EUGENE WATER & ELECTRIC BOARD
SPECIAL BOARD MEETING
(WORK SESSION)
EWEB BOARD ROOM
NOVEMBER 16, 2004
5:30 P.M.
Board Members present: Patrick Lanning, Sandra Bishop, Dorothy Anderson, Mel Menegat, and Ron Farmer. President Patrick Lanning was excused.
Others present: Randy Berggren, Dick Varner, Debra Smith, Tom Buckhouse, Ken Beeson, Jim Origliosso, Marty Douglass, Jim Wiley, Roseanna McArthur, and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene minutes recorder.
President Lanning convened the work session of the Eugene Water & Electric Board (EWEB) at 5:34 p.m.
2005 BUDGET AND WORK PLAN
Fiscal Services Supervisor Dick Varner presented the 2005 EWEB Budget . He explained the increases in labor costs, as follows:
• Wages and salaries were driven by the Union negotiated contract for Union employees and the national trends for non-Union employees;
• EWEB added 21 full time equivalent (FTE) positions;
• EWEB reevaluated how overtime costs were budgeted as those costs repeatedly exceeded the budgeted amount and, based on historical overtime usage, now calculated those costs differently;
• The Public Employee Retirement System (PERS) indicated the rate would increase by 25 to 30 percent, but this had no direct impact on the “bottom line” because EWEB continued to pay its old rate into its account, offsetting the increase;
• The customers to employee ratio had increased substantially.
Commissioner Menegat remarked that the Union had bargained in good faith with the utility. He was not comfortable with awarding the non-Union people a higher pay raise than those who were Union members. He thought it could be perceived as a “slap in the face.”
Vice President Bishop arrived.
Mr. Varner explained that the differential had existed for the last five years and was unrelated to bargaining.
Mr. Varner commented that more positions would likely be added in 2006 to aid in completion of some of the capital projects and also in the Information Services Department (ISD). He noted that some personnel were being added in advance of looming retirements in order to allow for training.
In response to a question from Commissioner Farmer, Mr. Varner underscored that it took time to bring a person “up to speed” with EWEB's systems. Commissioner Farmer commented that one did not see other places hiring replacement staff one year in advance. Mr. Berggren pointed out that EWEB had a projected turnover of 25 to 30 percent over the next five years.
Vice President Bishop emphasized the importance of cross-training for employees.
Regarding Capital Analysis Issues , Mr. Varner noted that EWEB had used up all of its spare capacity in its feeders. This was a long-term issue to address.
Mr. Varner clarified that the Increase in Net Power Cost was largely driven by the reduction in the generation assumption.
Commissioner Farmer asked if the gross margin would then improve if the generation assumption was exceeded. Mr. Varner replied that it would. He added, in response to Commissioner Farmer, that the power reserve was the first place the money would be allocated to.
Commissioner Farmer wondered where the generation assumption for the Bonneville Power Administration (BPA) lay. Mr. Varner explained that the BPA always budgeted on the assumption that it would have a 100 percent water year. Historically, he added, this had been in response to their customers' wishes. Mr. Berggren commented that the BPA's customers ended up with “complicated rate actions.”
Vice President Bishop stated that, since 2001, there had been a drastic disparity between operating reserves and working cash. Mr. Varner responded that when the utility came out of the energy crisis, it was allowed to keep $15 million in its “checkbook” and to draw $30 million in a short-term loan. He said the utility had to repay the loan prior to addressing its reserve fund needs and it was repaid in 2003. At that time, he indicated that the utility had $15 million in working cash, $3 million in reserve, and just under $1 million in the self-insurance reserve. General Manager Randy Berggren added that the trend was that “decent progress” had been made, though not enough.
In response to Vice President Bishop, Mr. Varner affirmed that $15 million was the minimum the utility should have in reserve because that was what it would cost to run the utility for 30 days.
Commissioner Farmer indicated that he wanted to have a greater understanding of some of the finer points of the budget, such as what the trend line for the expense of employees was, without having it skewed by the work related to the Carmen Smith relicensing project. He also wanted a “better handle” on capital spending. He wished to understand the components for capital expenditure, how much was spent for equipment versus how much was spent for labor.
In response to a question from Mr. Varner, Commissioner Farmer acknowledged that page 7 of the budget document provided a better idea of the sales and purchasing statistics.
