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

Others present: Randy Berggren, Marc Anderson, Dean Ahlsten, Ken Beeson, Tom Buckhouse, JoAnn Andersen, Dick Helgeson, Terry Bequette, Deborrah Brewer, Jim Wiley, Jim Origliosso, Debra Smith, Mat Northway, Dawne Howard, John Yanov, Marty Douglass, Dick Varner, and Krista Hince of the EWEB Staff; John O'Connor and Vicki Maxon; and members of the public.

PROPOSAL FOR BOARD GOVERNANCE

President Lanning called the Work Session of the Eugene Water & Electric Board (EWEB) to order at 5:30 p.m. He recognized Commissioner Masterson. Commissioner Masterson said that he had previously indicated to Marty Douglass that he would provide input into a recent editorial piece published in the Register-Guard, but subsequently decided it was more appropriate for President Lanning to review the piece as it was going out under his name.

General Manager Randy Berggren introduced this item. He provided some background on the item, recalling the Board's decision to embark on a discussion of Governance in 2000. Other issues and changes in Board membership had postponed that discussion the remainder of that year and through 2002. He said a kick-off session for the discussion was scheduled on April 22.

Mr. Berggren called the Board's attention to a memorandum he authored, included in the packet, which stated the purpose of the discussion, which was to improve the effectiveness of the Board and staff work in establishing Board direction and policy for the operation of EWEB. He referred the Board to the suggested statement of outcomes in the memorandum, which included improved communication between Board and staff, consensus on a protocol for raising Board Governance issues, and a clear definition of Board/staff roles.

Mr. Berggren noted President Lanning's expectations for outcomes as outlined in the State of the Utility address: 1) clarify of the expectations and policies of the Board; 2) provide a sound framework to set executive and organizational performance criteria; 3) ensure the timeliness of Board monitoring of operational performance; 4) allow the Board to agree on what was important to monitor; 5) make sure the work being done was supported by the entire Board. He suggested that the Board discuss what it was looking for as a result of the Board Governance work.

By way of providing a larger context for the discussion, Mr. Berggren reviewed a chart showing the parameters of the Board's authority as established by the charter, its other roles, the mission statement and values, examples of some Board policies, and examples of some EWEB planning efforts. He identified his role as providing organizational leadership that ensured the Board had the resources, the structure, and the opportunity to have the type of discussion it wanted to have regarding the topic of Board Governance.

Mr. Berggren recommended John O'Connor as a facilitator for the upcoming discussion. He provided the Board with copies of Mr. O'Connor's professional resume. He indicated that Mr. O'Connor would be present at the April 22 meeting.

Mr. Berggren previewed the agenda of April 22.

Vice President Farmer recalled that the auditor had offered some assistance on the topic of Board Governance when the auditing firm presented the year-end financial statements. He suggested that the firm might be willing to provide a framework for discussion prior to the meeting. Mr. Berggren said he would contact the firm.

The Board discussed the agenda.

Commissioner Bishop questioned why the entire Executive Management Team (EMT) had to be present for the April 22 meeting. Mr. Berggren indicated that staff would observe rather than participate. Commissioner Bishop continued to question the use of staff time. She also did not want to go through a prioritization exercise at the April 22 meeting as she preferred that occur at a second meeting after Commissioners had more time to think about the issues involved. Commissioner Masterson did not want to postpone that exercise and suggested the Board go through the prioritization exercise and have discussion later.

Commissioner Bishop questioned what was encompassed by the term "Board Governance." For example, she did not perceive policy review as an element of Board Governance. She suggested that the Board have a discussion of what the phrase meant.

Responding to a question from Commissioner Anderson, Commissioner Bishop distinguished between policies governing the Board's functions and policies governing EWEB's operations. She said that the Board needed to tighten up its own operations before moving into other subject areas.

Mr. Berggren said that Board Governance was a Board topic because it had influence on other areas. He said that he would like to see the Board reach agreement on a protocol for raising Board Governance issues so that it became a routine part of the Board's work. He said that the Board may take a narrow focus at first, but that did not mean that there were not other topics it would want to take on, and a process would ensure that new items of interest to the Board were not lost.

