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

Others present: Randy Berggren, Dick Helgeson, Debra Smith, Jim Origliosso, Jim Wiley, Roseanna McArthur, Lance Robertson, Dick Varner, 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) to order at 7:32 p.m.

AGENDA CHECK

There were no changes to the agenda.

PUBLIC INPUT

Patrick Donnelly, Leaburg, provided a petition signed by 350 people who were unhappy with the utility's work on the Leaburg Lake and canal, undertaken to meet Federal Energy Regulation Commission (FERC) requirements. He complained that $500,000 had been spent to clean up a "logging mess" and now $75,000 was being spent to plant daffodils. He said the ratepayers were "stuck with the bill." He opined that the decisions made by staff and management contributed to the need for rate increases. He felt the rate increases in the face of such expenditures made the staff "look arrogant."

APPROVAL OF CONSENT CALENDAR

Minutes

• December 16, 2003, Work Session and Special Board Meeting, and the January 12 and 20, 2004, Executive Session minutes.

Business Service Agreement

• Sybase - Sybase Database Management System - Information Services - Corporate Services Division.

Resolution

• Power Risk Management Policy Resolution - Fiscal Services - Financial and Customer Services Division.

Commissioner Anderson pulled the minutes from the work session held on December 16, 2003.

Commissioner Menegat, seconded by Vice President Bishop, moved approval of the Consent Calendar, with the exception of the minutes from the December 16, 2003 Work Session. The motion passed unanimously, 4:0.

ITEMS FROM BOARD MEMBERS

Commissioner Anderson reported that the McKenzie Watershed Council (MWC) retreat had been held and had been a success. She shared that much progress had been made in the last year, most notably that a riparian manager had been hired and had instituted 19 enhancements. She related that she had reported to the council on the conversations regarding an advisory committee and the institution of an ombudsman position from the McKenzie Valley area to the Board of Commissioners. She said they understood that it was too complicated to change the City Charter in order to have an elected position and that EWEB was working on a communication strategy.

Commissioner Menegat reported that he had attended the Lane Council of Governments (LCOG) in President Lanning's place. He noted that President Lanning had been appointed to the executive committee in his absence and Sue Bonamie, Mayor of Oakridge, was appointed as a City representative to the Regional Investment Board. He said the primary discussion involved regional education concerns.

President Lanning thanked Commissioner Menegat for attending the LCOG meeting in his absence and on short-notice. He reported that he and EWEB's External Communications Coordinator Lance Robertson had attended the Friendly Neighborhood Association meeting. He estimated that there were nearly 75 people in attendance. He conveyed his appreciation for Mr. Robertson's ability to provide the more technical answers, adding that the group asked "good questions."

President Lanning stated that Mr. Robertson had circulated copies of an op-ed piece that was written in response to an editorial regarding the Leaburg Lake raise printed in The Springfield News. He said he intended to have a conversation with the editor to determine why the paper had printed such an editorial without contacting EWEB to ascertain the facts behind it.

President Lanning congratulated Mr. Berggren on his appointment to the Governor's Board on Sustainability. He called the work "significant."

Additionally, President Lanning reminded Commissioners that evaluations of the General Manager were to be completed by February 6. He thanked Mr. Berggren and staff for putting together the detailed evaluation information.

Vice President Bishop related that EWEB staff had been working on a light pollution policy, noting that she had called attention to it during the previous board meeting. She expressed appreciation that this item was already an item of interest.

CORRESPONDENCE

General Manager Randy Berggren reported the following:

• He thanked President Lanning for the acknowledgment of his appointment to the Governor's Board of Sustainability. He noted that Corporate Services Director Roseanna McArthur had to attend the first meeting in his place due to a family emergency. He declared his commitment to participate fully.
• He had been interviewed by KPNW-radio regarding the General Manager's 2004 goals.
• The Bonneville Power Administration (BPA) settlement had been defeated and it was unclear as to what would be next.

Commissioner Anderson asked if EWEB was the only publicly-owned utility from Oregon in the Governor's group on sustainability. Mr. Berggren affirmed this to be so.

