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

Others Present: Randy Berggren, Jim Wiley, Marty Douglass, Dick Helgeson, Jim Origliosso, JoAnn Andersen, Tom Buckhouse, Dick Varner, Debra Smith, Terry Bequette, Eric Armstead, Deb Brewer, and Krista Hince of the EWEB staff; and Ruth Atcherson, City of Eugene Minutes Recorder.

President Lanning called the Regular Board Meeting of the Eugene Water & Electric Board (EWEB) order at 7:32 p.m.

AGENDA CHECK

There were no changes or additions to the agenda.

APPROVAL OF THE CONSENT CALENDAR

Minutes

• Minutes of the September 17, 2002, Work Session, the October 22, 2002, Work Session, and the December 3, 2002, Work Session.

Resolutions

• Banking Resolutions - Financial Services - Change is signatories with new officers

Bid Awards

• Brown and Caldwell - City View 1150' Reservoir Inspection - Water Division - $116,000
• Cornforth Consultants - 2003 Carmen-Smith FERC Part 12 - Inspection and Safety Report - Electric Division - $45,324

Business Service Agreements

• Contract Labor - Cash Processing - Cash Accounting/Atrium Department - Customer Services Division - $40,000
• Sybase, Inc. - Sybase Database Management System - Information Services - Corporate Services Division - $25,420.50

Vice President Farmer stated that he would abstain from voting on the banking resolutions due to a potential conflict of interest.

Vice President Farmer moved, with a second from Commissioner Bishop, to approve the Consent Calendar, with the exception of the banking resolutions. The motion carried unanimously. Commissioner Bishop moved to approve the banking resolutions. Commissioner Anderson provided the second. The motion passed unanimously, with one abstention (Vice President Farmer).

ITEMS FROM BOARD MEMBERS

Commissioner Bishop reported that, though she had intended to attend the power generation conference in Seattle, she was unable to attend. She said she had received the notebook of materials from the conference and offered to share it with interested Commissioners.

Commissioner Bishop thanked the Umatilla Tribe for the tickets to the Governor's Inauguration Ball. She said she met the Executive President of the Diamond Corporation, Hiroshi Mikuma, and spoke with him.

Vice President Farmer related that the subcommittee on the General Manager's compensation package held their first meeting. He noted that President Lanning, Jean Meyers, and General Manager Randy Berggren also sat on the subcommittee.

President Lanning stated the former EWEB Commissioner Peter Bartel had received the award for being an outstanding citizen from the Lane Council of Governments (LCOG).

CORRESPONDENCE

Mr. Berggren reported the following:

• He confirmed that a special meeting had been scheduled on February 6 from 9:30 to 11:30 a.m. to review the PERS issue. He noted that the first hour of the meeting would be an Executive Session.
• He noted that a recent issue had arisen out of the Bus Rapid Transit (BRT) project. He said that he had been contacted by a city councilor regarding this and a back grounder was being put together to make Board Members aware of the issues being raised.
• A coalition of the joint customers of Bonneville had come to Eugene to brief The Register Guard editorial Board on the post-2006 joint customer proposal for Bonneville contracts. He noted that attendees included representatives from Portland General Electric, Pacific Corporation, Pacific Northwest Generating Cooperative (including two representatives from local power cooperatives).
• The Northwest Power Planning Council had read the joint customers' proposal and had responded favorably. The Bonneville Power Administration was still forming a response. He anticipated that the BPA response would be favorable as well.
• The packet on the Board vacancies had been circulated to the board members.
• The February 4 Work Session would include a discussion on the General Manager's Goals and, at the Regular Board Meeting, there would be a Master Plan update and a discussion on an Electronic Media Policy.

Commissioner Bishop asked when the Board would next be receiving an update on the Wanapa power development. Mr. Berggren responded that it would be an the agenda for the meeting to be held on March 4, 2003.

PUBLIC INPUT

Fred McVey, Engineering Data Service Manager for Public Works, City of Eugene, 858 Pearl Street, noted that he had worked on aspects of the joint billing by which the stormwater fees were assessed through the EWEB utility bills. He explained that the new transportation fee that the City had proposed to be included in the utility's billing was not a tax, but a fee for service. He pointed out that using EWEB as a billing agent was highly efficient and cost-effective. He noted that it would save the rate-payers money. He said that the city staff would do everything in its power, should EWEB choose to include the billing for the transportation fees in its bills, to keep the phone calls that could be generated by this directed to city staff.

David Bulbee and Walter Henderson, 39429 McKenzie Highway, spoke regarding the Walterville Canal. Mr. Bulbee stated that the EWEB canal was located by his house and had been rewatered and that the canal leaks. He reported that there was a foot of water over his septic tank. Mr. Henderson requested that EWEB pump the septic tank again.

