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

Others present: Randy Berggren, Cathy Bloom, Marty Douglass, Jim Origliosso, Dick Varner, Tom Buckhouse, Ken Beeson, Dick Helgeson, Roseanna McArthur, Debra Smith, Laurie Muggy, Jim Wiley, Kevin Biersdorff, Nancy Cook, and Krista Hince of the EWEB staff, and Lynn Taylor, City of Eugene Minutes Recorder; and John Simpson, member of the public.

President Lanning called the regular meeting of the Eugene Water & Electric Board (EWEB) to order at 7 p.m.

AGENDA CHECK

General Manager Randy Berggren requested that Board Governance-Vison Legacy Statement be moved ahead of Employee and Retiree Benefits Request for Proposal.

Commissioner Bishop requested that Public Input be moved down on the agenda so that it occurred after 7:30 p.m. President Lanning suggested that Public Input follow Board Agendas.

The Commissioners accepted the proposed changes.

APPROVAL OF CONSENT CALENDAR

Minutes

1. Minutes of the March 16, 2004, Regular Board Meeting and the April 20, 2004, Executive Session minutes.

Business Service Agreements

2. VTCU Corporation - Willow Creek Transformer Repair - Electric Division - $46,073

3. Sun Microsystems - Hardware Support - Information Services - Corporate Services - $139,906

• Pacific Utility Equipment (Terex Utilities West) - 40 ft. Troubleshooter Bucket Truck - $68,010
• Mail-Well Envelope - Billing Envelopes - Office Systems - Corporate Services Division - $25,000
• ERMCO/c/o Hees Enterprises - Single-Phase Padmounted Transformers - Electric Division - $122,356 per year up to five years
• Industrial Safety Services, Inc. - Training - Safety Department - Corporate Services - $10,000
• Savin Corp/Novel - EWEB Local Area Network - Information Services - Corporate Services - $150,000

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

ITEMS FROM BOARD MEMBERS

Commissioner Menegat reported that he had attended a McKenzie River construction meeting on April 29, 2004, and Public Affairs Manager Marty Douglass made a presentation to approximately 20 people representing different groups and organizations. He commended Mr. Douglass' presentation on various EWEB projects and the meeting was very positive. He noted that an issue that arose during the meeting was the drastic changes in the level of Leaburg Lake. He said that a number of people had asked for specific contact information to use when concerns arose and who to contact if information needed to be provided to a commissioner. He suggested a Board assignment to cover similar meetings during the construction season and into the fall.

Vice President Bishop reported that she met with McKenzie River neighbors regarding a liaison to attend Board meetings. She said that residents were frustrated with coming to meetings and being limited to three minutes to speak and were interested in having a representative at the table. She related that she told them that a charter amendment would be necessary to add a Board member; however, having a liaison participate at some level could be discussed by the Board. She also related that residents felt there was some miscommunication regarding the recreation plan.

Vice President Bishop also reported that she had attended a NW Energy Coalition (NWEC) Board meeting in Vancouver, B.C., and that NWEC had developed a PowerPoint presentation to educate the public about the affordability and reliability of clean and renewable energy. She suggested a joint meeting between EWEB and Emerald People's Utility District's (EPUD) Board to view the presentation. She indicated that NWEC was requesting that members return the energy resolution as soon as possible. She provided a copy of the energy resolution for the Board's consideration at its next meeting.

Commissioner Farmer and Vice President Bishop asked for a briefing to inform the Board about the status of the McKenzie-Willamette Medical Center issue. Mr. Berggren replied that an Executive Session could be scheduled for that purpose.

President Lanning expressed his thanks to Vice President Bishop for chairing the last meeting and for meeting with John O'Connor, along with Commissioner Anderson, to address board ground rule issues. He also thanked John Simpson for regularly attending Board meetings and being fully engaged in the Board's activities. He reported that he and Vice President Bishop had been meeting monthly with the Integrated Electric Resource Plan (IERP) group and commended the group's efforts. He asked staff to provide an update on a meeting the next evening.

New Resources Project Manager Ken Beeson reported that EWEB had been invited to attend a meeting of the Save Our Valley Coalition at Harris Hall on May 5, 2004, to speak generally about EWEB, the Coburg project planning process, electric generation planning processes, and IERP.