• Debra Smith, Assistant to the General Manager, would provide "homework" for the Commissioners, the Thomas Killeman Conflict Mode Instrument, in order to determine the conflict styles of the Board.

Ms. Smith briefly outlined the retreat process. She provided copies of a booklet printed by the American Public Power Association (APPA) entitled It's Your Future, Lead It.

BOARD AGENDAS

President Lanning reported that there were a few items pending.

Mr. Berggren suggested that, given that the agenda was projected to be brief, that the Board hold its discussion on Consent Calendars at the present meeting. He said he had gone through the Consent Calendars of the previous 12 months and had provided a synopsis for the Board to give Commissioners a sense of what sorts of things, by major category, were included in them.

President Lanning related that it had seemed there was a receptiveness on the part of the Board to include this discussion in the present meeting.

Regarding Item 4: Board notification of key staff changes, President Lanning recommended that he and Mr. Berggren discuss this first. He asked the Board to consider whether it warranted a full Board discussion.

Commissioner Anderson felt it was the purview of staff and not the Board.

Vice President Bishop opined it was the responsibility of the governing Board to be aware of change in key staff positions.

Commissioner Menegat did not think it merited a Board discussion.

President Lanning concurred with Commissioners Menegat and Anderson. He felt a Commissioner with a need to know could ask the General Manager.

Regarding Item 5: light pollution, President Lanning suggested that the Commissioners look over the backgrounder, yet to come, prior to determining whether it should be elevated to a Board level discussion. The Board was amenable to this.

President Lanning inserted the discussion on Consent Calendars after agenda item 8.

PRESIDENT'S ANNUAL MESSAGE

President Lanning gave his annual message, as follows:

"Waking up to a half-foot of snow on New Year's Day was a thrill for most of us in the southern Willamette Valley who'd been deprived of a true winter snowstorm for too long. We broke out the sleds, skis and warm gloves, enjoying the day. But the reality of the storm soon hit us in the form of snapping limbs, skidding cars, toppled trees, and for thousands of Eugene Water & Electric Board customers, one to three days without electricity.

"While Mother Nature was to blame for the power outages, the damage caused by the storm sent a warning signal to our customers: EWEB's 1,200-mile network of wires, poles, substations and other assets is getting older and in need of some major upgrades.

"Sixty percent of the 23,000 power poles we own or maintain are at least 30 years old; 25 percent are at least 40 years old. Too many are old and weak from dry rot and need to be replaced. Unfortunately, we are only replacing about 150 a year when we should be replacing 400 to 500. Similarly, wires, circuit breakers, substations and other equipment all over town are nearing or have reached the end of their useful life and are in need of replacement or upgrading.

"Electric service reliability remains strong, but if we don't start taking care of these needs now, a $360 million community asset will further deteriorate. Reliability will slip below acceptable levels. Our customers have told us through our annual satisfaction survey that having reliable and steady power is their top priority.

"EWEB managers and commissioners have known for several years that we have under-funded capital spending, but the 2000-2001 West Coast energy crisis put the utility's plans to address these needs on hold as electricity prices rose sharply.

"In scaling back overall utility spending, by $10 million in 2002 and another $9 million in 2003 to avoid further rate increases, many capital projects were put on hold. Critical projects that just couldn't be delayed were funded with borrowed money or by drawing down cash reserves. This can be done for a year or two but is not a financially sustainable strategy.

"EWEB is now at a point in which something must be done to ensure the electric system is properly maintained. Although it pains us to raise rates again, the Board must consider an electric rate increase this spring to devote more revenues from rates to capital needs. All of the revenue generated by the increase will be dedicated to funding capital projects.

"Fortunately, the impact on electric bills will be offset by slightly lower BPA costs this spring and, later in the year, elimination of the Power Cost Recovery Surcharge. When Commissioners enacted the surcharge in April 2002, we promised to eliminate it when our power cost debt was paid off and the power cash reserve reached $10 million. We will eliminate this surcharge as promised, most likely earlier than the original three-year estimate.

"However, Commissioners will be considering additional rate actions in the years to come. BPA may raise its rates again this fall and next year. Commissioners this summer will discuss a potential rate increase to continue building cash reserves to acceptable levels. And a general rate action to pay for normal operational cost increases is expected sometime in the next five years.

