorder.

President Anderson called the Work Session of the Eugene Water & Electric Board (EWEB) order at 6:30 p.m.

ELECTRIC CAPITAL FUNDING

Ken Beeson, Energy Resource Projects Manager, introduced members of his team: Dave Koski, Electric Operations Manager; Dean Ahlsten, Electric Engineering Manager; Dick Varner, Fiscal Services Supervisor; and Terry Bequette, Information Services Manager who was absent due to illness. Mr. Beeson provided an overview of the Electric Capital Funding Plan as outlined in memoranda to the Board and with the aid of overhead projections. Included in his review was reference to the aging infrastructure issue. He explained that the purpose of the Work Session was to ascertain that there was Board agreement on how staff was proceeding in developing the capital funding plan and to allow for Board feedback should the Board note any gaps in the plan. He stated staff's intention to determine the appropriate level of funding for ongoing replacement of the capital assets of the utility, to define the funding alternatives for the capital plan, and to define strategies for obtaining funding approval.

Referring to a chart on the back of the Board packet, Mr. Beeson reviewed the five-year projections for expenditures and funds and noted that the goal was to reduce a $22 million gap.

Commissioner Bishop said that the consideration of intangible costs was important to her.

Mr. Varner stated that, from his perspective, there were two primary sources of funding and they were customer rates and direct customer charges. He noted that the issuance of bonds resulted in debt service and reserve funding requirements that had to be funded from rates. He said that one question confronting the funding team was how to fund the indirect costs of growth.

President Anderson questioned the ability of the utility to move forward with instituting a Systems Development Charge (SDC) and whether Libby Henry (EWEB's legislative representative) would need to lobby for a legislative change in order to facilitate this. Mr. Varner responded that it was premature to move forward with an SDC process, as it would not be possible to adequately prepare for it for this legislative session. He felt that it was a possibility for the legislative session of 2005. Mr. Beeson commented that more research on this was necessary.

Vice President Lanning said that the reliability of the electric utility was good and questioned the importance of addressing the capital funding issue at this point. Mr. Koski responded that preventive maintenance was necessary and that there were new developments to extend the lifetime of some of the components. He noted that some of the poles were more than 40 years old. Mr. Varner added that procrastination could prove to be a great deal more expensive in the long run.

Mr. Beeson briefed the Board on the schedule for the process of developing a draft Electric Capital Funding Plan.

In response to a question from Commissioner Bishop, Mr. Varner stated that increasing the dollars that would come in would only increase the amount of funding going to Contributions In Lieu of Tax (CILT) and, perhaps, the allocation to conservation, but that power and operations and management costs would not necessarily increase.

Commissioner Bishop asked if, when the plan was completed, there would be specific capital projects in mind, or if this was a more general plan. Mr. Beeson responded that the goal for this year was to critically review the five-year plan and that staff would be returning in March with the preliminary plan on how to close or mitigate the funding gap. He said that specific projects would be reviewed with the Board as part of the 2004 budget process.

The meeting was adjourned at 7:22 p.m.

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Assistant Secretary President