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

Others Present: Randy Berggren, Debra Smith, Jim Origliosso, Jim Wiley, Roseanna McArthur, Cathy Bloom, Marty Douglass, Tom Buckhouse, Mike Logan, and Krista Hince of the EWEB staff; Win Calkins and Eric DeFreest, General Counsel to EWEB; and Ruth Atcherson, Minutes Recorder for the City of Eugene.

President Lanning called the Regular Board Meeting of the Eugene Water & Electric Board (EWEB) to order at 7:26 p.m.

AGENDA CHECK

President Lanning proposed that agenda item (9) be interchanged with agenda item (6) to allow Cathy Bloom, Assistant Treasurer, and Eric DeFreest, EWEB's General Counsel, to leave. The Commissioners accepted the proposed change.

PUBLIC INPUT

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

APPROVAL OF CONSENT CALENDAR

Minutes

• Minutes of the February 13, 2004, Board Planning Session, the February 17, 2004, Special Board Meeting, and the Executive Session Minutes of March 16, 2004

Memorandum of Agreement

• Northwest Energy Efficiency Alliance (NEEA) - Energy Management Services - Power Resources Division - $117,080

Water System Development Charge (WSDC) Grant Request

3. Apple Orchard Development - Interagency Housing Policy Board - Water Division - $33,080

Bid Awards

4. L.R. Brabham, Inc. - Standby Generator Installation - Water Division - $128,621

5. North Creek Analytical Inc. - Analytical Services - Environmental Management - Corporate Services - $9,800

6. Fiber Planners - Fiber Optic System Design - Electric Division - $32,760

Bid Awards (continued)

7. 2-G Construction - Concrete Removal and Replacement - Construction - Water Division - $375,000 estimated

• Beacon Electric - Residential DSM Resources Program - Energy Management Services - Power Resources Division - $150,000

9. Wells Fargo Bank, N.A. - Trustee Services - Finance Division - $25,000 for five years

• Olsson Industrial Electric - Leaburg Automation, Perhouse Upgrade and Leaburg Substation Rebuild - $166,701.44
• Pacific Engineering Corporation (PEC) - Design and Engineering Service - Water Engineering - Water Division - $12,999

12. MWH - Geotechnical Engineering Services - Generation - Electric Division - $22,525

Commissioner Anderson pulled the minutes from the Special Board meeting held on February 17, 2004.

Commissioner Menegat, seconded by Vice President Bishop, moved approval of the Consent Calendar, with the exception of the aforementioned minutes. The motion passed unanimously, 5:0.

ITEMS FROM BOARD MEMBERS

Commissioner Menegat reported that he had attended the Western Generation Agency meeting held on March 23. He noted EWEB's Assistant Treasurer Cathy Bloom had attended as well and had been elected as treasurer in the officer elections. He commented that it was a lengthy agenda and had been dealt with efficiently.

Vice President Bishop said she attended the Northwest Energy Coalition meeting. She added that John Simpson, candidate for EWEB commissioner, had attended the meeting as well. She shared that there had been a very interesting presentation given by representatives of Kettle Foods, which has the largest solar array in the nation. She noted the payback period was projected to be less than six years.

Vice President Bishop commented that the ECCO Trust Building, where the coalition had convened, was an interesting building and a "good exercise in reuse of materials."

Vice President Bishop reported that she attended the Fair and Clean Energy Coalition meeting hosted by Portland General Electric (PGE). She said the coalition had requested that Neil Goldschmidt attend as he was one of the group of local investors proposing to purchase PGE. She related that Mr. Goldschmidt had been invited to explain comments he made regarding Senate Bill 1149. Mr. Goldschmidt agreed to write a letter and clarify his position. She stated that much had been learned regarding the proposal to purchase PGE.

Continuing, Vice President Bishop said she received a letter from a customer thanking her for voting against General Manager Randy Berggren's pay raise. She reiterated that she had opposed the pay raise to give the public the message that the Board was balanced and because the timing was not good, given the financial difficulties customers were faced with.

President Lanning reported that he and Vice President Bishop continued to be involved with the Integrated Energy Resource Planning Work Group (IERPWG). He shared his excitement with how involved the group was.

Vice President Bishop commented that the group had a good balance and were representative of all customers.

President Lanning felt people were working hard on focusing on the best needs of the community.

President Lanning said he would not be able to attend the meeting scheduled for April 20.

Vice President Bishop apologized for missing the vote on rate hikes. She noted that she had missed it, due to a bicycle accident, but would have voted in favor of the hike.

CORRESPONDENCE

General Manager Randy Berggren reported the following:

• EWEB received accommodation from the Oregon Municipal Finance Officers Association regarding Cathy Bloom's good work on the Public Employee Retirement System (PERS) issues over the last several years. He noted that media outreach would be considered. The recognition was well-deserved and, pending Board direction, some sort of commendation should be made.
• The packet included a memorandum on tree removal policies, in order to provide the Board answers to questions frequently asked by members of the public.
• Public Affairs Manager Marty Douglass sent a memorandum providing an update on the Bus Rapid Transit (BRT) undergrounding project. The cost sharing agreement was codified.
• Electric Operations Manager Dave Koski included copies of letters in the Board packets that were sent in response to several concerns expressed by individual customers.
• Human Resource Analyst Jennifer Joule had sent out a memorandum updating the Board on the 2004 benefits project update.

