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

Others present: Randy Berggren, Ken Beeson, Tom Buckhouse, Dick Varner, Jim Origliosso, Bill Fletcher, Mel Damewood, Marc Anderson, Debra Smith, Scott Spettel, Lance Robertsopn, Roseanna McArthur, Jim Wiley, and Krista Hince of the EWEB Staff; and Joe Sams, City of Eugene Minutes Recorder.

Commissioner Lanning called the Regular Board Meeting to order at 7:35 p.m.

AGENDA CHECK

There were no changes to the agenda.

APPROVAL OF CONSENT CALENDAR

Minutes

1. Minutes of the July 1, 2003 Work Session and Regular Board Meeting

Public Agency Network Budget

• Adoption of Public Agency Network (PAN) Budget for 7/1/03-6/30/04 - revenues and costs totaling $109,848

Business Service Agreements

• RAC Timber & Excavating - Leaburg-Walterville Power Canal Maintenance - Electric Division - $180,675
• Denslow Repair & Service Center (R&SC) - Leaburg Tailrace Barrier - Electric Division - $102,335

Vice President Farmer, seconded by Commissioner Menegat, moved to approve the items on the Consent Calendar.

Commissioner Anderson pulled the minutes of the July 1, 2003 Work Session.

Commissioner Bishop pulled July 1, 2003 Regular Board Meeting minutes

The remaining items on the Consent Calendar passed unanimously.

ITEMS FROM BOARD MEMBERS

Commissioner Bishop noted there was a meeting in Leaburg dealing with EWEB issues. She noted that she could not be present and urged another Commissioner to attend. She said the meeting would start at 7 p.m.

Vice President Farmer said he would attend the meeting.

Vice President Farmer said he had received four phone calls regarding the utility selling water in certain locations. He called for a future agenda item on how to deal with constituent questions and how to involve staff.

Mr. Berggren noted that the subject would be coming up at the next Governance meeting.

President Lanning said he would be absent from the August 19, meeting.

President Lanning welcomed Mel Menegat to the Board and thanked him for being willing to work for the community.

CORRESPONDENCE

General Manager Randy Berggren noted that the Lane County Fair was coming up the next week. He said there would be opportunities for Commissioners to serve in EWEB's booth.

Mr. Berggren noted the EWEB picnic would be held at Alton Baker Park on August 23. He noted the change in parks due to the construction being conducted up river.

Mr. Berggren noted that a memo had been sent out on the Carmen Smith Emergency Action Plan. He added that a second memo had been sent out on the Carmen Smith relicensing issue.

Mr. Berggren noted that lightning strikes that morning had caused a power outage for approximately 2,500 customers. He noted that 1,500 had only had momentary outages. He said all power was restored by mid-afternoon.

Mr. Berggren noted that water demand had been high over the previous week.

In response to a question from Commissioner Bishop regarding whether there would be any challenges to the Carmen Smith relicensing, Mr. Berggren said he was not expecting any challenges but noted that it was always possible.

Mr. Wiley added that questions and concerns would come out after the report was issued.

BOARD AGENDAS

Mr. Berggren noted that Krista Hince, Assistant Secretary, had distributed projected agendas until the end of 2003. He said this was in response to the discussion at the July 28, and July 29, 2003 Board Retreat. He said he would work on more specificity as time went on.

Mr. Berggren said the August 19, 2003, Board meeting would have an Executive Session on union issues.

Vice President Farmer expressed a preference to see an ongoing agenda item for Board Governance issues.

In response to a question from Mr. Berggren regarding whether additional time should be added to meetings to accommodate that item or whether already scheduled items should be rescheduled, Vice President Farmer suggested that staff presentations with no Board action scheduled should rely on written background information and have a short time scheduled for questions from Commissioners.

In response to a question from President Lanning regarding whether he should plan agendas with Mr. Berggren and not take Board meeting time to address the issue, there was general consensus that he could plan agenda items outside of meeting times.

PUBLIC INPUT

There were no members of the public wishing to speak.

WANAPA DEVELOPMENT

Ken Beeson, Energy Resource Project Manager, Scott Spettel, Power Management and Planning Manager, and Jim Origliosso, Treasurer, provided a power point presentation on the Wanapa Energy Center. The presentation included a project overview and status check, a transmission financing proposal, an agency formation schedule, project development budget status, and a project schedule review.

Mr. Beeson said his focus would be on the transmission funding proposal. He said the project was a natural gas fired combustion turbine in eastern Oregon. He said the development partner was Diamond Generation Corporation which was a subsidiary of Mitsubishi. He said the project was being permitted at a 1200 megawatt size. He said permitting for the project was underway and would be completed in March, 2004. He said the focus of the project in the last few months had been getting the transmission capacity in place and finding buyers for the output of the project.

Mr. Beeson said staff had been working with Bonneville on financing the construction of transmission capacity. He said arrangements had been reached in the last month. He said EWEB and the Wanapa participants would form an intergovernmental agency, under ORS 190, for the purpose of providing the financing for the new line. He said the agency would issue non-recourse debt back to EWEB which would be turned over to Bonneville to build the line. He said the agency would purchase transmission service from Bonneville on a long term basis and receive rights to transmission credits from Bonneville.

