Board Members Present: Patrick Lanning, Sandra Bishop, Dorothy Anderson, Mel Menegat, and Ron Farmer.

Others Present: Randy Berggren, Dick Helgeson, Debra Smith, Jim Origliosso, Jim Wiley, Terry Bequette, Marty Douglass, John Yanov, Lance Robertson, Ken Beeson, Mark Freeman, Dick Varner, and Krista Hince of the EWEB staff; Rick Lindholm, Lindholm Research, L.L.C.; Ruth Atcherson, Minutes Recorder for the City of Eugene, and members of the public.

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order at 7:39 p.m.

AGENDA CHECK

There were no changes to the agenda.

PUBLIC INPUT

There were no members of the public who wished to speak at this time.

CONSENT CALENDAR

Minutes

1. Minutes of the January 12, 2004, Work Session and Regular Board Meeting and the January 20, 2004, Special Board Meeting and the February 3, 2004, Executive Session.

BUSINESS SERVICE AGREEMENTS

2. Accountemps - Temporary Services for Customer Accounts and Credit/Collections - Customer Service - Finance and Customer Service Division - $20,000

• Office Team - Temporary Services for Customer Accounts and Credit/Collections - Customer Service - Finance and Customer Service Division - $40,000

• Universal Communications Network (UCN) - Information Services - Corporate Services - $24,000

• MCI Worldcom - Information Services - Corporate Services - $34,300

• Qwest - Information Services - Corporate Services - 171,929

• Global Crossing - Information Services - Corporate Services - $9,600

• Proctor Engineering Group - Energy Management Services - Power Resources Division - $150,000

Commissioner Anderson pulled the minutes from the regular session held on January 12, 2004.

Commissioner Menegat, seconded by Commissioner Farmer, moved approval of the Consent Calendar, with the exception of the minutes from the January 12, 2004 Regular Board Meeting. The motion passed unanimously, 5:0.

ITEMS FROM BOARD MEMBERS

There were no items from Commissioners.

CORRESPONDENCE

General Manager Randy Berggren reported the following:

• The Board packet included a copy of a memorandum on a media event at Stewart Aquatic Center. It highlighted the work in photovoltaics that EWEB staff had done there.
• The packet also included a status report on the "Leaburg Lake raise."
• Intergovernmental Affairs Coordinator Deborrah Brewer included in Commissioner packets a memorandum on the City's progress on the Downtown Plan and the Urban Renewal District.
• Public Affairs Manager Marty Douglass wrote a memorandum that summarized the Commissioners' thoughts and views on the McKenzie River representation/communication issue.

BOARD AGENDAS

Mr. Berggren went over the future board agendas indicating that for the March 2, 2004 Board Meeting, the Board would discuss the GM 2003 Goal Status; the GM 2003 Evaluation; the 2003 Audit Management Letter and Governance work on a Bill Stuffer Policy.

2004 BUDGET AMENDMENT NO. 1 FOR REORGANIZATION

Dick Varner, Fiscal Services Supervisor, referred the Commissioners to the memorandum entitled Reorganization Budget Amendment. He explained that two division director positions had been eliminated and two positions created. The impact of this action had been a decrease in $27,000 in the budget, due to the pay differential between the two lost positions and the two gained positions. He further explained that it represented a small loss to the Electric Division and a small gain to the Water Division.

Commissioner Anderson moved to approve Budget Amendment No. 1 for reorganization. Commissioner Farmer provided the second. The amendment passed unanimously, 5:0.

ELECTRIC RATE PROPOSAL

John Yanov, Senior Financial/Rate Analyst, said staff would present the Electric Rate Proposal. He circulated two letters from the consultants regarding the cost-of-service results and began the power point presentation. He reported that using revenues from the current rates and investing in capital reserves would create a deficiency of $7 million.

Mr. Yanov noted that the far right column in the table entitled 2004 Cost of Service Results delineated the results by customer class. He said staff had not had good information on the proportions before. He stated that the utility was maintaining objectives for the rate design.

Mr. Yanov delineated the Current and Proposed Residential Rates.

In response to a question from Vice President Bishop, Mr. Berggren explained that "30-year incremental costs" referred to the maximum cost of power from the most expensive resource.

