9/7/04

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

Others Present: Randy Berggren, Debra Smith, Dick Varner, Dick Helgeson, Lance Robertson, John Yanov, Marty Douglass, Jim Wiley, Mel Damewood, Mark Oberle, and Krista Hince of the EWEB staff; Ruth Atcherson, Minutes Recorder for the City of Eugene; and John Simpson, Commissioner-elect.

President Lanning called the Regular Board Meeting of the Eugene Water & Electric Board (EWEB) to order at 7:35 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 July 20, 2004, Special Board Meeting and the August 5, 2004, Special Board Meeting.

Business Service Agreements

2. Rose Logging, Inc. - Leaburg/Walterville Canal Mowing - Electric Division - $39,810

3. Pacific Northwest International Trucks, LLC - International 2 Axle Tool Truck - Shop - Corporate Services - $130,850

4. G. Cole Inc. - Asphalt Concrete Patching Services - Construction - Water & Steam Divisions - $329,330 annually, up to five one year periods

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 attended the McKenzie River Valley meeting and it had been quiet and productive. He said the agenda was open to what those present chose to discuss and it had gone very well.

Commissioner Menegat related that he and Mr. Simpson had been given a tour of the water facilities.

Additionally, Commissioner Menegat reported that he attended the quarterly meeting of the Western Generation Agency (WGA), the utility's co-generation involvement.

Commissioner Anderson said State Representative Vicki Walker had indicated that she had received a complaint from a constituent regarding the deposit policy. She asked staff to verify whether or not the policy was such that a deposit would not be automatically returned to a customer. General Manager Berggren indicated he would provide that information.

President Lanning announced that he had been given the position of Instructional Vice President at Lane Community College.

President Lanning said it had become apparent to him that the EWEB Board Room did not have adequate access for media. He asked if staff could look into provision of better facilities for television and radio reporting.

CORRESPONDENCE

Mr. Berggren reported the following:

Assistant Secretary Krista Hince sent an email asking about potential dates for a special board meeting. Mr. Berggren thought it would be scheduled for either September 13 or 15.
Ms. Hince also sent out a calendar with the dates Board members had indicated they were able to attend.
The major customer meeting was scheduled for October 14. Steve Wright, Administrator for the Bonneville Power Administration (BPA) was scheduled to speak.
The Board had been notified that EWEB had ranked #1 in water quality out of 712 utilities in the nation in the Organic Style magazine.
He noted that the Board had been sent an invitation to the ground-breaking ceremony for the new nodal-type development that Arlie and Company was constructing.
Staff was continuing to look for a date in the latter part of October for a budget workshop.
A tour of the Carmen-Smith facilities for all of the non-governmental organizations, special interest groups, and the public was scheduled for September 24. The Board was invited to attend.

BOARD AGENDAS

Mr. Berggren reviewed the Eugene Water & Electric Board Agenda Report dated September 7, 2004. He said there were no outstanding backgrounders at this point and the Board continued to have the same set of pending, potential future agenda items, all non-critical. He highlighted the agendas for the next month.

Fall Rate Proposal

Senior Rate/Financial Analyst John Yanov outlined the November 2004 Electric Rate Proposal with power points. He explained that the utility sought to accumulate approximately $13.2 million in reserve to cover one year of operation should the stream flows be even lower than they are.

In response to a question from Commissioner Farmer, Fiscal Services Supervisor Dick Varner affirmed that after two years of water flows at 85 percent of normal, the reserve would reach $13.2 million. Commissioner Farmer asked if he could be assured that this money would not be siphoned away to meet another financial need. Mr. Varner replied that there was potential that, if the utility was not adequately hedged, there would be a decline in wholesale power costs. He thought enough money was provided in the forecast. He indicated he would not advise hedging farther in to the future than the utility already had.

Commissioner Farmer asked how much would accrue in the reserve fund with the rate increase if the utility experienced a normal water year. Mr. Varner responded that it level would hit $20 or $30 million.

In response to a question from Commissioner Menegat, Mr. Varner said based on Board directives to staff in the financial policies, staff would look at what the projected net from wholesale/retail sales less power costs. He stated that to the extent there was any surplus there, it would first go into the power operating reserve and, when that reserve was full, the Board could choose whether to put more into that reserve or a different one. He added that staff was working under the assumption that the utility was operating under the current policy which dictated that any surpluses in the contribution margin go first to the power operating reserve and then, once the reserve is at the target level, it was the Board's discretion as to what to do with the excess. He predicted that the power operating reserve could be met with one normal hydro year.

President Lanning expressed concern that the response from the public was weak. He wondered how the process to publicize hearings such as the one the Board was about to undertake could be improved. Marty Douglass, Public Affairs Manager, responded that the first thing to check was how the present meeting would be reflected in the Register-Guard on the following day. President Lanning asked Mr. Douglass to clarify the information reported in the newspaper over the weekend. Mr. Douglass replied that a reading of the article would lead one to believe that, should the surcharge come off, it would be in the range of five to four percent and the difference would be what the utility would be dealing with. He stated that the article overlooked the rate increase, which amounted to a greater percentage increase than the surcharge.

PUBLIC HEARING ON FALL RATE PROPOSAL

President Lanning opened the public hearing and explained the procedure for giving testimony.