Commissioner Masterson determined from Commissioner Bishop that she was suggesting that the Board first work on its process issues before embarking on the remainder of the agenda. Commissioner Bishop said that she believed the Board was a good one, and she wanted to enhance what it did. She wanted to build better relationships among Board members so that the Board functioned more smoothly as a Board rather than as a individuals.

Commissioner Anderson wanted sufficient structure in the meeting to ensure that all Board members' issues were raised. She suggested the potential that the Board go through a Myers-Briggs exercise.

Commissioner Bishop advocated for an interactive initial session during which the Board reviewed its bylaws, operating principles, and other documents regarding the Board's governing authority.

President Lanning endorsed the process being proposed. He said that he wanted some of what Commissioner Bishop wanted to get out of the meeting, but he also wanted to hear from the Board regarding what outcomes it believed was most important. He envisioned the Board would then brainstorm and develop themes from what resulted to come to a sense of what the Board considered to be priorities, creating a launchpad for the next steps. He asked that the materials requested by Commissioner Bishop be provided to the Commissioners prior to the meeting. President Lanning wanted the Board to be flexible and be prepared to adjust the agenda at the meeting if needed.

In response to the earlier concern expressed by Commissioner Bishop, President Lanning said he did not object to having staff present and that it was a public meeting.

Vice President Farmer said he was most interested in clarifying the role of the Board at the April 22 meeting, although he thought that a Board review of adopted policies on a regular, rotating basis would be useful. Commissioner Lanning concurred about the importance of clarifying the Board's role.

ELECTRIC CAPITAL FUNDING

Resource Project Manager Ken Beeson and Fiscal Services Supervisor Dick Varner joined the Board for the item. Mr. Beeson provided a presentation on the electric capital funding work done by staff over the past few months. Board members asked questions clarifying the information presented.

Mr. Varner requested Board direction on a proposed new customer development charge. He provided some details about the proposed charge, and estimated it could realize $500,000 to $1 million annually. Responding to a question from Vice President Farmer, Mr. Varner said that legal counsel had indicated that such a charge would be legal. He said staff had to do more research on the concept.

Mr. Beeson said that staff believed that a rate action would be required in mid-2005 to address anticipated budget shortfalls.

President Lanning invited comments and questions.

Vice President Farmer questioned if the budget provided for room to scale any expenditures back, and what those figures might be. He said that it was difficult to find that information in the materials. He asked if staff was saying that all the proposed expenditures were crucial.

Vice President Farmer expressed concern about the need for adequate infrastructure funding, and the need for EWEB to fund system depreciation.

Commissioner Bishop thanked staff for the work it did on the issue. She determined from Mr. Varner that the repayment of the surcharge netted nothing to the capital reserve.

Responding to a question from Commissioner Bishop, Mr. Beeson said that the budget maintained the net plant value with a slight increase over time. The largest increases anticipated were for such expenditures as the Carmen Smith relicensing.

Commissioner Bishop commented that when the Board contemplated a rate increase dedicated to capital, it should consider whether the rate should be offset with a targeted new customer charge.

President Lanning noted his concern about the legality of EWEB imposing a new customer development charge. He said that he would have to know more about such a charge to support it. He did not want staff to spend too much time developing that option prior to more extensive Board discussion. Mr. Varner acknowledged President Lanning's remarks.

President Lanning said that the Board consistently chose to buffer the impact of EWEB's rate increases by putting it back on the system, and that could not go on.

President Lanning observed that the size of the unmet need had surprised him, characterizing the projections as "sticker shock." Mr. Beeson noted the impact of the Bonneville Power Administration's 2001 actions on the budget.

Vice President Farmer expressed concern about the impact of continual rate increases from the Bonneville Power Administration on top of attempting to address EWEB's own needs.

President Lanning adjourned the meeting at 7:25 p.m.

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Assistant Secretary President