Mr. Yanov outlined the Current and Proposed Small General Service Rates. He stated that overall this class would receive a four percent increase as would the medium general service rates.

Mr. Yanov reported that street lighting was proposed to have a 3.5 percent increase. He noted that use of better lighting had helped to conserve energy. He explained that the City owned the street lighting plant and EWEB was in negotiations with the City at this time.

Commissioner Farmer asked for an explanation of private lighting. Mr. Yanov replied that private lighting was customer-owned, usually operated by photo-sensors, and typically utilizing a high-pressure sodium. He noted it was a very small portion of the bill. He said a flat rate was charged for privately-owned lighting.

Mr. Yanov indicated that the increase would cost the average customer approximately $4.40 more per month.

In closing, Mr. Yanov highlighted the time line for the rate action, noting the next step was a public hearing and on March 16 another public hearing would be held and the Board would be asked to take action.

Vice President Bishop commented that a 15 percent increase in demand charges seemed like a "large bite." She asked if it was a typical part of a rate increase and if the percentage was a standard percentage. Mr. Yanov clarified for her that the 15 percent increase was in the basic charge and the demand charge would increase by approximately 3.7 to 4 percent.

Commissioner Farmer asked how the utility had determined the residential bill comparison. Mr. Yanov responded that it was delineated on page 31 of the document. Mr. Berggren added that the same consumption was run through a comparison with other utilities, noting that each utility would be impacted differently depending on how rates were structured. He clarified that it reflected typical consumption rather than average consumption.

In response to a question from Vice President Bishop, Mr. Yanov stated that medium general service customers totaled 2,100.

Vice President Bishop asked how staff took into consideration the cost of service results for commercial customers. Mr. Yanov said the goal was to achieve the same revenue results either way. Vice President Bishop explained that she sought assurance that the rate was fair and equitable. Mr. Yanov referred to the energy charts and assured her that staff tried to assure consistency. He said there was a 15 percent cost increase in the basic charge for all classes.

Mr. Berggren commented that the cost of services was a fairly large piece of work and this was the reason the utility had chosen to hire consultants. He explained that the consultants were able to provide a pure view of customer usage and cost and then rate setting principles. He stated that the basic charge had been undercharged for a number of years. He commented that were the utility to base its basic charge increase on a pure cost of service number, the basic charge would nearly double. Mr. Yanov added that the basic charge had not been increased in tandem with the last several rate actions.

Commissioner Farmer observed that the typical residential bill was becoming more comparable, while business rates were substantially cheaper than the average utility.

Mr. Berggren noted that the surcharge that was placed on customers' bills two years ago was going to be discontinued in approximately six months and utility bills would experience a slight reduction.

PUBLIC HEARING ON ELECTRIC RATE PROPOSAL

President Lanning outlined the rules for the public hearing.

President Lanning opened the public hearing.

Jim Seaberry, 3294 Stark Street, took a neutral position on the electric rate proposal at this point. He noted that there was an advertisement in the local paper for the Assistance League in which the utility was given credit for helping curtail the used clothing store's utility bill. He opined that more children would be shopping there as their families would not be able to afford new clothing if the utility raised its rates.

Mr. Seaberry stated that over the last two years the delivery charges on his bill totaled $960. He felt his bill to be somewhat average and calculated the delivery charges collected in the area over the last two years to total approximately $70 million. He felt this money should have gone into the coffers for maintenance. He remarked that using words like 'delayed,' 'slowed,' and 'deteriorated' implied money that should have been spent on maintenance of the delivery was spent on other things. He asked the utility to disclose how much the delivery system cost was charged to the public.

Mr. Seaberry noted that EWEB said it needed to raise rates because it had not done so to fund capital expenditures in a decade. He questioned where this money had been spent in the meantime. He also asked if the per megawatt charge from the Bonneville Power Administration had gone up, stayed the same, or decreased in this time.

Nicki Berlaiut, 925 Coburg Road, #5, said she tried to conserve electricity and there was nothing more that she could cut back. She commented that she had begun to feel that if she even thought about using her utilities it would cost money. She felt rates were already exorbitant.

Joe Downing, 3050 Whitbeck Boulevard, thanked EWEB for restoring power to his neighborhood quickly during a recent 24-hour power outage. He asked what the kilowatt hour rate from the BPA cost at the moment.

