Board Members present: Ron Farmer, Sandra Bishop, Dorothy Anderson, and Mel Menegat. President Patrick Lanning was excused.

Others present: Randy Berggren, Dick Varner, Dick Helgeson, Debra Smith, Jim Origliosso, John Yanov, Jim Wiley, Terry Bequette, Tom Buckhouse, Roseanna McArthur, Lance Robertson, and Krista Hince of the EWEB staff, and Ruth Atcherson, City of Eugene Minutes Recorder.

Vice President Farmer called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) order at 7:37 p.m.

AGENDA CHECK

There were no agenda changes.

APPROVAL OF CONSENT CALENDAR

Minutes

1. Minutes of the March 11 and 13, 2003, Special Board Meetings, the July 25 and 31, 2003, Special Board Meetings, and the July 8, 2003, Work Session.

Easements

2. Sewer and Slope Easements to the City of Springfield - Electric Property Management - Facilities Services.

Bid Award

3. Conveyor Truck Services Inc. - Conveyed Aggregate Delivery - Construction - Water Division - a possible total amount of $250,000 over the five-year period

• Regional Information System (RIS) Partner Services Agreement - Information Services - Corporate Services - EWEB's share of RIS expenses is $121,232 a year
• Lane Council of Governments (LCOG) - GIS Cooperative Project Agreement - Information Services - Corporate Services -EWEB's participation level is $46,047

Commissioner Bishop pulled the minutes from the Special Board meeting held on March 13, 2003.

Commissioner Menegat moved, with a second from Commissioner Bishop, to approve the Consent Calendar with the exception of the meeting minutes from the Special Board meeting held on March 13, 2003.

ITEMS FROM BOARD MEMBERS

Vice President Farmer reported that he had attended a meeting with McKenzie area residents. He noted that the meeting had been locked out of the facility it had been scheduled to be held in and the meeting had then been moved to a nearby baseball field. He called the gathering "relatively benign." He commended Marty Douglass, Public Affairs Manager, for the good job done on the meeting. He commented that there had been no discussion on the closure of the dam. He felt that this reinforced the importance of not over-reacting to one person's viewpoint. Another example of this he cited was that, outside of the meeting, he had been approached by three people who were vehemently opposed to the usage of goats for vegetation control and that, inside the meeting, this environmentally friendly alternative to spraying had been lauded.

Vice President Farmer commented that he had met with several groups of people. He said that this had lead him to decide to suggest holding a Board-level discussion on how board members should handle requests from constituents. He noted that he had been called by Steve Cornacchia in regard to a client who lived on the McKenzie River. He added that he had referred them to the vegetation committee.

CORRESPONDENCE

General Manager Randy Berggren reported the following:

• He noted that backgrounders included in Board packets included one on the lack of policy on bill stuffers, a PERS update from Cathy Bloom, Assistant Treasurer and Libby Henry, Legislative Lobbyist, and an update on EWEB's approach to the Public Utility Commission (PUC) violations. He added, regarding the latter, that resolution of the violations was contingent on the Board electing to fund capital projects to a certain extent.
• He highlighted the backgrounder on the Arlington electric service encroachment.

Commissioner Bishop noted that she had been involved in the Arlington dispute. She felt it to be a situation of differing perceptions of the entities involved. She disagreed that it was an encroachment. She stressed that she was opposed to spending any money to underground these facilities.

Commissioner Anderson opined that the court should decide how the situation should be resolved. Vice President Farmer agreed, calling it a management issue.

Mr. Berggren continued, as follows:

• He reported that Ms. Bloom had included a memorandum on the second quarter financials in Board packets.
• The Oasis Booth at the Lane County Fair had gone very well and Commissioner Menegat and his wife, Leitha, had served as a volunteer in the booth. Public comments submitted at the booth were overwhelmingly positive. He cited one in particular which allegedly stated that water samples from EWEB tap water were more pure than filtered water from most taps.
• The annual picnic was scheduled for August 23 at Alton Baker Park. Commissioner Menegat and his wife were slated to cook chicken.

BOARD AGENDAS

Mr. Berggren highlighted the scheduled agendas for the Board, as listed on the attachment circulated in the Work Session entitled Upcoming Board Agendas and Other Significant Events 2003. He said that the aim was to create a schedule for the full year in advance. He asked for feedback as to how the Board wanted to bring items of concern forward for placement on the agenda.

Commissioner Anderson expressed interest in holding a discussion on the outsourcing of the billing. Vice President Farmer agreed.

Commissioner Bishop requested an update on what had changed since the storm event in February, 2002. Mr. Berggren offered to have staff prepare a backgrounder on this.

Vice President Farmer commented that the Chairman of the Board of Blachly-Lane Electric had shared their Governance program with him and that he had shared it with Mr. Berggren and President Lanning. He said that it would get passed along.

