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

Others Present: Randy Berggren, Jim Wiley, Marty Douglass, Dick Helgeson, Ken Beeson, Brenda Sirois, Terry Bequette, Jim Origliosso, Joanne Andersen, Tom Buckhouse, Dick Varner, Scott Spettel, Deborah Brewer, Jim Maloney, Debra Smith, and Krista Hince of the EWEB staff; and Ruth Atcherson, City of Eugene Minutes Recorder.

President Lanning called the Work Session of the Eugene Water & Electric Board (EWEB) order at 5:30 p.m.

INTEGRATED ELECTRIC RESOURCES PLAN (IERP) - SCOPE OF IERP UPDATE, STATUS REPORT ON RESOURCE STRATEGIES, AND DISCUSSION OF BOARD PROCESS FOR IERP UPDATE

Brenda Sirois, Resource Planning Analyst, and Jim Maloney, New Resource Project Manager, provided the staff presentation on the Integrated Electric Resources Plan (IERP) accompanied by overhead projections. Mr. Maloney highlighted the work that had been done on the plan between 1995 and 2000 and how the plan had been crafted. He explained that a large part of the citizen involvement process, by which citizen input on the IERP was garnered, involved educating the citizens as to how the system worked.

Ms. Sirois stated that the plan was on track with the demand-side management strategies and the proposed implementation plans and that, currently, a variety of programs were being offered.

Mr. Maloney reported that all of the strategies for renewables had been implemented. He said that the utility was ahead of its baseline acquisition schedule. He noted that, in accordance with the strategy of working in concert with other utilities in the region, he was serving on the Generating Resource Advisory Committee for the Northwest Power Planning Council. He added that he had also agreed to serve as a back-up on the National Geo-Thermal Collaborative. He explained that he was a back-up because, though he supported geo-thermal power generation, he had workload issues that interfered with full participation.

Scott Spettel, Power Management and Planning Manager, spoke on the strategy of central generation. Commissioner Anderson asked if was prudent to add more centralized generation in today's market. Mr. Spettel responded that the variables were such that it was not possible to provide a conclusive response at this time.

Ms. Sirois stated, regarding the strategy of distributed generation, that a business plan was being drafted.

Mr. Spettel said that the utility had done everything that the strategy for power purchases called for, but had not done it as well as had been hoped. He explained that a major aspect of the strategy was to maximize the utility's entitlement on the Bonneville Power Administration (BPA), but at the time the utility had some contracts comprising approximately one-third of EWEB's load that were expiring. In order to maximize the entitlement, the utility could not simply renew long-term contracts, so the utility bridged the gap by forming short-term contracts that were in compliance with the risk management plans. He related that this made the utility about 15 percent short, with plans to purchase on short-term markets. He said that, at the time, this was perceived to be the way to avoid a rate increase, but the utility had been caught in the market run-ups at a point that it had maximized its BPA entitlements.

Continuing, Mr. Spettel stated that the recent contracts at Wanapa had been reviewed by FERC and FERC had decided to throw out one provision, which made the entire contract null and void. He said that the agreements that had been made at the site were an unqualified success, "except that the contracts are not legal."

Ms. Sirois highlighted the specific events that had affected the utility since the IERP had been implemented in 2000. In response to a question from Commissioner Bishop, Mr. Spettel reported that the highest price in the daily Dow-Jones mid-Columbia price index was over $3000 per Megawatt Hour (MWH) on December 10, 2000.

Commissioner Bishop felt that the ethics of the BPA should be looked into. Mr. Maloney commented that the mitigating circumstances were extensive and, while he did not think that the BPA had done a "stellar job," he questioned whether any actual ethics violations had occurred.

Ms. Sirois outlined the 'decision tree' that staff had designed to aid the board in the decision-making process.