Mr. Yanov responded that it was difficult to say because it changed from month to month and the utility had three separate contracts. Mr. Varner said the first tiered rate was relatively close to the cost for power and transmission from the BPA.

Mr. Downing asked if there was going to be relief from the energy crisis of 2001. Mr. Varner replied that staff would be returning to the Board in the summer or fall and suggest that the surcharge referred to earlier was no longer needed. He added that it was unlikely that the BPA would lower its rates. Mr. Yanov commented that deregulation cost the utility money.

Mr. Downing thanked the Commissioners for their work. He expressed hope that the Board would make the right decision, adding that "for the average person, electricity is very expensive."

Janet O' Bryant, 85 North Madison Street, said she had attended the meeting at which the Board had decided to delay the rate increase until the BPA raised the wholesale power rate to the EWEB. She related that, at the time of the hearing in June, she and others with her had asked the Board to share the vision of where the utility was going in this time of this "deluge of utility bill rate hikes" and a suffering economy. She commented that schools were having to go to big businesses to help keep schools afloat. She wished to see the businesses and commercial users shoulder more of the burden of the rate increases. She alleged that, of the businesses that make $1 million or more, 67 percent paid a state tax of $10 or less. She advocated for placing the greater burden on industry rather than on the residents who were already hard-pressed to make ends meet. She noted that she had taken every conservation measure she could in her home and it had been to no avail. The conservation measures were not helping to lower her bill.

WATER RATE PROPOSAL

Mr. Yanov offered a correction to page 33 in the May 2004 Water Rate Proposal. He stated that the EWEB rate for the suggested 9,000 gallons average use, incorrectly listed as $13.39, was actually $13.18.

Mr. Yanov highlighted the proposal for the water rate action, accompanied by a power point presentation.

Mr. Yanov explained that the reduction in sewer billing fees was a result of their expiration. The cost drivers represented an overall increase of 5.6 percent.

Mr. Yanov pointed out, in the 2004 Cost of Service Results by class, the contract service had gone up because of a reduced level of consumption. He said it appeared that since the time this had been put into place, the levels might have come up a little. He stated that EWEB was trying to maintain parity between the two classes, general and residential.

Continuing, Mr. Yanov indicated that the elevation charges would increase by 12 percent. He noted that water service outside of the City cost more by virtue of being farther away.

Mr. Yanov discussed the Residential Bill Comparison. He projected the average bill would increase from $13.18 to $14.13 per month, which was still far below the rates of most utilities.

Mr. Yanov noted that the time line for the next steps on the water rate proposal were the same as for the electric rate proposal.

Commissioner Anderson asked if the utility was going to have to wait until the Public Employees Retirement System (PERS) litigation was settled before it could estimate any sort of reform into the budgeting process. Mr. Varner affirmed that the utility was waiting until the litigation was finished. He said, once finished, the utility would figure out what to do with anything that might be left over.

In response to a question from Vice President Bishop, Mr. Yanov said EWEB used the same consultant, who was now working with a different consulting firm.

Vice President Bishop asked, regarding the changes in how water districts were charged for water, if staff had room to negotiate on the contracts. Mr. Yanov responded that, since the creation of the service contracts with water districts, EWEB had taken over more of the functions of serving the customers and water district customers and were now at the point where they received almost the same amount of service as EWEB customers. Mr. Berggren interjected that there would likely be a policy-level discussion on water districts in a future Board meeting.

Commissioner Farmer asked why Medford charged so little for water to its customers. Dick Helgeson, Power Resources Director, replied that Medford had a very inexpensive non-filtered spring-fed source. He explained that this involved less mechanics. He stated that they also sold water to the outlying communities at a profit and had a low debt load because the utility was not expanding; thereby subsidizing the overall rate charged to their customers. Mr. Yanov reminded the Board that we do not subsidize other rate structures, therefore, our rates were higher.

PUBLIC HEARING ON WATER RATE PROPOSAL

President Lanning opened the public hearing.

Seeing that no one wished to testify, President Lanning closed the public hearing.