"Annualized over the five-year period, customers can expect electricity costs to rise between 2 and 3 percent a year, barring another energy crisis that sends power prices higher. This is in line with, or lower than, increases you are seeing for many other goods and services. College tuition, medical premiums, gasoline and many other products are rising much more than this.

"EWEB faces several other challenges in 2004. Without dwelling on the details, I'd like to mention just a few:

· We will continue work associated with relicensing of our Leaburg and Walterville hydroelectric project and engage the community to ensure they understand the work we are required to do as part of our federal license.

· We will update our Integrated Electric Resource Plan, using the advice from a citizen committee to determine where EWEB will get its future power resources.

· The Board will continue to bargain a first-ever labor contract for EWEB, with a goal of obtaining an acceptable first contract that both the Board and IBEW feel good about.

· We will continue our governance work to make the Board a better-functioning unit.

· We will continue to make EWEB a high-quality workplace and employer.

"EWEB's finances have improved since the energy crisis, and barring another major drought or emergency, they should continue to get better. Although electric rates rose significantly in 2001, the good news is that EWEB's overall power rates remain lower than half of the comparable utilities in the Northwest, are lower than four of the five other electric utilities in central Lane County, and are below the national average. With the energy crisis now behind us, it is time for EWEB to turn its attention to critical needs for the electric-distribution system. We must ensure a larger and steady source of funding to maintain the high level of reliability our customers have come to expect from their community-owned utility."

President Lanning received a round of applause.

GENERAL MANAGER'S GOALS FOR 2004

Mr. Berggren requested Board approval of the goals.

Vice President Bishop moved to accept the five goals set forth by the General Manager for 2004. Commissioner Menegat provided the second.

Vice President Bishop wished to convey for the record her appreciation for the refinement of the goals. She felt the General Manager had been very responsive to the Board.

President Lanning expressed hope that the work that the Board and management were doing on the goal setting would become useful for the organization. He avowed the work should be meaningful and helpful. Mr. Berggren responded that substantial steps had been taken toward leveraging the work further in the organization.

President Lanning called for the question. The motion passed unanimously, 4:0.

CONSENT CALENDAR CONTENT

Mr. Berggren stated that, in the spirit of the Board Governance conversation, the Board wanted to discuss whether significant items on the Consent Calendar should be elevated to agenda items. He noted that this concern had been raised as a result of the inclusion of a budget amendment amounting to more than $1 million on the Consent Calendar.

Ms. McArthur said the original idea behind Consent Calendars was to put routine decisions in them in order to increase the efficiency of the meetings and to avoid bringing every single thing before the Board.

Vice President Bishop asked if there was a dollar-amount trigger on the Consent Calendar. Ms. McArthur responded that the triggers related to cost were only for certain types of contracts that needed to come before the Board.

Mr. Origliosso explained that Business Service Agreements over $20,000 were required to be included on the Consent Calendar. He commented that there needed to be a certain degree of flexibility for budget amendments to come up on an as needed basis and that this was why they were sometimes included in the Consent Calendar.

Commissioner Anderson supported the utilization of a Consent Calendar. She felt it was the responsibility of the Board to be informed about Consent Calendar items.

Mr. Berggren noted that staff used to come before the Board with every budget amendment, but it had been felt that such things need not take meeting time. He said the intent of the discussion on the Consent Calendar was to define the exceptions for Consent Calendar use.

Commissioner Menegat commented that he had experienced some discomfort with the Consent Calendars he had seen and approved of, in particular the items having to do with the McKenzie River Valley residents. He felt it important to be aware of the ramifications of such decisions on the people who lived in that area. However, he averred that Board members had the mechanism of removing an item from the Consent Calendar and considering it separately. He thought this to be an adequate safeguard.

President Lanning agreed with Commissioner Menegat. He stated that items on the Consent Calendar were always accompanied by a brief description and a contact person. He felt that this provided ample opportunity for Board members to be familiar with the items.

Commissioner Anderson concurred. She encouraged Board members to make staff aware in advance of a necessity to have the contact person present at a Board meeting.