Commissioner Anderson felt that she needed more information regarding the distributed generation. She stated that she had not read the Telles report on renewable sources of energy and she asked whether it was relevant to the discussion. Mr. Maloney responded that questioning the specifics of the different strategies was integral to the discussion. He said that the first question for the board would be whether the board would still maintain the same policies, but look at the question with new information.

Commissioner Anderson stated that she did not think that it was necessary to develop new strategies so much as to update what was already there. She questioned whether it would be possible to maintain the second policy, regarding making progress toward a sustainable energy future.

Vice President Farmer pointed out that under Power Purchase Portfolio Strategies there was a sentence that read : "...EWEB believes that for the next five to seven years the price of power from Bonneville will likely be lower than that available from wholesale markets in general..." He questioned whether this was still a valid statement. Mr. Spettel responded that, in the long run, there was still reason to believe that the BPA rates would remain below the market rates. He noted that the BPA prices had "gone high," but said that the rest of the market had gone high as well. He added that the BPA was paying off its hydroelectric facilities and its expenses would eventually be reduced.

General Manager Randy Berggren opined that he did not feel comfortable with the greater dependence on hydroelectric power. He felt it advisable to have a more diverse power portfolio.

Regarding distributed generation, Mr. Berggren commented that the technology was moving quickly, but that it looked to be very different, that there were very significant ramifications on the distribution systems. He felt that the utility had much to learn about the management of it beyond learning about the actual technology of it. He stated that this was a dynamic generation, that micro-turbines or other power generation on a distributed level, would involve a whole different layer of complexity and sophistication over what a central station strategy would require. He likened it to "an Orwellian future," adding that it would require a certain level of redesign of the system.

President Lanning commented that distributed generation was relevant to this discussion, as the Board was supposed to make a long-term decision on its contractual agreement with the BPA.

Mr. Maloney agreed with Mr. Berggren, but said that distributed generation was more customer driven and that EWEB had no choice but to address it. He recommended being pro-active.

President Lanning asked what was driving the process for the review of the IERP. Mr. Spettel responded that the IERP was a great platform for decision-making. He felt that having a plan helped staff and the Board to "direct [sic] their energies." Mr. Berggren added that he supported bringing the IERP back to the board.

In response to a question from Vice President Farmer, Mr. Spettel stated that, at the balancing level, staff and the Board needed to delve into the strategies to assure that the strategies that the utility was pursuing were the correct balance of the policies.

Commissioner Bishop felt that there were no problems with the policies, adding that the discussion was useful as it helped to understand them.

Ms. Sirois stated, in response to a question from President Lanning, that the aim of the Work Session had been to determine that the new Board was in alignment with the existing policy framework. Additionally, she articulated the Board's wish to update the resource options, and their attributes, available in each of the strategies. She noted that the variables included climate changes and fluctuating gas prices.

Commissioner Bishop agreed that it would not be necessary to go through the entire IERP process again. She felt that it would be best to begin by looking at strategies and then move on to the assessment of policies and whether policies needed adjustment. President Lanning added that it was important that the board was aware of which policies were effective.

Mr. Maloney suggested that staff return with examples of scenarios in which there was conflict between strategies.

Mr. Berggren summarized the discussion, stating that staff would bring back some policy clarification work and, at the strategy level, the staff would provide what it perceived as issues and what staff felt had been beneficial. He said that staff would provide the Board with the opportunity to look over the policy and aid in identifying the gaps and discrepancies in the policies. Commissioner Bishop felt that the Board should discuss the policies prior to the next staff-lead discussion.

Commissioner Anderson felt that it may not be necessary to have a Citizen Input Committee for the next phase of the IERP as it had been a lengthy process and would add expense.

Commissioner Bishop recommended that staff provide the models for how the different strategies would pan out, rather than having the Board determine what the models would be. She felt this would simplify the process. Mr. Spettel responded that it was helpful to staff to hear the Board's concerns.

Ms. Sirois said she welcomed the Board to email any concerns or afterthoughts regarding the IERP.

The meeting was adjourned at 7:15 p.m.

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Assistant Secretary President