ANNUAL CUSTOMER SURVEY

Lance Robertson, External Communications Coordinator, introduced Rick Lindholm, of Lindholm Research, L.L.C. He explained that Lindholm Research, L.L.C. had conducted the annual benchmark survey for EWEB. He stated that the objective was to gauge customer attitudes about EWEB. He said some questions were the same from year to year as a measure of change, for better or for worse. He noted that many of the results from 2004 were similar to results from 2003 and satisfaction ratings remained high. He provided a power point presentation on the overview of survey results.

Mr. Robertson pointed out that concern for environment had increased from 48 percent to 56 percent. He added that controlling costs, reliability, and water quality had also increased in importance to the customers.

Mr. Robertson noted that controlling costs continued to have a fairly low performance ranking compared to the others.

In response to a question from Commissioner Farmer, Mr. Lindholm averred the customer response to the question regarding efforts to control costs merited placement on a "watch list" but was not low enough to be considered a failure.

Commissioner Farmer asked if there was a sense as to how educated people were regarding the utility and its rates. Mr. Lindholm replied that it was difficult to inform people in a phone survey and to do so would skew the results. He felt people were somewhat informed, adding that a number of respondents provided detailed advice and comments regarding how EWEB was doing. He stressed that controlling costs were almost always going to be "low performing" as it was something that customers would always see.

Mr. Robertson called attention to the questions regarding where customers get their information about the utility. He said the number of customers who cited bill messages, inserts, and the Pipeline had increased.

Mr. Robertson related that the survey sought to determine customers' expectations in regard to price versus reliability. He reported that they had employed conjoint analysis. Customers were asked to rank several options in order to test preferences for which element. He said that results suggested customers would be willing to put up with more outages for a lowering of price.

Vice President Bishop felt that, as a Commissioner, she did not have an option of trading one for the other.

Mr. Berggren clarified that the point of the exercise was to get to know more of what customers want. He remarked that it was a simplistic but interesting view and would provide a useful tool to aid in the calibration of resources and priorities.

Mr. Robertson commented that the survey might have gotten a different result had it defined an outage as three days rather than five minutes to two hours.

Mr. Berggren said the utility continued to carry 80 percent customer satisfaction as an operational performance measure (OPM). He noted the survey indicated that it had risen from 70 to 72 percent.

Commissioner Farmer asked how this information should be used other than reviewing it once a year for 30 minutes. He felt the survey should be used to guide the Board more. Regarding curtailing costs, he thought perhaps EWEB should make more of an effort to disseminate information on costs and revenue.

In response to a question from President Lanning, Mr. Lindholm said there were no key concerns called out that were different from past results. He noted that surveyed customers seemed to know more and were more aware of what they did not know. He felt customers were paying more attention to EWEB.

Mr. Robertson stated that the open-ended comments would be compiled and provided to the Board.

Mr. Lindholm remarked that customers were offered a chance to give comment to the Board at the end of the survey and half of them declined to compliment. He said the other half were fairly evenly divided between compliments and complaints.

ITEMS REMOVED FROM THE CONSENT CALENDAR

Commissioner Anderson stated that the minutes from the Special Board Meeting held on January 12, 2004 had erroneously indicated that Vice President Bishop had not served as Vice President in her time on the Board. She related that Vice President Bishop had served as Vice President in 2000 for a six-month period of time.

Commissioner Farmer, seconded by Commissioner Menegat, moved to approve the minutes from the Special Board Meeting held on January 12, 2004, as amended. The motion passed unanimously, 5:0.

Mr. Berggren commented that, in the spirit of the Governance work, the Board should consider whether the minutes should reflect what was actually said at a meeting or a concept of what was intended to be said. He related that he had experienced this taken to an extreme in past years. He stressed that minutes were one of the most important aspects of the public meeting. He recommended the Board engage this issue as a Governance question in order to have clarity on what the Board intended its minutes to reflect.

Vice President Bishop asserted the Board knew the minutes were a legal obligation of a public meeting and the Board was accurately trying to record what had been said. She did not believe it needed more discussion than that.

Commissioner Farmer commented that discrepancies between what was said at a meeting and what someone thought had been said at a meeting could be resolved by going over the tape recording.

President Lanning adjourned the meeting at 9:25 p.m.

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Assistant Secretary President