Mr. Wiley stated that the utility has had problems with leaks in the Canal. He related that workers had tried to dig a trench and put in a clay core. He said that he was also aware that a farmer had a flooded field and that the utility was going to pump the water out of there until the canal "heals itself again."

Commissioner Bishop asked if the utility would take responsibility to pay for having the septic tank pumped out. Mr. Wiley responded that this was a reasonable request.

In response to a request from President Lanning, Mr. Wiley stated that staff would follow up on the problem with the canal.

TRANSPORTATION TAX

Director of Customer Services JoAnn Andersen explained that the City of Eugene had approved a Transportation Maintenance Fee that would be dedicated to the repair and maintenance of roads within the city limits. She related that city staff had asked EWEB to consider serving as a billing agent in the collection of the fee.

Mr. Berggren stated, in response to Vice President Farmer, that this was intended to be an information item for the purpose of determining Board sentiment on this.

Commissioner Anderson asked if the fee would increase the number of pages of the bill and, thus, the cost of the mailing. Data Manager Greg Armstead stated that staff would attempt to redesign the bill, should the utility choose to agree to this, in order to prevent the addition of a second page.

Vice President Farmer felt that the real issue was not what it would cost, as he felt certain that the City would reimburse the utility for any expense, but rather whether the utility wanted to act as a billing agent for the City.

Commissioner Bishop did not believe that serving as a billing service for the City fit into the mission of the utility. She likened the fee to a tax as it was a charge for road repair. She felt that it also would burden the customer service personnel with extra phone calls.

Commissioner Anderson concurred that EWEB should not be a billing service. She felt, though, that it could be a "win-win situation." Regarding the staff memorandum entitled Transportation System Maintenance Fee, she felt that the third option, that of separate billing within the same envelope, could save the city and the utility money.

President Lanning stressed that the Board was balancing the needs of maintaining good customer service and the need for more staff with saving money for the City. He reiterated that EWEB needed to function as a utility. He added that, of the three options presented, the third one seemed like a possibility and that customers would have to write two separate checks.

Commissioner Bishop responded that she thought it would actually cost the City more to use the EWEB system for billing.

Vice President Farmer clarified that his stance on billing had nothing to do with whether he supported a transportation maintenance fee.

In response to a question from Vice President Farmer, Mr. McVey stated that the utility was "only legally obligated to bill for liquid and solid waste." He did not feel that using EWEB as a billing agent would set a precedent for the collection of future fees. Vice President Farmer disagreed.

Vice President Farmer emphasized that a bill from EWEB would only be perceived as a bill from EWEB, regardless of any level of explanation included in it. He asserted that the City Council should be sending a billing mechanism that explained that the council felt that the fee was an appropriate and necessary medium for raising a needed municipal capital investment.

Commissioner Bishop recommended that the Board act on the item at the present meeting and not cause staff to spend any further time on it. The Board agreed.

Vice President Farmer made a motion to instruct the General Manager to communicate with the City that the Eugene Water & Electric Board was not interested in serving as the billing agent for the Transportation Maintenance Fee. Commissioner Bishop provided the second.

Commissioner Anderson asked for staff's opinion on whether there was any advantage for EWEB to serve as the billing service for the fee. Mr. Douglass responded that if the bill went out in the same envelope and two checks came back to EWEB, there would be no advantage. Should one check be mailed to the City, there would be some advantage.

The EWEB Board voted unanimously to pass the motion.

Mr. McVey stated that the City of Eugene paid "a lot of money" for billing for the sewer and stormwater charges.

Vice President Farmer responded that, if the Board had a choice, it would choose not to bill for the wastewater and stormwater services either. Commissioner Bishop added that it was not a revenue raising enterprise for the utility. Mr. Berggren stated that the billing was incremental and, if the utility was not billing for the services, the cost for billing would be reduced.

Commissioner Bishop said that it would have benefitted the issue if the City Council had come and spoken to EWEB. She felt the notice that the Board had been given on this issue had been inadequate.

CONTRIBUTIONS-IN-LIEU-OF-TAX NEGOTIATION STATUS

Treasurer Jim Origliosso briefed the Board on the most recent negotiations with the City on the Contributions-In-Lieu-of-Tax (CILT). He reported that the City agreed, in principle, with the utility regarding CILT. He explained that staff had impressed upon the City that retail customers were already being financially stressed without having to pay more on their utility bills to support the CILT. He said that they had discussed instituting a cap. He related that they had determined criteria by which the utility could make a request for exemption.