Mr. Origliosso stated that the criteria applied to the Consent Calendar was that, using reasonable judgement, staff believed there was likely to be consensus among the members of the Board on the item. He said the middle ground was that an item would be placed on the Consent Calendar and a backgrounder would be provided to the Board.

Corporate Services Director Roseanna McArthur remarked that before the Board was provided the Consent Calendar it had been through a process with staff. She stressed that no item "just fell" on the Consent Calendar.

President Lanning affirmed this, adding that the Board did set the policies for purchasing.

President Lanning remarked that it was sometimes difficult to fully read the packets and contact staff prior to the meeting due to his heavy schedule.

Assistant Secretary Krista Hince thought it would be possible to send out the packets earlier in the cycle, given that most things were submitted electronically.

Ms. McArthur commented that a Board member could call on the day of the meeting and have the staff contact person for a Consent Calendar item present to answer questions.

Vice President Bishop asserted that the public perception should be taken into consideration when approving an item of the magnitude of the budget amendment that had instigated her concern about the Consent Calendar. She opined that "really large budget items" needed to be listed on the agenda because it played better to the press and to provide members of the public to speak to them.

Vice President Bishop recommended that the Board review the levels of money that trigger inclusion on the Consent Calendar. She felt they were too low.

Mr. Berggren opined that this was a worthy suggestion. He noted that the levels were borne out of Board discomfort, but now with a Board having more confidence in staff's ability to handle the more rudimentary contracts, it would be prudent to reexamine the levels.

Mr. Berggren surmised from the Board discussion that the Board was largely comfortable with the function of the Consent Calendar, but that the dollar amount of items included on it warranted some further policy discussion.

Vice President Bishop felt it inappropriate to use the Consent Calendar for "major Board actions" such as the BPA settlement, even though this particular item had been adequately discussed in meetings.

Commissioner Anderson did not support discussing every budget amendment.

President Lanning said there was a forum within public utilities from which there was discussion on decisions. He felt there were internal checks and balances which the Board oversaw. He stated that any issue could be raised to the level of discussion by virtue of being pulled from the Consent Calendar by a Commissioner. He called it the most flexible part of the agenda.

Vice President Bishop reiterated her discomfort with large dollar items being included on the Consent Calendar.

Treasurer Jim Origliosso commented that budget amendments were fairly infrequent, usually less then ten per year. He related that they tended to be fairly large and arose due to capital overruns. He stated that this sort of budget item could be a cost of several hundred thousand dollars or a million dollars. He added that holding a discussion on each one would expand the agenda.

Ms. McArthur stressed that the Board was approving budget items when it approved the budget. She said budget amendments came about because of a change in the budget. She suggested the Board have someone stand before them only in the case of an amendment.

Mr. Berggren remarked that staff had worked hard not to bring budget amendments before the Board. He recommended that the Board try hearing such amendments for the next year and determine if this was how it would want to proceed.

Ms. Hince pointed out that there were 19 budget amendments in the previous year. Mr. Origliosso said that was because of the Tool Kit Changes that brought about so many amendments, but that usually there are less than 10 per year...

Commissioner Anderson noted that there had been concern expressed by the Board regarding how much time was being spent in meetings. She remarked that adding more to the agenda would make meetings longer and not shorter.

Vice President Bishop asserted that adding budget amendments would not add time to meetings. Mr. Berggren countered that any time there was an item on the agenda, there was generally a conversation about the item.

Ms. McArthur said from the standpoint of trying to abbreviate a discussion it was noteworthy that staff generally provided a backgrounder that went into "excruciating" detail.

President Lanning underscored the importance of the Board's acceptance of the responsibility to read the backgrounder.

ITEMS REMOVED FROM THE CONSENT CALENDAR

Commissioner Anderson made the following correction to the minutes from the Work Session held on December 16, 2003:

• Page 4, paragraph 3: "She said a discussion on representation outside the city and an ombudsman committee needed to be scheduled soon."

Vice President Bishop, seconded by Commissioner Anderson, moved to approve the minutes from the Work Session held on December 16, 2003, as amended. The motion passed unanimously, 4:0.

President Lanning adjourned the meeting at 8:56 p.m.

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Assistant Secretary President