President Lanning noted that an invitation to all Board members had been sent by the EWEB Credit Union. Assistant Secretary Krista Hince added that the annual meeting would be celebrating the 50^th anniversary of the Credit Union.

Vice President Bishop related that the Board had received a letter from the president of Northwest Natural Gas Company. She felt it was very educational and provided a copy to staff.

BOARD AGENDAS

Mr. Berggren said a background memorandum regarding the proposed power plant to be built in Coburg had been provided to the Board. He stated that nothing new had been added to the list of future agendas. He highlighted the planned agenda for April 20.

Vice President Bishop said she wished to bring up to the Board level the light pollution policy. Mr. Berggren responded that the Board had not voted to bring it forward.

Vice President Bishop felt more information was needed on the issue. Mr. Berggren asked if she meant more information than what had already been provided in the backgrounder. Vice President Bishop indicated she felt more information would be useful.

Mr. Berggren asked for more clarity as to what needed to be addressed in the light pollution policy.

PUBLIC EMPLOYEES RETIREMENT SETTLEMENT AGREEMENT

Cathy. Bloom, Assistant Treasurer, explained that before the Board were copies of the settlement agreement. She said staff was asking two things, to authorize the signing and addition of minor modifications to dates in the document. She stressed that no substantive modifications would be included.

Vice President Bishop moved to authorize the General Manager to finalize the date and also such terms as may be necessary to put in for the context of an appeal but unrelated to substance, with the understanding that this will be appealed. Commissioner Menegat provided the second.

Vice President Bishop commended the staff work on this item.

President Lanning called for the vote. The motion passed unanimously, 5:0.

BOARD GOVERNANCE

• Litigation Notification Policy

Mr. Berggren referred the Board to the attached memorandum entitled Reporting Litigation. He agreed that it would be a good idea to have a policy in place that served to keep the Board current regarding significant litigation and proposed bringing a quarterly report before the Board. He did not support bringing miscellaneous small claims before the Board; however, he did say that General Counsel Win Calkins would coordinate with other legal counsel and would act as a clearinghouse for the information coming from any major litigation.

Mr. Berggren outlined the rest of the proposal, which included meetings between himself and counsel prior to reporting to the Board.

Commissioner Menegat supported quarterly reporting. He felt it would provide a greater understanding of what was happening within the utility.

Commissioner Farmer requested clarification of the statement made on page two, paragraph three under Proposal. Mr. Berggren explained that Mr. Calkins would not report on litigation if it would compromise the legal standing of the utility.

In response to a second question from Commissioner Farmer, Mr. Berggren explained that the report on litigation would not include items already presented in meetings, such as the PERS litigation.

Commissioner Farmer opined it was a good start. He recommended that the report summarize the litigation and not be too elaborate. He thought it could be encapsulated in an Excel spreadsheet format. He added that he would prefer there to be a "minimus test," e.g. that a suit for less than $50,000 not be a concern to the Board.

Vice President Bishop said she primarily wanted to be provided notice and a description of such litigation. She felt she should be able to answer questions from customers, but did not want to burden the General Counsel.

Commissioner Anderson remarked that there were many frivolous lawsuits. She was interested in only hearing of important litigation.

President Lanning said the memorandum indicated the goals he sought in the policy. He agreed that the Board did not need to get into "the nuts and bolts" of litigation.

In response to a question from Vice President Bishop, Mr. Calkins affirmed the public record can be revealed, but that there could be elements in the report that the Board should not share with the public.

Vice President Bishop responded that such elements should not be included in the report.

Commissioner Farmer concurred, adding that he did not want anything included in such a report that discussed strategy. He emphasized that the Board had a fiduciary responsibility to know potential financial impacts to the utility.

Mr. Calkins commented that the report would not be a huge undertaking. He agreed that the Board should know about litigation.

Vice President Bishop asked if the report could be crafted by an EWEB staff person to save in legal fees. Mr. Calkins responded that it was the type of thing he needed to be aware of anyway and that he did not anticipate that it would be a large burden of time. He liked that it formalized the process for him.

In response to another question from Vice President Bishop, Mr. Berggren predicted the cost of the report to be between $1,000 and $2,000 per year. He added that he did not think of this as new reporting but, rather, a formalization of the process.

President Lanning commented that the Board was missing the opportunity to engage the "human risk piece." He did not feel that provision of a report on litigation would take the Board to where it needed to be, but that it was a good starting place.

Commissioner Farmer asked how many suits were currently pending. Mr. Calkins replied that there were approximately half a dozen underway.

Mr. Berggren said, as a standard practice, staff had reported truly significant litigation against the utility for years.

Mr. Berggren stated, in response to Vice President Bishop, that the first report would likely be presented to the Board in May.

