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

Others Present: Randy Berggren, JoAnn Andersen, Dick Varner, Jim Origliosso, Marc Anderson, Dick Helgeson, Jim Wiley, Mike Logan, Mat Northway, Terry Bequette, Roseanna McArthur, Garilyn Johnston, Jean Meyers, Jennifer Joule, Debra Smith, Scott Spettel, Lance Robertson, John Yanov, and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene Minutes Recorder; Jeff Wright, representing the Register-Guard; Win Calkins, General Counsel, Henry Masterson, Commissioner-elect; and members of the public.

President Lanning called the Work Session of the Eugene Water & Electric Board (EWEB) to order at 5:35 p.m.

2003 BUDGET AND TOOL KIT

Dick Varner, Fiscal Services Supervisor, explained that the Work Session was to provide the opportunity for staff to go over the tool kit items with the Board and then to find a combination of items that added up to approximately $10 million through program reductions and/or additional revenue. He provided a presentation, with the aid of overhead projections.

Vice President Farmer asked if there were restrictions on the "Con-Aug" money. Mr. Varner replied that it would be required to be used for conservation measures, but could be used to supplant other conservation funding.

In response to a question from Commissioner Anderson, Mr. Varner explained that there was $950,000 available for the Board to use in the Foote Creek settlement. He said that there had not been a chance to re-calibrate the recommendation.

Regarding tree trimming, Mr. Varner commented that $140,000 of the cut was doable, but the other $160,000 could present a challenge.

Regarding the deferral of Trades, Labor, and Craft (TLC) employee pay rate adjustments, Vice President Farmer asked if this was truly a deferral or rather a freeze of the adjustments. Mr. Varner clarified that it was a delay.

Commissioner Anderson questioned the wisdom of removing support for the compensation plan for employees. She stressed that if the Board should reinforce the Board's support for the compensation plan and that eventually the pay scale should catch up to the market rates. Mr. Varner stated that there was no plan to make compensation retroactive.

President Lanning agreed with Commissioner Anderson. He felt that the compensation plan should not go "off course."

In response to a question from President Lanning, Mr. Varner said that the conservation savings represented the largest amount that Mr. Northway thought could be removed from the program without withdrawing the commitments that had already been made.

Commissioner Anderson asked, regarding hours that the utility was open to the public, whether demand for service extended after 5 p.m. JoAnn Andersen, Director of Customer Service, responded that the proposed change in hours was structured to match banking hours. She felt that extending the hours beyond 5 p.m. posed significant problems for the utility and, as such, she could not recommend it.

In response to a question from Vice President Farmer, Ms. Andersen opined that reducing the work hours by one hour in the morning would not impact the ability for the customer service department to meet the needs of the customers. She noted that only 5 percent of the customer volume occurred between 8 and 9 a.m. She added that the department was trying to find other ways for customers to access them, including the internet.

Vice President Farmer noted that the Customer Service department had recently added five FTE to its staff to meet an increased demand. Given that, he questioned whether a reduction in hours was prudent. Ms. Andersen replied that having an hour to conduct trainings and respond to correspondence could actually increase the efficiency of customer response. Mr. Varner added that he thought there would be a slight reduction in service. Vice President Farmer stated that the level of "wait" time that customers experience was still unacceptable.

Commissioner Bishop arrived at 5:55 p.m.

Vice President Farmer explained that the reason he was focusing on what was potentially not going to reduce costs all that much was that there was already a public perception that the rates were increasing while the services provided were lessening.

Regarding Contribution In Lieu of Tax (CILT) payments to Springfield, Mr. Varner stated that it was voluntary. He stated that the CILT to Eugene, according to General Counsel Win Calkins, would not likely be able to be discontinued.

