EUGENE WATER & ELECTRIC BOARD
REGULAR BOARD MEETING
EWEB BOARD ROOM
OCTOBER 5, 2004
7:30 P.M.
Board Members present: Patrick Lanning, Sandra Bishop, Dorothy Anderson, Mel Menegat, and Ron Farmer.
Others present: Randy Berggren, Debra Smith, John Yanov, Dick Helgeson, Ken Beeson, Dick Varner Lance Robertson, Marty Douglass, Jim Wiley, Tom Buckhouse, and Krista Hince of the EWEB staff; John Simpson, Commissioner-elect; Frank Nearing, KLCC; Joe Harwood, representing the Register Guard; Jody Unruh, KVAL; Ruth Atcherson, minutes recorder for the City of Eugene; and members of the public.
AGENDA CHECK
There were no changes to the agenda.
APPROVAL OF CONSENT CALENDAR
Minutes
1. July 14, 2004, Board Planning Session.
Business Service Agreements
Notice of Noncompliance and Cease and Desist Orders
Vice President Bishop pulled Item 4.
Commissioner Menegat, seconded by Commissioner Farmer, moved to approve the Consent Calendar with the exception of Item 4. The motion passed unanimously, 5:0.
ITEMS FROM BOARD MEMBERS
Commissioner Menegat reported that the McKenzie Construction meeting had been held on September 23. He shared that the group had been concerned, but cooperative. He said people were informed about what was happening and chiefly worried about the Leaburg Lake raise. He related that Gale Banry provided a report on the chevrons at Walterville. He noted that some citizens had expressed concern about erosion at the bend in the river and staff responded to their concerns. He said, while the residents were not satisfied, they at least understood EWEB's position. He thought it had been presented it very well.
Commissioner Menegat reported on the subcommittee on the General Manager evaluation, which met on September 24. He stated that Commissioner Farmer and Human Resource director Jean Meyers met and discussed and assessed the performance evaluation process and format. He thought the subcommittee would recommend adoption of scoring in increments, i.e. 1, 1.25, 1.5, 1.75 etc. He said there had been some question as to whether the operational performance measured should be weighted individually. He noted that there had been concern regarding the rate proposal and how that would affect the performance evaluation for 2004. He related that the subcommittee determined that it would not affect it because it was happening at the end of the year. He also noted that the discussion had touched upon whether the salary range for the General Manager should be constructed, adding that the General Manager's employment contract was up in January, 2006. The subcommittee was scheduled to meet again on October 14.
Continuing, Commissioner Menegat stated that the Carmen Smith tour took place on September 24. Though he had not been able to attend, he reported on John Simpson's behalf that it had been a beautiful day and a successful tour.
Commissioner Anderson ascertained that all of the Commissioners had received a letter from the Springfield schools regarding the Web education project.
Commissioner Anderson complimented Mr. Beeson and Mr. Helgeson for their comments on the Bonneville Power Administration (BPA).
Vice President Bishop reported that she and Deborah Brewer had attended a day-long sustainability training conference on September 23rd. She noted that mayors from Boulder and Fort Collins, Colorado, from Olympia, Washington and from Vermont had been presenters. She was pleased to participate as a Commissioner from EWEB.
Vice President Bishop indicated she would be attending the large customer luncheon and encouraged other Commissioners to attend.
Commissioner Farmer stated that he would not be able to attend the EWEB meeting of October 19.
Commissioner Farmer conveyed his distress at the recent letter from a local small business person regarding the deposit policy. He asked that the policy be placed back on the agenda for further discussion. Mr. Berggren commented that some specific details had been left out of the letter.
Commissioner Farmer reported that he had spent the day with the national head of the Bureau of Land Management (BLM). He related that she spoke of reading an article on the water quality of EWEB.
President Lanning noted that he served as a representative on the Lane Council of Governments (LCOG) and that LCOG would be reviewing public infrastructure in January. He felt it would be appropriate for EWEB to host that meeting.
President Lanning said the question had been raised regarding the artwork at the Walterville facility and whether it would be maintained as part of the Federal Energy Regulatory Commission (FERC) relicensing process. He related that staff had indicated that it was not part of that process. He thought the question might come up again.
President Lanning also wished to thank Mr. Robertson and Mr. Douglass for ensuring that the Board received copies of all of the written and email input regarding the rate increase.
