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

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

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order at 7:45 p.m.

AGENDA CHECK

There were no changes to the agenda.

PUBLIC INPUT

Wanda Simmons, 1183 Skipper Avenue, spoke in her capacity as a member of the Board of the River Road Water District. She conveyed their concern in regard to the proposed increase in charges to the water district. She deemed the increase, proposed to be 9.2 percent, "large" and asked if this was really the level of the increase. President Lanning affirmed that it was, noting that there would be a presentation later in the meeting on water rates. She asked for a written explanation of the water rate action and President Lanning assured her one would be provided to the River Road Water District.

Zachary Vishanoff, Villard Street, expressed concern that there was not enough regulation for nanotechnology. He urged EWEB to look ahead on the issue and suggested a task force be formed. He suggested EWEB contact the Eugene Toxics Board regarding nanotechnology. He conveyed his concern that train or tanker disasters could lead to spills that would jeopardize the health of the community.

Regarding the potential siting of a hospital on the EWEB property, Mr. Vishanoff felt the users of the area should have input on this and that more public outreach was needed.

Mr. Vishanoff alleged that EWEB was installing a power plant in eastern Oregon that was like the one proposed for the Town of Coburg. He opined that EWEB should not oppose the Coburg plant and simultaneously build one.

APPROVAL OF CONSENT CALENDAR

Minutes

1. The Executive Session and Regular Board Meeting Minutes of March 2, 2004.

Business Service Agreements

2. Group 1 - Bill Print and Mail - Information Services - Corporate Services - $184,100

• GEAC Enterprise Solutions - SmartStream Maintenance Administration - Information Services - Corporate Services - $235,344

• General Pacific - Stores Item - Padmounted Switchgear - Electric Division - 236,875
• Rhodia Eco Services - water Production - Hayden Bridge Filtration Plant - Water Division - $345,033

Intergovernmental Agreement

• Lane Council of Governments (LCOG) - IGA No. 10701 - 2004 Aerial Photo Project - Environmental Management - Corporate Services - $127,795
• Lane Council of Governments (LCOG) - IGA No. 10729 - Source Protection Program - Environmental Management - Corporate Services - $40,450

Resolution

• Resolution No. 0204 - Refunding of Trojan Bonds

Commissioner Farmer, seconded by Commissioner Anderson, moved approval of the Consent Calendar. The motion passed unanimously, 4:0.

ITEMS FROM BOARD MEMBERS

There were no items from Board members.

CORRESPONDENCE

General Manager Randy Berggren reported the following:

• He thanked the employees who had participated in the booth at the Lane County Home Show. He noted there had been a large turnout.
• He pointed out that a copy of the letter on Systems Development Charges (SDCs) had been included in the Board packet. He suggested SDCs be included in a future Board Governance discussion.
• He indicated there was an informational item in the agenda packets regarding the progress on the Wanapa Plant.
• Fiscal Services Supervisor Dick Varner provided a piece describing in greater detail wholesale power costs and revenues, as had been requested at the Board's retreat.

BOARD AGENDAS

Mr. Berggren stated that there had not been much shift in the Board agendas since the last meeting. He noted that a back grounder on the proposed power plant in Coburg would be provided. He stated that the Board would discuss a litigation policy on April 6 and the discussion on the Low-Income Energy Assistance program would be deferred to the meeting scheduled for April 20.

ELECTRIC RATE PROPOSAL

Mr. Berggren stated that staff had looked at a five-year view of the financial picture. He said the utility was trying to stabilize and maintain its costs and infrastructure. He called the rate action the first step in paying more to upgrade the system.

Senior Rate/Financial Analyst John Yanov stated that the May 2004 Electric Rate Proposal was very similar to the power point presentation he had made at the meeting held on February 7. He noted there were copies available for the public. He reiterated that capital improvements were the main cost driver. He said there had been a decrease in Bonneville Power Administration (BPA) charges. All of the factors indicated that a 4.6 percent rate increase was warranted and staff recommended that this rate action be taken.

Commissioner Farmer commented that he found it curious that the utility was in a more favorable position compared to other cities when looking at commercial rates, but this was not so for the residential rates. Mr. Yanov acceded that residential rates at other utilities were sometimes subsidized by commercial customers to a small extent.