PUBLIC INPUT

There were no members of the public present who wished to speak.

2004 DRAFT STRATEGIES

Debra Smith, Telecommunications Project Manager, provided an overview of the Eugene Water & Electric Board 2004 Strategic Plan Draft; August 13, 2003. She predicted that the Board would drive the planning cycle for the utility in 2004-2005 and that the Board vision would be more integral.

Vice President Farmer opined that the Board should establish goals and staff should take charge of developing strategies and action steps to achieve them. Ms. Smith agreed with this.

Vice President Farmer asked where the goals lay in the document. Ms. Smith responded that the goals lay in the strategic thinking and flow from Board prioritization. She added that measurement criteria, in order to determine the outcomes, should be developed concurrently with goals.

Commissioner Anderson remarked that goal-setting should be a joint process between Board and staff, as the Board changes and does not have the consistency of staff.

Ms. Smith said that, previously, there had been seven goals and 28 strategies, but in 2001 there had been 45 strategies. She stated that, in 2002, some of the strategies for performance metrics had been dropped from the list and, on the present list, the goals had been reduced to four.

Mr. Berggren asked four of his Division Directors to speak to the goals individually.

Jim Wiley, Electric Division Director, spoke on the first goal:

Align EWEB operations and actions with customer expectations.

Mr. Wiley outlined the strategies as they appeared in the draft document. He said that a major theme of this goal was to educate the customers and help the community understand rate volatility, both in electric and water rates. The first strategy was ongoing and directed toward this end.

Mr. Wiley noted that, per the second strategy, further Internet access was being implemented and it was hoped that customers would soon be able to stop and start service on line. He predicted this would increase call availability.

Mr. Wiley stated that the third strategy was somewhat new and sought to obtain more information on customers. He noted that EWEB conducted an annual customer satisfaction survey and numerous operations surveys. He said that a focus group was being formed for the Integrated Energy Resource Plan (IERP). He likened the utility to other customer-service oriented services, as EWEB also sought high customer satisfaction.

Commissioner Anderson commented, in regard to the shift of the bill remittance service to Vancouver, Washington, that there should have been more education of the customers, perhaps through a bill stuffer.

Mr. Wiley called the fourth strategy a critical piece as it represented the interface between the customers' expectations and the Commissioners and staff. He stated that the intent of the goal was to develop a systematic and valid way to determine the customers' values, expectations, and desires. He expected to undertake development of the process in 2004, and the goal was for staff to, after extrapolating data from the variety of surveys, have a report prepared for the Board on the findings by the end of that year.

Vice President Farmer asked what expected outcome would come from the goal being 100 percent achieved. Mr. Wiley replied that the organization would be aligned with customer expectations. Vice President Farmer supported the goal, but felt that there were no concrete strategies developed to further the goal. He called the strategies that Mr. Wiley had listed 'action steps.'

Mr. Berggren stated that the ultimate goal was 100 percent customer satisfaction.

Corporate Services Director Roseanna McArthur addressed the second goal:

Develop a workforce that is energized by change and committed to EWEB's values and vision.

Ms. McArthur viewed this as a three to five year goal. She said that there were financial pressures on the utility to do more with less and this had an impact on what sort of workforce was needed to achieve success in the utility. She felt that employees needed to be able to thrive and be challenged by the changing environment in the energy industry.

Ms. McArthur commented that, should the union be voted in, a collective bargaining agreement would challenge the utility in new ways. She felt that this might necessitate the formation of different strategies.

Ms. McArthur stressed the importance of hiring employees with a positive attitude and appropriate qualifications and then training for skills. She reiterated that it was difficult to buy commitment.

Commissioner Bishop remarked that the workforce had gradually changed from being more family-oriented to putting a greater emphasis on doing more with less. She wondered if there were rewards or incentives for employees. Ms. McArthur responded that some rewarding and recognizing of good work could be done at no expense and that management needed to be cognizant of providing appropriate encouragement.

Commissioner Bishop commented that the strategies seemed to need more "heart." She suggested that strategy 2.4 be rewritten, as follows:

• Encourage and reward employees to continuously improve what they do and how they do it.

Mr. Berggren noted that, in the last decade, the employee count had been reduced by 6 to 7 percent and the customer count had increased by 20 percent.

Vice President Farmer asked if the strategies were measurable. Ms. McArthur replied that the strategies would play out and that changes would occur.

Vice President Farmer commented that it was challenging to stabilize wages in a period of volatility. He added that this goal could look radically different, should the union be voted in.

Commissioner Bishop asserted that the stabilization of wages and benefits was essential to the function of the utility.

Facilities Director Tom Buckhouse highlighted the third goal, as follows:

Improve business products and processes through innovation.