PUBLIC INPUT
Doug Newton, 147 Cross Place, urged EWEB not to "give property away" to McKenzie-Willamette/Triad Hospital. He opined that EWEB's only mission was to provide low-cost electricity and water to the City's residents and not to participate in the City's poor urban planning. He asserted that $22.5 million was what it cost for improvements to this site in the late 1980s, approximately what Triad had offered. He suggested that the EWEB Board and staff should talk with residents of the City of Roseburg regarding its experience with Triad. He stressed that EWEB should not allow itself to be pressured by the City and The Register Guard into a "boondoggle."
Ed Pliml, 1012 West 4th Avenue, Apartment 2, noted he had spoken to the Board a couple of months earlier regarding his inability to pay a utility bill. He said he had been trying to pay his bills, but was struggling and was now faced with a shut-off order. He asked for Board help.
Zachary Vishanoff, Patterson Street, felt not enough public involvement had been solicited in the site planning. He suggested the EWEB site be turned into a natural history museum. He feared that the riverfront would become governed by homeland security issues should a hospital be sited there, resulting in eventual patrols by small, unmanned aircraft. He thought this area could become a high profile target, given the research he alleged was happening in the Riverfront Research Park. He provided a 32 page report to the Board on nanotechnology and encouraged EWEB to work with the Toxics Board to regulate nanotechnology.
CORRESPONDENCE
General Manager Randy Berggren reported the following:
BOARD AGENDAS
Mr. Berggren provided a brief overview of the coming Board agendas.
President Lanning asked if the Board could agree to meet on November 1, given that November 2 was Election Night. The Commissioners indicated they were amenable to the change.
Mr. Berggren thought it likely that a reimbursement resolution would be placed on the Consent Calendar in order to get the financing for alternate site acquisition in place. He stressed that it would simply document the utility's intent to reimburse itself from its bonding authority.
Vice President Bishop requested that items regarding the Master Plan or the acquisition of property not be placed on the Consent Calendar. Mr. Berggren agreed to place those sorts of things on the regular agenda, but added that it would extend the length of the meeting. Vice President Bishop felt it was a misuse of the Consent Calendar.
Vice President Bishop noted that under the items to be added to future Board agendas that the item on the potential conversion of the Steam Generation Plant into a museum had been pending for some time. She wanted to place it on an agenda. President Lanning responded that he and Mr. Berggren had looked at this item and had wanted to discuss this when there were not other pressing issues to address.
Mr. Berggren reminded her that the item had yet to be voted on as an agenda item. He noted that the offer from McKenzie-Willamette/Triad had not provided an option on the steam plant, though the utility would consider the first right of refusal should it ever decide to sell it.
Commissioner Farmer said it was not a high priority item for him, though he did not object to discussing it. He did feel that the same process should be followed as is followed for other Board issues, i.e. that the Board should be provided with a comprehensive backgrounder so that meeting time would be used wisely.
FALL RATE PROPOSALS
Senior Rate/Financial Analyst John Yanov recapped the November 2004 Electric Rate Proposal accompanied by a power point presentation. He said the process and slides were the same as the last presentation with the exception of the increase in the Slice true up projection provided to the utility by the BPA, which would impact EWEB by increasing its projected BPA power costs by approximately $500,000. He noted that a number of customers had provided input and asked questions at the September 5 meeting and a memorandum in response to questions had been provided to the Board.
Mr. Yanov pointed out that one customer class, Contract B, would not be increased because it was governed by a contract which was not mutable.
Regarding the proposed residential rates, Mr. Yanov called attention to the proposed elimination of EWEB's cost recovery surcharge which he indicated would offset some of the increases.
Mr. Yanov stated that there had been a change in the comparison graph for residential bills in Pacific Northwest utilities. He said Puget Sound Energy had experienced a 2.8 percent increase.
SECOND PUBLIC HEARING ON FALL RATE PROPOSALS
President Lanning opened the public hearing.
Susan Swanson, 1284 Crenshaw Road, recalled that EWEB had indicated in its letter to customers dated September 10 that one-third of the proposed increase was from BPA increases. She felt this contradicted recent news from the BPA that indicated that it was dropping rates by 7.5 percent. She asked for an explanation of that discrepancy. She also thought predictions that the region was facing a negative precipitation year would not pan out to be true. She related that State climatologists were forecasting average or above average precipitation for the year. She was also curious as to why the Springfield Utility Board (SUB) had lower rates.