In response to a question from Commissioner Bishop, Mr. Origliosso stated that staff had talked about retail first and not wholesale.

Commissioner Anderson asked why, if the criteria had been determined and the utility met the criteria, would the utility have to "beg" for an exemption.

Mr. Origliosso stated that a staff goal was to attain a formal amendment at the City Council level on the CILT.

Vice President Farmer advocated for the establishment of firm criteria that would provide for relief from the CILT on an as-needed basis.

Commissioner Bishop commented that the City needed to be brought into partnership with the utility in this and brought to an understanding that the money was coming from rate-payers. She likened it to taking money from the people and then redistributing it to them via tax revenues. She added that when the utility was in a financial crisis, the utility should be exempt from paying the CILT. She stressed that she was not opposed to the six percent CILT. She merely felt that it should not be strictly applied when the utility was not in good financial shape.

Vice President Farmer opposed paying the CILT when the utility was at the point at which rates must be raised to cover additional taxes.

Commissioner Bishop clarified that the utility did not pay taxes to the city, only in lieu of taxes.

Vice President Farmer commented that he took issue with holding the CILT level at six percent. Mr. Origliosso responded that the level could only be altered by the pursuance of a legal amendment procedure.

Mr. Berggren stated that the City had proposed a process for engaging the issue but that the outcome was yet to be seen.

Mr. Origliosso said, regarding the wholesale energy sales, that there had been concern on the settlement period. He related that, at the time, it was calculated daily and paid on a monthly basis. He stated that the utility had proposed changing the settlement period and using something other than the index, specifically the utility's version of a budgeted contribution margin i.e. the amount of money left over after buying, selling, and paying for wholesale power. He reiterated that, should EWEB perform better than the budgetary predictions, he would be willing to contribute. He reported that the City had indicated a willingness to agree to changing the settlement period to an annual settlement and to tie the amount of the settlement to one that was more closely based on the budgeted contribution margin.

In response to a comment from Commissioner Anderson, Mr. Origliosso said that the utility had paid $1.1 million too much.

Mr. Origliosso stated, in response to Commissioner Bishop, that if the utility changed the time it would be cause for acrimony and possible litigation.

Vice President Farmer asked how staff would proceed from this point forward. Mr. Origliosso replied that staff would meet with city staff three or four more times and then would bring the issue back before the Board. He added that he would tell city staff that the Board would be acting on this issue.

FINANCIAL POLICY

Mr. Origliosso explained that the utility has had financial policies since 1990 and that they are reexamined every three to five years. He noted that, in order to achieve the tax exempt financing of the commercial paper, some of the aspects of implementation of the policy had been set aside. He cited the example of the elimination of the capital improvement fund. He commented that the policies had not been formulated in the context of the energy crisis. He related that many policies had their origins in the bond resolution. He noted that a bond resolution was considered "weak." He said that, typically, the utility would supplement their bond resolutions with credit rating agencies.

Mr. Origliosso briefly outlined the eleven financial policies delineated in the attachment entitled Financial Policies.

Mr. Origliosso stated, in response to a question from Vice President Farmer, that there were advantages of having entities that exist outside of a bond issue, but that the advantage was not legal in nature. He cited the steam utility, which was part of the electric entity, but for rate-making purposes would be considered a separate entity. He commented that telecommunications may be treated in the same fashion.

Commenting on the Rate Stability Policy, Mr. Origliosso explained that there was nothing in the bond covenant that dictated that the utility would maintain stable rates. He noted that, while the EWEB rates had increased, they had not increased to the same degree as many power providers.

Regarding the Capital Investment Policy, Mr. Origliosso stressed the importance of increasing the allocation of rate revenues to capital investment. Mr. Berggren added, regarding the Major Capital Improvements Policy, that the major capital fund had been "diminished too much."

Mr. Origliosso listed the financial issues that would be brought before the Board, as follows:

• The funding of medical and pension liabilities.
• The re-calibration of the minimum and maximum reserve funding target levels in the Board designated reserves.
• Telecommunications as a financial entity.
• The possibility of participation of additional "190" entities, most notably the regional transmission consortium that was affiliated with the Wanapa project.
• The reserve funds for the Low Income Energy Assistance Program (LIEAP).

In response to a question from Vice President Farmer, Fiscal Services Supervisor Dick Varner stated that staff had conducted an extensive review of other utility's administrative and general costs three years earlier. He added that, presently, costs had not been compared per se.

Vice President Farmer requested that, when providing financial statements, the ratios get compiled into a cover sheet.

Vice President Farmer noted that the billing policy for commercial accounts was generating the most complaints.

President Lanning adjourned the meeting at 9:43 p.m.

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Assistant Secretary President