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

Others present: Randy Berggren, Will Bondioli, Marc Anderson, Tom Buckhouse, Marty Douglass, Mel Damewood, Eric Hiaasen, Dick Helgeson, Jim Origliosso, Dick Varner, Jim Wiley, and Krista Hince of the EWEB staff; Joe Sams, City of Eugene Minutes Recorder, and members of the public.

AGENDA CHECK

President Lanning called the meeting to order at 7:45 p.m. There were no changes to the agenda.

APPROVAL OF CONSENT CALENDAR

Commissioner Anderson, seconded by Vice President Farmer, moved to approve the items on the consent calendar as amended.

The motion passed unanimously.

ITEMS FROM BOARD MEMBERS

Commissioner Bishop reported that there was a meeting with McKenzie River Residents at Leaburg. She urged other board members to attend.

CORRESPONDENCE

General Manager Randy Berggren noted that Commissioner Masterson had submitted a letter of resignation from the Board, effective June 16. He said he did not have more information than what was supplied in the letter.

Mr. Berggren noted that there was a printed tentative schedule of board events included in the meeting packet. He added that the packet also contained a memo regarding PERS legislation information. He suggested that those Commissioners with questions should contact himself or Libby Henry.

Mr. Berggren noted that the June 17 meeting was canceled and said the next Board meeting would be on July 1, 2003.

PUBLIC INPUT

Patrick Donnolly, Leaburg, commended EWEB management for the effort to involve McKenzie River residents in its planning in the area. He stressed that the more information gotten to residents in the area, the more understanding residents could be about EWEB policies. He stressed the importance of communication. He noted that there was still a lot of anger in the McKenzie community but added that it was getting better. He suggested using Commissioner Bishop as an advocate for residents in the area.

J.N. Lapeyre said he was a new general service customer and raised concern that he had to pay a security deposit even though he had a spotless credit record. He commended staff for changing its deposit policy and questioned whether it was needed at all. He urged the Board to review the amount of his security deposit and stated that three years was too long to hold a security deposit.

STEAM/ELECTRIC RISK SWAP

Eric Hiaasen, Mid-Term Trader, and Will Bondioli, Steam Operations Supervisor, provided a presentation on the steam/electric risk swap. Mr. Bondioli showed overhead graphs of sales of steam sales. He noted that fuel sales accounted for fifty percent of his annual budget. He noted that the costs of buying gas fuel on a margin for hedging through the winter months was getting more difficult. He noted that the bars shown on the graph were costs to the customer and reflected the shifting costs in the fuel market.

Mr. Hiaasen put up a chart showing daily gas and power prices as evidence of a strong correlation between gas and power prices. Because power prices are strongly dependent on the price of natural gas, the electric division is affected negatively by falling gas prices because it lowers the revenue it receives from sales of surplus power. On the other hand, the steam division is negatively affected by rising gas prices because it purchases gas.

Both divisions need to hedge their exposure to changes in the price of natural gas that would impact their ability to meet budget targets. Mr. Hiaasen recommended that the two divisions could each save money by insuring each other, rather than each separately purchasing incurance in the form of an option from a gas marketer or bank.

Mr. Hiaasen outlined four options for hedging purchases;

1. Do not hedge
2. Lock in gas prices by purchasing fixed price gas.
3. Purchase an option from a marketer or bank
4. Internal hedge between Steam and Electric Divisions.

Mr. Hiaasen noted that the graph entitled "Figure 2", included in the meeting packet, showed the financial impacts of the strategies to the Steam Division.

Mr. Hiaasen noted that an internal hedge would avoid the need to pay premiums to other suppliers and save the utility $325,000 annually.

In response to a question from President Lanning regarding whether an internal hedge limited the ability of the utility to lock in prices, Dick Varner, Fiscal Services Supervisor, said it did not limit either party from taking a position in the market but did talk about the distribution of benefits between electric and steam customers.

Mr. Berggren added that it also provided a hedge position for both steam and electric customers.

Commissioner Bishop stressed the importance of not disadvantaging or putting burdens on one class of customers to the benefit of another.

Mr. Berggren said the cross subsidization policy had always been applied with a cost of service view within a utility. He said that the current situation was that multiple utilities were hedging against one another. He said cross subsidizing was a theory that had all kinds of aberrations at a practical level.

Mr. Varner noted that either the steam or the electric utility would end the agreement if, by the agreement it was being financially harmed. He said that either division could terminate the agreement as long as by terminating it the other party was not financially harmed.

In response to a question from Vice President Farmer regarding whether the Board had the authority to terminate a deal between utilities, Mr. Berggren said the Board had the authority to end such an agreement but noted that this would leave one of the utilities without a hedge. He said the Board would have to weigh its accountability when making such a decision.

Dick Helgeson, Water & Steam Division Director, said staff would monitor gas prices through the summer and lock in prices that would be most advantageous to the utility through the winter season. He said he would bring a fuels price for steam customers back to the Board in September.

ITEMS REMOVED FROM THE CONSENT CALENDAR

Commissioner Bishop apologized to the Board that she had changes to the Minutes of the April 22, 2003 Work Session. She then requested that the original motion made earlier in the evening be withdrawn and re-voted on, as she wanted to make her changes to the minutes.

Commissioner Bishop, seconded by Vice President Farmer, moved to remove the motion to approve the consent calendar. The motion passed unanimously.

Commissioner Bishop then offered the following changes to the April 22, 2003 Work Session Minutes on page 6 and offered a wording substitution which read:

"Commissioner Bishop suggested that determining a Board communications standard and policy and clarifying the EWEB utility information privacy policy would be an important outcome."

On page 8, Commissioner Bishop requested adding the term "derogatory" before "...personal remarks...".

It was moved by Commissioner Anderson, seconded by Vice President Farmer to approve the minutes and amended. The motion passed unanimously.

The remaining Consent Calendar items were then moved by Commissioner Anderson, seconded by Vice President Farmer, to approve the consent calendar as presented. The motion passed unanimously.

The meeting adjourned at 9:00 p.m.

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Assistant Secretary President