Mark Hudson, 1285 Crenshaw Road, opposed the rate proposal. He also questioned the discrepancy between information from the BPA that alluded to a decrease in rates to utilities. He echoed the previous speaker's assertion that there would be more precipitation and not less. He related that the Western Regional Climate Center was predicting a 90 to 110 percent of normal snow pack. He asked the Board to examine where this assumption had come from. He noted that the letter from EWEB had indicated it expected power sale revenues to fall short due to hydroelectric generation. He said some surrounding states would be experiencing a drought and would need power. As such, he asserted that EWEB should make more money from power sale revenues and not less. He related that the BPA letter had asserted that all customers would experience a reduction in rates. He urged the Board to vote against the increase.
Jim Seaberry, 3294 Stark Street, asked the Board to "set aside the surcharge in their minds." He suggested that the Board should think of the increase as a 10.7 percent increase. He asserted that it appeared that the surcharge had been "folded in" to the rates. He thought the utility should bill customers on a rolling average instead of always increasing rates. He said computers could enable such a billing process. He opposed the increase.
Charles Biggs, 540 Antelope Way, thought it opportune that he had learned of the meeting earlier in the day so that he could provide testimony. He called attention to a front page article in The Oregonian which discussed the rising costs of basic expenses and how they were not being adequately matched by the median income. He recommended that the utility scale back its staff and reassess what it had already approved.
Chris Mitchell, 2545 Riverwalk Loop, said he was an EWEB customer and was also the EWEB grant administrator for Springfield Public Schools. He conveyed the gratitude from the Springfield Schools for the grant money. He explained that the money was in lieu of tax money allocated to the schools for eight years now. He stated that the amount of money had originally been $165,000 and was now $82,000. He used the money to teach third through fifth graders about electricity and water and he stressed that he always tells them where the money for the program came from. He felt this provided good public relations. He surmised that the program was now in a slow downward spiral adding that another 25 percent reduction could eliminate the program altogether. He provided a schedule and invited the Board and staff to come to some of the events he had scheduled over the next six weeks.
Robin Irish, 3295 Cross Street, opposed the rate increase. She described herself as a voice for the poor. She related that she had asked many low income people to come and speak to the Board but the overwhelming response had been that they did not feel they would be listened to. She asked, regarding the Low Income Energy Assistance Program (LIEAP), for more information on the 45 to 80 percent increase. She also questioned the change in how support for the program was allocated over the different classes of customers. She perceived the lowest increase in low income support to be from private lighting. She thought EWEB should look at street lights and how the City mandated street lighting and why the increase was so much lower.
Tim Jones, 2559 Emerald Street, asked what had been done regarding alleviation of contracted rates between EWEB and Enron. Regarding the BPA issue, he had read that some of the cost had resulted from the WPPSS debacle and was to pay the debt service on it. In closing, he asked that the utility tighten its belt to get more cash flow.
Janet O' Bryant, 85 North Madison Street, said she had conducted an independent survey of the local, cooperatively owned utilities. She acknowledged that Lane Electric Cooperative and other rural power providers were more challenged to deliver power. She listed the following charges per Kilowatt Hour:
1) Lane Electric Cooperative: 7.1 cents/KWH;
2) Springfield Utility Board: 4.8 cents/KWH;
3) Emerald Public Utility District: 6.1 cents/KWH;
4) EWEB: 7.1 cents/KWH.
She questioned why EWEB was operating with more money from poor people and why it was seemingly increasing rates all of the time. She alleged that Lane Electric provided dividend checks to its power users. She felt it was odd that smaller utilities could keep their power rates more stable. She pointed out that of the 16 utilities that EWEB sought to compare itself with, only five had higher rates.
Ms. O'Bryant registered her opposition to any subsidization of McKenzie-Willamette/Triad in its possible move to the EWEB riverfront location.
Zachary Vishanoff, Patterson Street, advised the utility not to move out of the City's core. He suggested that the Board match the amount of minutes given to people who testify on a rate increase to the percentage level of the rate increase. He recommended that EWEB provide its information on line rather than using paper. He asserted that even people who did not have computers could go to the library. He expressed concern about future potential changes to the steam plant.