In response to a question from Commissioner Bishop, Mr. Varner explained that the grants to schools were comprised of $600,000 to the Bethel, Springfield, McKenzie, and 4J School Districts, and $100,000 to Lane Community College. He added that the reason that the utility had switched from the CILT to a grant program was that, in the state funding formula, the CILT were treated like property taxes and were included in the state "pot" for funding and were not specifically dedicated to the schools. He clarified, at Vice President Farmer's request, that there was no legal obligation to continue providing this funding.

Commissioner Anderson felt that the money provided to the McKenzie School District created positive public relations with the area.

Debra Smith, Telecommunications Project Manager, displayed the overhead projection of the Eugene Water & Electric Board 2003 Financial Tool Kit Consensus.

Mr. Varner observed that the consensus of the Board members on the value of the "one-time money" was $4.18 million. Ms. Smith noted that staff now thought that the Foote Creek 1 reimbursement would be larger than originally estimated. The Board was amenable to raising that amount, so that the total of this category of money was $4.73 million.

Commissioner Bishop explained that she had not added in the Williams settlement because she still felt it to be speculative.

Treasurer Jim Origliosso responded that, as of March 14, the Attorney General had issued a press release that indicated that the money would be distributed in 2003 and that the Public Utility Commissioner would determine how it would be distributed. He said that, at this time, EWEB staff thought conservatively that the utility would receive $500,000.

In response to a question from Commissioner Bishop, Mr. Origliosso said that EWEB, as a publicly-owned utility, would likely have discretion as to how the settlement funding would be allocated.

President Lanning recommended that the Williams settlement be added into the mix. The Board agreed to do so. This raised the tool kit savings of financing and "one time" money to $5.23 million.

Regarding program reductions, Mr. Varner noted that only Vice President Farmer supported the reduction of conservation monies. Vice President Farmer explained that, in a fiscal environment in which some customers cannot support a rate increase, it was necessary to find any area to adjust in order to lessen the impact to those customers. He stressed that his support for the reduction did not indicate a lack of support for conservation.

Mr. Varner observed that Vice President Farmer had recommended reducing the non-labor operations and management by $750,000 while the other Board members supported a reduction of $610,000.

President Lanning asked if staff compensation would still be above the 50^th percentile. Mr. Varner responded that staff was presently reviewing the salary schedules and would not know exactly where the utility stood in the spectrum of salaries until early April.

Commissioner Anderson said that she would consider a six-month deferral.

Vice President Farmer stated that staff had communicated that there would not likely be a risk to staff recruitment. He commented that EWEB provided a competitive wage and did not have much attrition. He said that he did not feel concern with regard to deferments.

Commissioner Bishop opined that the utility would start paying more for hiring and training should it not retain good workers. She felt that the deferments ran the risk of "losing good help."

Vice President Farmer asserted that the utility should not manage employee expense through salary or FTEs, but should manage through a salary budget, and should determine what the FTE needs were from there. He supported cutting positions over reducing salaries.

Regarding a reduction in hours that the utility was open for customers, Commissioner Bishop asked what 5 percent represented in actual customers served. Ms. Andersen replied that approximately 65 people called before 9 a.m. She assured the Board that she would do what she could to provide alternative modes for contacting the utility. President Lanning decided that he could support the cut in hours.

Board members discussed the CILT payments to the Cities of Eugene and Springfield. Commissioner Bishop did not support cutting the CILT to Springfield unless the CILT to Eugene was also cut. Vice President Farmer noted that there was more of a legal basis for making the CILT to Eugene than to Springfield.

General Manager Randy Berggren commented that the reason EWEB served Weyerhauser and Sierra Pine was because the Springfield Utility Board (SUB) (formerly Pacific Power & Light at the time) refused to serve them when they opened in 1952. He noted that EWEB would likely find itself in a court of law should it try to convince other customers to switch from SUB to EWEB.

Mr. Calkins explained that the legal bases for the CILT to Eugene and Springfield were entirely different. He stated that the CILT to the City of Eugene was not voluntary, adding that there would be ramifications should the utility withdraw the CILT from the City of Eugene. He felt that there was "quite a bit of risk" of a legal issue, should EWEB stop the CILT to Springfield.