Commissioner Farmer commented that the City of Eugene intended to cut its funding to the McKenzie Watershed Council and asked if action had been taken. Mr. Berggren replied that he would forward a synopsis of comments from a recent meeting.

CORRESPONDENCE

Mr. Berggren reported the following:

• The Board retreat was scheduled for Monday, May 17 and Tuesday, May 18, 2004, from noon to 5 p.m. on both days at the Hilton in downtown Eugene. He said the strategic thinking group would also participate in a portion of the meeting.
• The American Public Power Association conference was scheduled for June 19-23, 2004, in Seattle and asked Commissioners to let staff know if they were interested in attending.
• EWEB's credit union was having its 50^th anniversary and annual meeting at the Valley River Center on May 21, 2004.

BOARD AGENDAS

Mr. Berggren said there were no outstanding background memoranda identified. He said that the issue of a policy on light was on hold pending further direction from Vice President Bishop. He said the "Energy Matters" resolution could be added to a future agenda as an action if that was the Board's wish.

President Lanning said the Commissioners could review the Resolution at its next meeting and decide if it should be addressed as a Board issue; if so, it could be placed on a future agenda.

Mr. Berggren listed the following items for the May 18, 2004, meeting:

• A Governance session on the relationship with the Eugene City Council during a work session
• A return on a low-income process improvement
• A placeholder for the Benefits Request for Proposal (RFP) in case the Board determined further action was necessary

Mr. Berggren noted that May 18 was Election Day and there was a Board retreat earlier in the day and asked if the Commissioners wished to start its meeting earlier or reschedule it to another date.

President Lanning determined it was the consensus of the Commissioners to tentatively reschedule the meeting to May 25, 2004, at 5:30 p.m.

President Lanning called for a five minute break to allow time for people to arrive for the public input section of the agenda.

PUBLIC INPUT

President Lanning explained the procedures for public comments.

Nancy J. Cook, 1415 Barton Street, Eugene. The following is her testimony in its entirety:

"I am an EWEB employee and Customers. Thank you for giving me an opportunity to speak to you tonight. I want to address concerns about the Benefits Project Team's proposal on the agenda for tonight.

"I realize and appreciate the national healthcare crisis and the hard work and efforts that our benefits committee has dealt with over the last few years. There are no easy answers, but I feel the need to bring awareness to a reality that may not have been recognized and addressed.

"The proposal indicates a $150 individual In-Network deductible, (which is $300 for a family). This is unreasonable for employees who earn less than the EWEB median pay. As an alternative, I'd like to suggest a slightly higher monthly premium than currently proposed to help lower these deductibles and assist employees, particularly those in lower pay brackets. Or is it possible for EWEB to consider a premium based on a percentage of an employee's salary?

"The maximum out of pocket, in-network ($3,000 individual and $6,000 for family) will also have a serious detrimental effect on many EWEB employees. EWEB's reputation for good benefits and salaries for all employees has long been recognized in our community. However, this reputation as an employer of choice faces major challenges when some of it's employees may pay 20% or more of the "after" tax salary for healthcare.

"For example, in Customer service a new employee with a domestic partner/spouse making $30,000 before taxes would qualify for government financial assistance programs if forced to pay EWEB's out of pocket health care expenses as currently proposed. Given the announced downward trend of Customer Service Department salaries, even with out existing healthcare plan, some EWEB employees qualify TODAY for government low-income programs, including EWEB's Energy Share.

"EWEB's decision to use a market-based salary structure, while simultaneously raising healthcare costs, jeopardizes our reputation as a caring and concerned community employer. Customer Service Department employees, whose pay ranges have already been reduced by the market, now face escalating healthcare costs, and are trapped with no hope of even a cost of living adjustment to offset expenses.

"Again, I thank you for your time and ask that you consider these comments and concerns in your decision."