Mr. Berggren countered that EWEB was a little better than average regarding the competitiveness of its rates, but without a detailed analysis of the rate structures of other utilities it was difficult to say exactly where it fell within the spectrum of comparable utilities. He commented that the tiered rates influenced any comparison, as there were not many utilities that used them.

PUBLIC HEARING ON ELECTRIC RATE PROPOSAL

President Lanning opened the public hearing.

Charles Collins brought his most recent bill and showed that he was already paying over $71 for a delivery charge. He said he had taken the advice of EWEB in the 1950s and installed ceiling heat and had been "getting shafted" every since. He commented that he would not mind paying a higher delivery charge if the tiered rates were eliminated. He stated that people who had all-electric houses were "taking a beating" on their electric bills.

Jody Johnson spoke in opposition to tiered rates. She stated that she had also "gone all electric" at the advice of the utility in the 1960s. She related that she had calculated that she had paid $272 more on her electric bill than she would have without tiered rates. She said she could not possibly conserve any more electricity than she could and was burning more wood than ever. She asked if the 6 percent rate increase would be on the total bill or on each tiered rate.

Mr. Yanov responded that all of the charges were going up. The 6.6 percent increase was spread across all of the classes, but he said the least amount of the increase was being applied to the tiered rates.

Michael Sussman said he had lived in Eugene since 1974. He related that he had been supportive of EWEB's efforts in conservation and in trying to keep rates down. He stated that he had received the letter to customers enclosed in the most recent bill which had indicated that the rates were lower than half of the comparable utilities. He averred EWEB could do better. He felt that the letter indicated there was a great deal of room for improvement. He urged EWEB to make it possible to write a letter stating that it was better than 9 out of 10 utilities across the state, for instance. He suggested EWEB talk to other utilities, utilities with better rate structures and better practices, and ask what they were doing that EWEB was not doing.

Robert Tallman, 3275 Chevy Chase, stated that he had all ceiling heat. He said he was in the third tier, but only lived in a small portion of his house due to the expense. In order to put another means of heating in his house, he explained that he would have to vent his house and this represented an exorbitant expense. He called the utility a "monopoly." He questioned the need for employee raises and opined they were already being paid too much.

Seeing no one else wishing to speak, President Lanning closed the public hearing.

WATER RATE PROPOSAL

Mr. Yanov provided an overview of the May 2004 Water Rate Proposal accompanied by a power point presentation. He noted there had not been an increase in two and a half years. He profiled the increases that were proposed for the in city rates and the out of city rates. He asked if there were any Board questions.

President Lanning ascertained that there were no questions from the Board.

Mr. Yanov conveyed the staff recommendation to approve the rate action.

PUBLIC HEARING ON WATER RATE PROPOSAL

President Lanning opened the public hearing.

Robert Tallman, 3275 Chevy Chase, asked why the City of Medford had lower water rates.

Power Resources Director Dick Helgeson explained that Medford owned a municipal facility that had access to an ample water supply that needed little treatment. He said the water treatment facility was not as large and the water utility sold water to outlying water districts and used the profit margin to subsidize its local water rates. He added that one percent of Eugene's water customers lived outside of the area and there was no cost margin.

Commissioner Farmer noted that he had asked that question at the last meeting. He said he had talked to the City Manager of Medford and the manager had explained that Medford's water utility was wholesaling water to large farming operations.

Mr. Tallman expressed his displeasure with tiered rates. He stated that watering his lawn in the summer months cost him over $100 per month. He felt he had to do so to make the area "look decent." He suggested that he should let it go dry and put a sign in the yard that said "thanks, EWEB."

Bobby Jones said he had lived in Eugene for 50 years. He commented that the information was not communicated in an understandable form. He thought people were embarrassed by their lack of understanding and this was why there was not a larger turnout at public hearings. He suggested that this could be remedied by more clarity in the explanations of how the utility functioned.

Mr. Berggren wished to respond to the person that asserted that the utility made more money from the tiered rates. He stressed that EWEB was a not-for-profit agency and did not make more money from the tiered rates. He clarified that, independent of how the rates were designed, the rates were to cover the cost of running the utility.

Mr. Yanov added that less than 5 percent of the total usage landed in the Tier 3 rates and, thus, it was not directly subsidizing anyone.