Vice President Farmer decided that he would withdraw his support for removal of the Springfield CILT. He strongly recommended that the Board hold an in-depth discussion of the CILT payments at a point in the near future. Commissioners Anderson and Bishop agreed.

Staff clarified, at Vice President Farmer's request, that the capital spending deferrals were for six months. Vice President Farmer affirmed that there was nothing on the list, in his opinion, that the utility could not "live without" for six months.

Commissioner Bishop commented that there were several things on the list that had already been deferred for "too long." She averred that the truck should not be deferred. Mr. Wiley responded that the truck that Commissioner Bishop was referring to was being leased for $10,000 per month and that operations felt that they could do without it.

President Lanning stated that he could not support the deferment of more than $580,000 in capital spending. Commissioner Anderson concurred.

Regarding the low-income funding, Commissioner Anderson requested an in-depth analysis from Charles Dalton before she would consider cutting the funding.

Commissioner Bishop commented that she had agreed to the reduction because it was her understanding that this money was "left over." Ms. Smith related that the customers were not getting the money and the funding would likely be underspent by $500,000. She commented that the program would be reviewed in the summer and some changes would be made.

Ms. Andersen affirmed that the $500,000 in question was unused low income funding.

Commissioner Bishop rescinded her support for this reduction.

Vice President Farmer remarked that the utility had a generous low income funding program. He asserted that the utility spent 100 percent more than any other utility in the Northwest with the exception of one on this type of program.

Ms. Andersen affirmed, at Commissioner Anderson's request, that within the context of the current structure of the low income energy benefits program, it was not likely that the money would be spent.

President Lanning decided to support the staff recommendation for adding in the unused low income funding. He stressed that this did not indicate a lack of support for this program on his part.

In response to a question regarding "green credits" from President Lanning, Power Management and Planning Manager Scott Spettel stated that staff had queued up a discussion on this for a future meeting. He said that, in the short run, it had been put on the list of things to consider for the tool kit.

President Lanning asked for more information regarding "green credits." Mr. Spettel responded that, within the context of the electric industry, it was evolving into something that facilitated the development of green resources. Mr. Maloney added that some utilities had been required to have a certain amount of resources in their portfolios rules that had been developed by their Public Utility Commissioners (PUC), since time lines for the addition of green resources to the utilities' power portfolios were long, utilities often purchase green credits as an interim step.

President Lanning decided to support the sale of "green credits."

Vice President Farmer recommended, regarding the shift of some staff from the electric utility to the water utility, that management should consider making it a permanent reduction.

Ms. Smith stated that the items in the tool kit that the Board had reached consensus on now totaled $7.36 million.

Board members Lanning, Farmer, and Anderson supported deferment of the rate adjustment at this time.

Vice President Farmer commented that it was irresponsible to increase salary and not reduce the FTE on staff in this time of recession.

Commissioner Anderson disagreed, stating that the utility needed the staff.

Commissioner Bishop agreed with Commissioner Anderson, noting that the utility now had less staff and more customers.

Ms. Smith stated that the adjusted numbers arrived at a total of $7.96 million for the tool kit. Mr. Varner commented that, at this point, it looked like the rates would need to be increased to cover the $2.3 million shortfall by approximately 4 to 5 percent. He noted that at the Regular Board meeting a 6 percent increase would be proposed.

President Lanning said that, based on the background memorandum provided by staff, he could agree to a reduction of $850,000 in the conservation funding. Ms. Smith stated that this would bring the total of the tool kit to $8.81 million.

Mr. Varner said that, based on this Work Session and the two public hearings, staff would return on April 1 with a proposal.

Vice President Farmer noted that the current tool kit was $1.2 million away from covering the shortfall.

The meeting was adjourned at 7:35 p.m.

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Assistant Secretary President