FALL RATE PROPOSALS
Commissioner Farmer asked staff to address the questions raised by the public regarding changes in BPA rates and on the source for the majority of the power generation that EWEB relied upon.
Mr. Berggren stated that he had complained personally to the BPA about the nature of their press releases, in which the BPA only focused on rates for one product. He explained that the reality was that the BPA continued to lean on reserves, which meant that prices for those who purchased the Block power product went down. He pointed out, however, that prices for those who purchased the Slice power product rates had been increased. He related that EWEB purchased two-thirds of its power in the Slice product and one-third in the Block product which meant that rates for EWEB had experienced an increase of $3.1 million. As a result of his complaints regarding how misleading the press release had been, the BPA added a one-line caveat that clarified that some utilities would not see a reduction in rates.
Mr. Berggren next spoke to concerns expressed about precipitation predictions. He stated that, though rainfall was projected to be normal, stream flows continued to be down. He said it was beginning to approach the five worst years of drought experience since the "Dust Bowl" days on the west coast. He expressed hope that this would end, but between the drought, recovery from the Enron debacle, and the recession of 2001, the utility had failed to meet its need for basic minimum reserves. He stressed that the utility had been operating without minimum reserves for three years and could no longer continue to do so. He said the utility was trying to position itself in a more conservative financial assumption that no longer assumed normal rainfall. He commented that many people in the scientific community believe that the Pacific Northwest was witnessing a fundamental change in climate. He stated that the generation assumption on which the budget was based would provide the utility a high probability that it would meet its projection or better. He believed the utility needed to be in this position for at least three to five years and before the BPA changed the nature of its supply contracts or the current contract ran out in 2011.
Mr. Seaberry pointed out that the public hearing had not been closed.
President Lanning closed the public hearing.
Commissioner Anderson asked for clarification on how responsibility for the LIEAP was being distributed among customer classes. Mr. Yanov replied that $1.8 million was included in the 2005 budget for the LIEAP. He explained that 45 percent of the funding came from residential customers and 55 percent came from business customers, but that 100 percent of the program was allocated to residential customers. This had caused staff and the Board to review the policy and, as a result of the review, to restructure the burden for the program so that residential customers now paid 80 percent of the cost, while the business customers paid 20 percent.
Mr. Varner added that the discussion on the change in distribution of the low income mitigation had been raised, in part, due to concerns expressed by the industrial customers who were not happy paying a higher share for such a program than they would have if they were buying power from a privately owned utility. He reiterated EWEB's belief that all customers benefit from such a program.
Regarding the concerns about the private lighting, Mr. Yanov said the overall revenue to the utility was a fraction of one percent. Mr. Varner added that the energy costs for running the lights was very minimal. He noted that the fixed charge for private lighting was substantial.
President Lanning recommended that the General Manager speak to the reductions the utility had taken over the past three years. Mr. Berggren responded that staff had submitted the remaining areas in which cuts could be sustained to the Board and the Board had engaged those issues. The Board then made moderate reductions in the low income funding, the school grants program, and the conservation programs. President Lanning reiterated that the Board had looked at all possible reductions.
President Lanning, noting that the surcharge was due to be sunset, and asked if it had achieved the goal of reserve replenishment. Mr. Berggren replied that a dual target for the surcharge had been in place, as it would either be retired when reserve levels had been met or when the time limit had expired. He said the reserve level would not be met until the end of the next year. He explained that the utility was seeing a continued shift and attributed this to global warming. He stated that elimination of the surcharge and institution of the rate increase would ultimately bring the power operating reserve to $13 million, which would operate the electric utility for one year, it would replace by 2009 the capital reserve fund that was spent in 2001 during the energy crisis, and it would restore the operation and maintenance reserve also spent in 2001 by the year 2006.
Vice President Bishop wished to counter any confusion of the potential relocation of the EWEB facilities and the rate increase. She stressed that the discussion regarding the move had been part of long-range master planning and was completely unrelated to the proposed rate increase. She emphasized that when the EWEB property was sold, if it was sold, it would be sold at fair market value. She said consideration of a move was largely due to facility needs, such as a need to address the difficulty that pole trucks had in turning around. She encouraged people to come to the meetings and provide public input.