ELECTRIC AND WATER RATE PROPOSAL

Mr. Yanov reiterated staff's recommendation that the Board approve the electric rate proposal.

Commissioner Menegat moved the approval of the electric rate proposals, specifically the residential increase by 6.6 percent, the small general service by 4.7 percent, the medium general service by 4.2 percent, the large general service by 2.7 percent, contract 'A' by 3.4 percent, contract 'C' by 3.1 percent, and a decrease of 2.4 percent in contract 'D,' an increase of 3.5 percent for street lighting and an increase of 14.5 percent in private lighting. Commissioner Anderson provided the second.

Commissioner Menegat indicated that the matter had been before the Board since early fall, 2003, and had been considered through the budget deliberations, the adoption of the budget, the reports regarding the aging infra-structure and the need to respond to the capital requirements of the utility. He supported the proposed increase, though he heard the concerns of people who had all-electric homes. He said he did not have an answer for those who felt the crunch because of such homes, but he did know that the system needed to be sound and was in great need of work.

Commissioner Anderson shared her unhappiness with the rate increase. She stated that the Board had cut into the budget by nearly $30 million over the last few years trying to maintain the rates at their existing level. Many maintenance items and capital improvements to the infrastructure had been delayed. She emphasized that the operation of the utility was endangered by this continued neglect.

Commissioner Farmer stated that it had been approximately ten years since an increase in rates had been exacted in order to address capital expenditures. He felt customers had been given a false sense of security. He related that he had spent much time with staff members looking at proposals for capital expenditures and had surmised they were appropriate. He was uncertain as to whether the utility was getting ahead of the curve regarding the necessary maintenance.

Commissioner Farmer added that he did not think the utility did an adequate job of explaining how it functioned to its customers. He felt that had he been looking at the rate proposals as a customer for the first time he would not understand the difference. He said that the Board had bone through a rate case study that showed that most of the value in the capital expenditures were going to the benefit of the residential rate payer and that was why the rate was higher than some of the other classes.

Commissioner Farmer stressed that he was not voting for a rate increase in the abstract. He was looking at a total plan across the rate increases and rate actions that the Board sought to undertake. He related that he intended to vote to eliminate the surcharge in the fall, which was roughly equivalent to the rate of the increase that was proposed. He stated that the overall plan he saw for EWEB between the present year and 2008 was roughly 3 percent per year, similar to the rate of inflation. He expressed hope that the public would perceive that this was the approach, rather than only being able to see a 5.7 to 6.3 percent increase on a single action.

President Lanning said he could not add much more than what had already been eloquently stated by the other Commissioners. He asked the General Manager to delineate the cuts the utility had taken to address the fiscal constraints that it was faced with.

Mr. Berggren responded that the utility had taken $9 million in cuts in 2003 and $10 million in cuts in 2002.

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

President Lanning asked the Board to consider the water rate proposal.

Mr. Yanov reiterated that staff recommended approval of the proposal to increase the water rates by 5.6 percent.

Commissioner Anderson moved to approve the staff recommendation on the water rate proposal. Commissioner Menegat provided the second.

Commissioner Anderson emphasized that the water rates for EWEB customers were still very low by comparison to other utilities.

President Lanning suggested that open houses for the purpose of having a dialogue about rates and usage be held and members of the public invited to attend and participate. He cited, as an example, that customers seemed to be somewhat unaware that people who use more electricity caused the utility to purchase more electricity, which means the power costs more. He felt there could be a greater understanding of the "bigger picture."

Commissioner Farmer likened tiered rates to "social engineering" and reiterated his opposition to them. He stated that the present proposal did not increase rates equally across the tiered rates.

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

BOARD GOVERNANCE

Litigation Notification Policy

President Lanning recognized that Vice President Bishop had requested that the topic be deferred. He noted that she had been unable to attend the meeting to a personal situation.

Commissioner Farmer commented that the issue was not time sensitive. He felt it important for Commissioners to honor such requests, adding that he may have an issue that he would wish to be deferred due to his absence at a future meeting.

Assistant to the General Manager Debra Smith noted that there was room on the agenda of the meeting scheduled for April 6 and the Board decided to defer the item until then.

ITEMS REMOVED FROM THE CONSENT CALENDAR

There were no items removed from the Consent Calendar.

President Lanning adjourned the meeting at 8:48 p.m.

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Assistant Secretary President