Lisa Arkin, 29136 Gimple Hill Road, Eugene, spoke on behalf of the Save Our Valley Coalition to voice concerns over Black Hills Corporation's application to site a 900-megawatt facility north of Eugene. She thanked EWEB for agreeing to speak at the Harris Hall meeting the following evening. She requested additional research by the Commissioners and staff and a 20-minute time slot on a future agenda for the coalition to make a presentation to the Board. She listed some of the coalition's concerns as particulate matter, federal air quality standards that were not consistent with current knowledge on health impacts of fine particulate inhalation, and a significant association between exposure to fine particles and premature death. She noted that EWEB was a proponent of sustainable and renewable energy sources and asked what was sustainable about importing fossil fuel from Canada, burning it in Lane County, and supplying electrical resources to other communities up and down the West Coast. She said there were a number of other questions the coalition had about the potential impact of the Coburg proposed facility and looked forward to discussing those with the Board.

BOARD GOVERNANCE -- VISION LEGACY STATEMENT

Debra Smith, Assistant to the General Manager, referred to the document Eugene Water & Electric Board: Statement of Legacy - Draft 4/30/04, which had been provided to Commissioners. She said the document incorporated comments received from Commissioners and pointed out the substitution of the phrase "fiscally prudent" for "cost effective" in the Community Output section.

Vice President Bishop commented that the latest version accurately reflected the Commissioners' direction and contained the elements the Commissioners wished to express. She said that the statement could be reviewed and updated annually.

Commissioner Menegat agreed with Vice President Bishop's assessment and expressed his appreciation for the contributions of Commissioners and efforts of staff.

Commissioner Farmer asked if there would be a mechanism in place to measure progress toward the vision and suggested that could be included in the Commissioners' goal planning session. Ms. Smith replied that development of performance measurements had been discussed and she invited suggestions from the Board. She agreed it was important to measure how well EWEB was progressing toward the destination defined by its vision.

President Lanning thanked staff for their work on the legacy statement and noted that it supported the Commissioners' work at a policy level.

Commissioner Menegat, seconded by Vice President Bishop, moved adoption of the Statement of Legacy. The motion passed unanimously, 4:0.

EMPLOYEE AND RETIREE BENEFITS REQUEST FOR PROPOSAL (RFP)

Mr. Berggren introduced the item and commented that time had been scheduled for another meeting to do further evaluation or answer questions if necessary; however, it was staff's preference because of the short time line for issuing an RFP, reviewing responses, carrier selection and approval, to obtain general agreement from the Commissioners in support of the technical content of the proposed RFP. He said that earlier comments from Nancy Cook addressed the issue of affordability with which the project team had struggled in their efforts to find a balance between that and financial implications.

Benefits Change Project Manager Laurie Muggy thanked the members of the project team and introduced Teri Venezia of AON Consulting, which had assisted the team in understanding utilization and experience data, identifying flaws in the current plan design, and improving the RFP to elicit better responses from providers.

Ms. Muggy stated that in January 2004 EWEB's health plan renewal experienced a 37 percent increase in costs although no changes to benefits were made, and another 30 percent increase for renewal was predicted for 2005. She said that the current plan design needed to be revised in order to continue to provide quality services to employees and to attract bids from carriers. She listed the three primary issues with which the project team was concerned:

• affordability - cost to employees and retirees of premiums and out-of-pocket expenses,
• budget and pro-forma - cost to EWEB, and
• comparability with other public organizations and utilities - plan design, total premium paid on behalf of employees, cost-sharing with employees.

Ms. Muggy reviewed the information in the handout 2004 Benefits Change Project and used a slide presentation to illustrate her points. She explained the options, which included a low option, mid-option, and high option and reviewed the plan design elements for each option. She said that co-pay related to an actual dollar amount and co-insurance related to a percentage of the cost of a service; co-insurance encouraged employees to become wiser consumers.

Ms. Muggy said that the recommendation from the project team to the Executive Management Team (EMT) was the mid-option and provided a comparison among all three options and the current plan. She noted that 85 percent of members currently had services rendered in-network.

Ms. Muggy used utilization data to develop "average" and "worst case" scenarios to illustrate the affordability of options and the current plan and responded to questions from Commissioners.

In response to questions from Commissioners, Ms. Venezia said that the reluctance of carriers to bid on EWEB's plan was primarily due to the demographics of the member population with approximately 20 percent of members on the plan between the ages of 55 and 65. She said that an analysis of another employer's plan indicated that 164 out of 8,000 members fit the "worst case" scenario by meeting the maximum out-of-pocket expenses. She said that typically 20 percent of the members of a plan incurred 80 percent of the costs. She said that none of the public sector employers with whom she was familiar provided any type of self-insured safety net for employees.