Vice President Bishop acknowledged that it was difficult to accept the frequency of rate increases. She reiterated that the Board had tried not to raise rates. She said the Board did not want to be faced with dramatic rate increases and so had to raise them incrementally. She underscored the necessity of replenishing the capital reserves, which were used to save and sustain the system of delivery.
Commissioner Menegat stated that the rate increase that was being considered had been under consideration since before initial discussions of it in March of this year. He reiterated that the utility had spent down its reserves and had cut the budget. He found that the utility was in a crisis situation as the Board had done the best it could to protect the customers from the dramatic rate increases but had found itself in a compromised situation with reliability of the system. Now, he said, there were transformers, poles, and relays that needed to be replaced. He noted the major blackout that happened in the northeast and underscored the importance of preventing such a situation from happening in the Northwest.
Commissioner Menegat stressed that he was a rate payer and received no discount for serving on the Board. He said the utility had a system that it needed to count on. He noted that the utility had been budgeting on more hydroelectric generation than it had been able to utilize for five years. He believed that staff had prepared a good rate proposal and expressed his support for it.
Commissioner Anderson noted that the comment had been made that the Board had already made up its mind. She wished to reiterate that the Board had been struggling with the utility's budget while being "whacked" by Enron and the BPA. She stressed that the utility had to get its reserve funding back and, as such, she would reluctantly support the rate action.
Commissioner Farmer commented that he had never attended a rate hearing at which people testified that they wanted their rates raised. He conveyed his disappointment regarding the utility's inability to better educate the public on reasons for the increase. He declared that the "frank and brutal truth" was that EWEB was broke. He likened it to a person with a job that paid only the bills and no more whose stove suddenly breaks and then has no way to cook food. He stated that there were no reserves and the utility did not have much it could borrow at this point, based on its financial condition. He opined it would be fiscally irresponsible, at this point, not to build savings back up. He emphasized that letting the utility go broke put its customers at risk of having no electricity to use and no water coming out of the tap. He said, after five out of six years had passed with low stream flows, the utility was coming to understand that this could be more of a trend than an anomaly. He felt the Board realized it should stop budgeting for money that was not going to come in and it was this assumption that was driving the rate action. He stated that, had the Board decided not to build reserves, the utility could proceed without a rate increase. However, he averred the Board recognized that this would be an irresponsible course of action. He stressed that the Board did not believe it could operate the utility and take the risk of not being able to run it in a prudent fiscal manner.
President Lanning thanked the number of customer-owners who spoke at the public hearing. He agreed with Commissioner Farmer that the utility had not provided enough of a detailed explanation regarding the budget cuts. He stated that the Board and staff had cut $20 million from its budget. He pointed out that employees had experienced cuts in benefits. He said, looking back over his four years as a commissioner, that EWEB was a part of a larger system. He asserted that when the Enron debacle happened, FERC had the opportunity to take actions to correct what happened but did not do so. He underscored that the Board sought to establish minimum reserves that were felt to be prudent to run the organization and it was his understanding that staff would notify the Board immediately when those goals were achieved.
Vice President Bishop stated that it was a rate increase across the board, though it affected different classes differently. As such, she asserted there was no special allowance given to larger customers.
Commissioner Farmer said he was cognizant that the utility could reach a point at which people's jobs would move out of Eugene.
Vice President Bishop remarked that the conference she had attended featured a presenter from Vermont who, among other things, stated that he was proud that electric rates were "only" 9.9 cents per KWH.
Commissioner Anderson, seconded by Commissioner Menegat, moved to approve the rate proposal as presented by staff. The motion passed, unanimously, 5:0.
Mr. Berggren asked that Item 10, Regional Issues Update, be postponed given that it was 9:30 p.m. The Board was amenable to deferring the item. Mr. Helgeson noted that the intent was to provide quarterly reports on regional issues.
ITEMS REMOVED FROM CONSENT CALENDAR
Vice President Bishop, seconded by Commissioner Anderson, moved to authorize the General Manager and staff to reach a settlement with the Army Corps of Engineers by accepting the penalty and offsetting it with supplemental environmental projects.
Commissioner Farmer offered a friendly amendment to insert "if possible" before "offsetting." The maker and second accepted the friendly amendment.
The motion passed unanimously, 5:0.
President Lanning adjourned the meeting at 9:34 p.m.
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Assistant Secretary President