Jim Seaberry, EWEB Customer, asserted that the rate increase needed to be clarified in the newspaper. He asked if EWEB's "good risk management" had lost $30 million in reserves. He wondered if the loss had resulted from trading. He said rates were going up even though people were conserving energy and more wind power facilities and other renewable resources were available. He reminded the Board that EWEB had indicated these things would keep the rates down. He opined that people, especially senior citizens, could not take another increase. He felt the increase in utility rates was one of the reasons more people were falling into poverty.

George Binke, EWEB Customer, said he was neither for nor against the increase. He noted that under revenue requirements, the information provided seemed to indicate that wholesale revenue was declining. He wondered if the utility thought there would be no new business in the community.

Mr. Binke pointed out that bills were sent out of State because it saved money. He suggested that management could move out of State, too, that the utility could save money with oversight from Seattle, for instance. He did not think that the jobs involved with billing should have been shipped out of State. He opposed outsourcing.

Mr. Binke asked what was going to happen when EWEB moved to a new location. He noted that when he constructed his building it was with the understanding that the heating units would be designed for easy conversion to natural gas or fuel oil as the steam generation plant would be shut down when EWEB moved. He wondered how much auxiliary generation of electricity would be lost when the plant was decommissioned.

Bob Cassidy expressed appreciation for the comments made about outsourcing the billing process. Mr. Cassidy supported having tiered rates, but questioned the lack of uniformity in the metric for the increase between tiers. He asked if this was a policy decision made by the Board.

Mr. Berggren responded that this was a rate proposal and the Board could choose to modify it.

Continuing, Mr. Cassidy said he preferred to see the increase be even across the board, or perhaps, a higher increase should be incurred to those with higher energy usage.

Commissioner Anderson commented that she wished the Federal Energy Regulatory Commission (FERC) could have heard some of the testimony. She stated that it was not that EWEB had bad risk management, but that the utility had been lied to by FERC. She said FERC had indicated it would absolutely not cap the rates back when buying power was extremely high. She related that the utility purchased power contracts and FERC then capped rates, leaving EWEB and other utilities in an uncompromising position.

President Lanning closed the public hearing.

ALTERNATE SITE ACQUISITION

Mr. Berggren recapped the Board's conversation regarding the tour of potential sites for the relocation of part or all of the facilities. He said staff answered the Board's questions in the memorandum included in the agenda packet entitled Potential Headquarter Site Comparisons. He hoped to get thoughts and feedback from the Board in order to continue pursuing options for alternate sites. He noted that staff had been "scrambling" to determine, should the appropriate site be located, how the purchase and its attendant studies would be funded.

Mr. Berggren was uncertain how to establish what the real relocation costs were. He said the proxy, at $38.5 million, had been staff's best estimate thus far. He noted it included a 35 percent contingency, but that it was not at the engineering level of accuracy. He stated that a copy of the most recent offer from McKenzie-Willamette/Triad offer had been sent to the Board, but he wanted the primary discussion for the present meeting to be on alternate site acquisition.

Commissioner Menegat felt there were a "great number of unknowns." He underscored that the Board was making a decision on a piece of property the utility would be located on for 50 years and more. He expressed concern regarding the funding mechanism. He questioned whether the utility could make the properties "shovel ready" before the contract expired.

Commissioner Menegat expressed a preference for the combination of sites 2 and 3. He thought it would make beautiful campus for the utility. He said he returned to site 6 and felt it posed interesting possibilities.

Commissioner Anderson did not like any of the sites. She recommended the Clear Lake Road site be forgotten. She preferred the Green Hill Road site, as the administration and the operations could both be there. However, she was uncertain that the administration should be moved away from the central area of the City.

Commissioner Farmer pointed out that the Board made a decision to move prior to Triad's interest in the current property. He stressed that, regardless of the end result of negotiations with the hospital, EWEB needed to continue looking for a piece of ground and land availability was only going to worsen.

Regarding alternate sites, Commissioner Farmer agreed with Commissioner Anderson regarding the Clear Lake Road site. However, he felt that, should the utility not come to an agreement with the hospital, the Board should continue to look at the Clear Lake Road site as it was only a matter of time before the urban growth boundary (UGB) was moved beyond that point. He recommended that if the hospital did buy the EWEB property the Clear Lake Road site be "taken off the table." In that event, he preferred the Roosevelt Boulevard site.

President Lanning agreed with the comments of the other Commissioners. He expressed his preference for the Roosevelt Boulevard site. He agreed that the process began prior to the hospital's interest in the present site. He thought the utility needed to continue to look at options. He recalled that the utility had sought to maintain a downtown presence. He was unclear as to what the best option was, given the current situation. He thought, should the Triad situation fall through, the Clear Lake Road could be his top choice.

Mr. Berggren said the input would help staff determine which sites to further investigate.

Commissioner Anderson agreed that being at the edge of town was "not great." She said the Roosevelt Boulevard site would be her choice, should the utility not sell its current site to McKenzie-Willamette/Triad Hospital.

Mr. Berggren said the Triad offer would be discussed at the next meeting.

In closing, Commissioner Farmer asked to include development of a Board policy for responding to public hearing testimony in the governance work.

President Lanning adjourned the meeting at 8:52 p.m.

_____________ ______________________________________

Assistant Secretary President