Continuing, Ms. Muggy reviewed the impact of options on premiums for the three tiers of retirees and noted any increase more than 12 percent (which is EWEB's cap) would be passed on to the retirees. She also reviewed the budget and comparability analyses of the options and current plan. She indicated that the comparability analysis considered the plan design, premium cost sharing, and total value of benefits.

Ms. Muggy said that the project team had met with the Employee Input Group (EIG) to inform them about the issues, share the options, and the project team's recommendation of the mid-option. In response to a question about which option they would choose, she said that one out of eight chose the low option, five out of eight chose the mid-option, and two out of eight preferred the current plan, plus 30 percent. She said a common theme of concern was that the in-network provider panel be a comprehensive list that provided a selection of physicians that would not force members to go out of network. She said the RFP process would include an assessment of the provider panels that bidding carriers offered. She said that meetings with employees indicated no strong support either way, with as many positive comments as negative. She indicated that the EIG included a representative from the lower pay range.

Ms. Muggy explained the other change recommendations:

• Prescription drug - removal of $2,500 maximum out of pocket, reduction in pharmacy selection
• Vision - priced as a part of medical plan
• Specialized medical case management - health risk appraisals, member education, patient advocacy
• Premium cost sharing - may be explored following the results of the RFP

Ms. Muggy listed the reasons for recommending the mid-option, which included many members may experience lower costs, lower financial risk to members under "worst case" scenario, closest to meeting the pro-forma of 17 percent, maintained comparability, and greater long-term plan design stability. She reviewed the timeline for carrier selection and implementation September 1, 2004, based on a May 28, 2004 release of the RFP.

Commissioner Menegat asked how much an employee would spend in a catastrophic health event. Ms. Venezia said there were a number of variables and staff would need to calculate those figures and provide them to the Commissioners. She noted that a very small percentage of the population would ever experience the "worst case" scenario and very rare that several members of a family would experience severe health problems in a year.

Vice President Bishop asked for a definition of specialized medical case management. Ms. Muggy explained that in the current plan there were nurse case managers that identified high cost claim members and worked with them to assure they received adequate care. She said the case managers were employed by the carrier and did consider least costly alternatives. She said that employee feedback on the case managers was extremely positive and case managers assisted members with claims, obtaining second opinions, review physician recommendations, and provide educational materials about specific health concerns. She said the cost of $4.25 per employee per month was embedded in current premiums.

Vice President Bishop urged that diversity of choice in pharmacies not be sacrificed in the search for lower costs.

Responding to a question from Commissioner Farmer, Ms. Muggy said that one cost-sharing strategy could have individual employees only pay a portion of the premium to help offset the costs paid by two-party and families paid.

Commissioner Farmer asked how implementation of a new plan would fit with a union agreement. Mr. Berggren said that conceivably there would be two different plans as the union would have to approve changes in the plan.

Vice President Bishop asked what percentage of employees triggered the full deductible in previous years and referred to concerns expressed during Public Input by Ms. Cook that some employees could pay 20 percent of their after-tax income for health care. Ms. Muggy replied that there were very few as 85 percent of members had services rendered in-network. She said she understood Ms. Cook's concerns related to co-insurance and amount paid out of pocket would depend on the member's utilization of the plan. She mentioned that employees had the option of putting money aside pre-tax in a flexible spending to help cover health care expenses.

Vice President Bishop asked if a dual system could be established to offer employees a choice between higher premiums or higher deductibles. Ms. Muggy said that under Phase 2 of the project those types of plans and options would be examined.

Commissioner Menegat thanked the project team for their work. He said the Commissioners were facing substantial fiscal decisions, including the increasing cost of health insurance. He said the education component of a new plan and helping people become wiser consumers was critical and the responsibility of EWEB as the employer. He said he would support the project team's recommendation.

Commissioner Farmer said he also would support the recommendation, but wanted to see additional information on the financial impact on employees.

President Lanning thanked the EIG for their participation in the project and Ms. Muggy for her efforts.

ITEMS REMOVED FROM THE CONSENT CALENDAR

There were no items removed from the Consent Calendar.

President Lanning adjourned the meeting at 9:35 p.m.

_____________ ______________________________________

Assistant Secretary President