• Legacy/Vision

Debra Smith, Assistant to the General Manager, explained that the Board had worked on this a couple of times. She indicated that copies of the Board ideas were encompassed in the attachment entitled Eugene Water & Electric Board - Statement of Legacy - Draft 3/30/04. She asked the Board to provide a general sense of whether it approved of the draft or edits, if necessary.

Commissioner Anderson said the list was excellent. She suggested the following change under Customer Outputs:

• EWEB provides reliable and high quality utility products.

Commissioner Anderson also submitted the following corrections or additions under Community Outputs:

• EWEB is concerned about and responsive to social issues involving the provision of energy and water services.
• EWEB provides for supports a sound economy through cost effective rates.
• EWEB is sensitive and responsive to environmental concerns recognizing a healthy eco-system is essential.

Commissioner Farmer commented that the Board had "beaten this to death already." He averred that being every one of these elements of the vision would make EWEB the perfect utility. He stressed that the legacy was what the utility wanted to be and not what it was.

Ms. Smith affirmed that the preamble explained this.

Commissioner Menegat said the legacy was what the Board would leave behind. He felt the statements were positive.

Vice President Bishop remarked that it was well-written. She questioned, however, what was intended by the statement regarding EWEB's influence on a sound economy.

Ms. Smith suggested alternative wording:

• EWEB provides a sound foundation through cost effective rates for economic vitality.

Vice President Bishop was unsure what was meant by 'cost effective.'

President Lanning commented that the legacy touched on the utility's ability to adapt and plan for the future, but thought a statement should be included on the integrated planning process. He said he would e-mail suggestions for wording to Ms. Smith.

Commissioner Farmer suggested the real value of the work was in how it was used. He recommended the Board take the legacy work out at regular intervals and determine if the work was being conducted with those goals in mind.

Ms. Smith stated that her goal was for the Board to submit further edits by email, to send out one more version of the legacy work, and then to place it on a future Consent Calendar for approval. She noted that the development of a Board manual was a goal for 2004.

REVISIONS TO DARK FIBER PRICING

Ms. Smith explained, as outlined in the memorandum entitled Revision to Dark Fiber Rates, that EWEB had been working with NoaNet, a service provider that uses fiber in the utility's fiber backbone. She said EWEB had worked with NoaNet for some time now with an approved rate structure for the use of this backbone. After more than a year working with NoaNet, EWEB had submitted many cost proposals. Ms. Smith felt the proposal was worthy to consider as the fiber would be dark if it was not used, the fiber was bundled with fiber that EWEB was using, and the operation and maintenance component was minimal. Ms. Smith recommended a change in pricing methodologies that would result in a significant reduction (35%), but NoaNet had yet to close any transactions. NoaNet asked that EWEB consider a rate reduction.

Commissioner Farmer questioned the 35 percent reduction in rates. He asked how the utility knew that it was the right amount. Ms. Smith answered that it was unknown. Commissioner Farmer was supportive of getting more revenue through increased leases, but was not ready to reduce rates without a case study to back it up.

Ms. Smith responded that Qwest, the main competitor, was bundling its services, but EWEB was wholesaling the fiber services. She likened this to an "apples to oranges" comparison. She stressed that she did not want to abandon the cost models.

Vice President Bishop indicated she had no problem with the staff proposal.

Commissioner Menegat asked if the utility would, since it was reducing rates to allow one provider to compete in the marketplace, offer the same rates to other competitors. Ms. Smith affirmed that it would. She said, in response to a second question from Commissioner Menegat, no service providers had approached the utility about utilizing its dark fiber aside from NoaNet.

Ms. Smith noted that the utility had been approached by PeaceHealth, but that staff did not want to discuss price with them until the item before the Board had been resolved.

In response to Commissioner Anderson, Ms. Smith clarified that the only component that would be taken from the price design was the capital reserve component.

Vice President Bishop moved to accept the staff recommendation to revise the Service Provider Pricing Methodology to eliminate the capital reserve component from the pricing model for dark fiber services so that the fiber mile per month rate would be reduced from $21.73 to $14.12. Commissioner Menegat provided the second.

President Lanning indicated he would support the motion. He suggested that staff take to heart Commissioner Farmer's concerns and if the revision did not open the door for other providers to utilize the dark fiber, the issue be revisited.

Commissioner Farmer expressed his opposition to the motion. He said he did not believe there was any underlying study that this was the correct price.

The motion passed, 4:1; Commissioner Farmer voting no.

ITEMS REMOVED FROM CONSENT CALENDAR

Commissioner Anderson provided the following correction to the minutes from the Special Board Meeting held on February 17:

• Page 9, paragraph 4: "...Vice President Bishop had served as Vice President in 2000 for a six month period of time."

Commissioner Anderson, seconded by Commissioner Farmer, moved to approve the minutes from the Special Board Meeting held on February 17, 2004, as amended. The motion passed unanimously, 5:0.

President Lanning adjourned the meeting at 9:28 p.m.

_____________ ______________________________________

Assistant Secretary President