Mr. Buckhouse stressed that this goal sought to keep up with business and industry changes, both in the realms of keeping up with emerging technologies and the improvement of EWEB's internal processes.

Mr. Buckhouse stated that staff was, per the first strategy, keeping track of technological changes and opportunities. He noted that distributed generation was being closely monitored and that staff was aware that this would change the way the utility does business when it becomes a greater presence in the realm of energy generation. He said that broadband carrier technology was another emerging area of the utility industry. Lastly, he added that automated meter reading was on the horizon. He asserted that there would be some need for the allocation of resources to pursue the newer technologies.

Noting the second strategy, Mr. Buckhouse agreed with Commissioner Bishop that some rewards and incentives would aid employees in the process of moving forward and embracing new technology.

Vice President Farmer remarked that the third goal needed more specificity. Mr. Buckhouse agreed that the goal was at a "high level" at this point and would become more clear with time.

Commissioner Bishop commented that 'innovation' was not a clear term.

Treasurer Jim Origliosso spoke to the fourth goal, as follows:

Stabilize customer rates and funding for EWEB operations.

Mr. Origliosso called this goal the "least slippery and the easiest to quantify." He said that the fundamental problem was that cost was increasing by 20 percent and revenue was increasing by five percent. He reiterated that EWEB had been doing very well prior to the years 2000 and 2001. He commented that there was a "certain amount of casting back and wishing for earlier days." He stated that the goal was to put the utility in a position that would make it fit enough to survive in the coming years.

Mr. Origliosso stressed the importance, in regard to the third strategy, of finding stable funding for capital improvements, especially in light of the serious blackout in the east that had occurred in the previous week.

Mr. Origliosso said that the main concern at this point was the management of non-power costs, as stated in the fourth strategies. Commissioner Bishop requested that he define 'non-power costs.' Mr. Origliosso explained that the term referred to the costs that were non related to purchase or transmission costs, and that it included labor.

Vice President Farmer expressed the concern that the ratio between the expenses and the increase in revenue was so large.

Commissioner Bishop encouraged staff to balance out the system and figure out an equitable way to spread out the costs.

BONNEVILLE POWER ADMINISTRATION'S RATE UPDATE

John Yanov, Senior Financial/Rate Analyst, provided a brief overview of the BPA rates for October, accompanied by a power point presentation entitled BPA Rate Update for October 2003. He said that EWEB was currently projected to receive $3 million from a 'slice' true-up instead of having to pay $3 million as previously projected.

Mr. Varner predicted that there would be no cash flow issues for the winter of 2004, based on the current projections.

Mr. Yanov provided a comparison of the power rate adjustments, with the aid of two graphs entitled Expected Power Rate Adjustments over May 2000 Base Rates for FY 2004-2006 and Expected Power Rate Adjustments over may 2000 Base Rates for FY 2004-2006 with Settlement both based on third quarter preliminary results. He stated that the settlement could make a reduction. He noted that a number of customers had begun to question the need for the safety net CRAC and were pressing the BPA to eliminate it.

Mr. Yanov recommended not applying the change in financial obligation to rates, but rather to apply it to building reserves. Mr. Varner commented that if rates were lowered and the levels decrease in the fall, the ratepayers would be facing an increase again. Mr. Yanov added that staff wanted to avoid "see-saw rates."

Mr. Yanov welcomed questions and phone calls from the Board.

Commissioner Bishop asked about the surcharge. Mr. Varner stated that, since not paying the Slice true-ups, the goal of a $10 million reserve would likely be achieved six months sooner than was originally predicted. He thought that the choice between keeping or eliminating the surcharge would face the Board in the second or third quarter of the next year. He added that the 2002 CRAC had put the utility $5 million behind in its recovery.

ITEMS REMOVED FROM CONSENT CALENDAR

Commissioner Bishop objected to the minutes from the meeting held on March 13, 2003. She felt that the minutes did not adequately reflect what had transpired.

Krista Hince, Assistant Secretary, noted that the minutes had been written directly from tapes.

Commissioner Bishop suggested that she make a motion to not accept the minutes. Mr. Berggren responded that a motion could be made to approve them but not to deny them.

Commissioner Bishop asked why the minutes had taken a long time to be written. Ms. Hince stated that there had been difficulties with the tapes when reproducing them from a Public Request notice. Commissioner Bishop requested copies of the tapes. Ms. Hince replied that she had already provided copies to Commissioner Bishop. Vice President Farmer recommended that Commissioner Bishop review the tapes and determine what specific concerns she had with the minutes so that the minutes could be re-submitted for approval. Vice President Farmer gave Commissioner Bishop until the September 16 Board Meeting to provide her changes.

The meeting adjourned at 10:02 p.m.

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Assistant Secretary President