In response to a question from Vice President Farmer regarding whether there was recourse back to the line users, Mr. Spettel said there would be no recourse to line users but there would be to revenues generated from their generation contracts.

In response to a question from Vice President Farmer regarding what would happen if someone defaulted, Mr. Spettel said the security would be revenues from transmission use in addition to any reserve funds available from the project.

Mr. Spettel said the transmission was a major upgrade for the area. He said EWEB's role would be as a load serving entity. He said the transmission path was a catalyst for wind generation to access the grid. He added that Wanapa had a great natural gas and water infrastructure.

Mr. Spettel said the construction bond amount would be approximately $160 million. He said the annual bond payment would be approximately $14 million per year and for coverage the contract would need to bring in $22 million per year. He said for this to be achieved, 1,800 megawatts of new subscription would be needed. He noted that some of this had already been accounted for. He said meetings were being set up to finalize those subscriptions.

In response to a question from Vice President Farmer regarding whether BPA was prohibited from entering into this type of agreement, Mr. Spettel said BPA had determined that they did not need more capability for their reliability/interests. He noted that this could change and said, if BPA decided to change their mind, it could fund its share directly or participate in the agency process as an "anchor tenant." He said staff would prefer the latter outcome.

In response to a question from Vice President Farmer regarding how long usage contracts would last, Mr. Beeson said the contracts would last the length of the bond.

Vice President Farmer raised concern over the financial stability of the parties signing the contracts. He said if there was no recourse to their assets then there would be no security unless their share was sold to another party.

Mr. Beeson said the Wanapa project had been tied to the formation of the Western Transmission Association (WTA) and had been divided into a series of stages. He said the first stage was to see if the project was financially viable. He stressed that there had to be a certain level of certainty before moving forward to the formation stage. He said the formation stage would have $150,000 in legal fees that would be split between the four partner agencies. He said the focus was on feasibility at the current point.

In response to a question from Vice President Farmer regarding when the bond issuance would occur, Mr. Origliosso said it would happen in October of 2004.

In response to a question from Commissioner Anderson regarding a scheduled public meeting held at the end of July, Mr. Beeson said basic attendance had been from interested agencies and not from the general public.

In response to a question from Commissioner Anderson regarding environmental mitigation and whether there had been any public meetings on the issue, Mr. Beeson said the agencies had held a public meeting in late July and had not gotten much attendance.

In response to a question from Commissioner Bishop regarding whether the confederated tribes would still pay legal fees if they were not part of the "190 entity agreement," Mr. Origliosso noted that the confederated tribes could legally be part of the agreement but had expressed a willingness to pay their share of legal fees.

GENERATION BUDGET ASSUMPTION

Fiscal Services Supervisor Dick Varner provide an overhead presentation on the general budget assumption for 2003. The presentation included information on current assumptions, variations in generation, financial rules of thumb, Pros & Cons, and suggested topics of Board discussion.

Mr. Varner said the difference between a critical year and a median year was 650,000 megawatt hours with a potential $20 million in financial impact. He noted this was the single biggest financial risk area for the utility. He said bond rating agencies were suggesting that the utility be more conservative in its financial assumptions.

In response to a question from President Lanning regarding whether there was a correlation between use and generation , Mr. Varner said there was not a strong correlation. He said what was more problematic was lack of foreknowledge of wholesale prices.

Commissioner Anderson expressed a desire to move forward without having to raise rates.

In response to a question from President Lanning regarding financial impacts based on the utility's bond rating, Mr. Varner said there were two impacts. The first would be interest paid on borrowed money and the other was how other agencies perceived the utility's credit worthiness under it bond rating and whether they would continue to do business on an unsecured basis.

Vice President Farmer said bond rating agencies were not his biggest concern. He stressed that the biggest risk to the utility was the current lack of financial reserves.

Commissioner Bishop said the utility could no longer afford to absorb costs without raising rates. She raised concern that doing so would seriously harm the organization over the long term.

Vice President Farmer said a more conservative approach did not have to be a long term policy. He said building up financial reserves would allow the utility to be less conservative in its future assumptions.

In response to a question from Vice President Farmer regarding how long it would take to build financial reserves if the surcharge were maintained, President Lanning said he recalled comments made when the surcharge was established that it would be used to build reserves to $10 million and pay off its debt. Mr. Varner noted that, in the current market, $10 million was not a big enough reserve and suggested reconsidering that amount.

Commissioner Bishop stressed the importance of the Board keeping its promise to its rate payers by getting rid of the surcharge when it said it would.

ITEMS REMOVED FROM THE CONSENT CALENDAR

Commissioner Anderson noted that she was present for the July 1, Work Session.

Commissioner Bishop submitted written corrections to the Work Session minutes and suggested a minor change in the Regular Board Meeting minutes.

Commissioner Anderson, seconded by Vice President Farmer moved to approve the July 1, 2003 minutes as amended. The motion passed unanimously.

The meeting adjourned at 9:30 p.m.

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Assistant Secretary President