BOARD GOVERNANCE
Strategy 1.1 – Communication Themes for 2005
Public Affairs Manager Marty Douglass reviewed the 2005 Communication Themes as outlined on the memorandum dated November 11, 2004 . He asked for feedback on the three themes proposed for consideration, beginning with the first listed in the memorandum:
EWEB Headquarters/Operations Location
Commissioner Menegat felt this subject would continue to need to be addressed for some time to come as he frequently received input when speaking to the public on it. He related that many expressed that they liked the EWEB building and where it was located. Mr. Douglass said staff would develop talking points and review them with the Board.
Commissioner Anderson indicated her support for the first communication theme.
Commissioner Farmer advocated for publicizing that EWEB was purchasing the ‘Brand S' property on Roosevelt Boulevard and why it was doing so.
Vice President Bishop believed the potential move to be one of the main themes of communications with the public.
President Lanning concurred.
Mr. Douglass asked for input on the second proposed communication theme.
Maintain Infrastructure & Financial Stability
Commissioner Anderson said she liked this communication theme. She had found it difficult to help the general public understand the need to maintain the infrastructure of the utility. She approved, in particular, of tying infrastructure needs into specific neighborhoods when speaking with them.
Commissioner Farmer reiterated that the utility recognized it had been wrong in its hydroelectric generation assumption and had previously predicated its budget on having more available power than it did.
Vice President Bishop advised caution as she averred the utility should not give the impression that more money coming in would bring about a rate reduction.
Mr. Douglass noted that staff had thought targeting neighborhoods that were particularly hard hit by the big wind storm would be useful.
Vice President Bishop said she did not know what financial stability meant as a priority goal. She noted she had only met one customer who understood why the rates had gone up.
Commissioner Menegat also supported addressing infrastructure conditions specific to a neighborhood.
Mr. Douglass moved on to the third proposed communication theme
EWEB's Resource Strategy Reflects the Community
He stated staff's intention to develop ways to articulate how EWEB was different from other utilities. Mr. Berggren noted that one theme was that the utility was publicly owned and used a public process in its decision making.
Commissioner Anderson felt the information should include facts about where the power came from, as public hearings had indicated that many thought the largest source of electric power for EWEB was the immediate river shed.
Commissioner Menegat recommended promoting the new slogan: “ Rely on us .”
Mr. Douglass stated that the Integrated Energy Resource Portfolio (IERP) process included open houses, forums, and public hearings. He remarked that many who show up to speak on this item already had a certain level of knowledge about it.
Commissioner Anderson suggested that when Commissioners attend neighborhood association meetings they speak on items that were not on upcoming Board agendas as well as current topics.
Vice President Bishop recommended that speakers highlight the Low Income Energy Assistance Program (LIEAP) and emphasize that “no one is left out in the cold.”
Commissioner Farmer encouraged staff to think about providing more information to the public about the Carmen Smith relicensing. He underscored that the utility was paying $150 million to keep an asset it already owned. Mr. Douglass said staff was devoting a lot of time to the project.
GENERAL MANAGER'S GOAL DEVELOPMENT FOR 2005
Mr. Berggren discussed Goal 2 – Manage Financial Performance , outlined in the attachment by the same name. He was uncertain how to put a weight on the generation assumption.
Commissioner Farmer thought the generation assumption was relevant and should have a high weight placed upon it. He asked if using a conservative generation assumption would present less of a risk that something would be budgeted incorrectly.
Commissioner Menegat saw a basic underlying compliance issue that was more important than whether the General Manager “could make rain.” He thought the utility reacted to such things in the normal course of responsibilities. He felt development of a system to insure compliance and meet the requirements, i.e. to ensure there were bonds and the utility was in good financial shape was more important than placing weight on the assumption.
President Lanning commented that it was challenging to discuss weights on goals independent of other factors. He thought it might be prudent for the subcommittee to take a thorough look at it as a part of their subcommittee work.
The Board was amenable to letting this item fall under the purview of the subcommittee.
Commissioner Farmer remarked that “weighting” was a way of stating where the utilities priorities lay.
President Lanning recommended the Board move Item 5 from its Special Board Meeting Agenda to the Work Session, given the time. The Board agreed to do so.
CORRESPONDENCE (moved over from the Special Board Meeting)
Mr. Berggren reported the following:
• Mr. Douglass included a backgrounder in Board packets outlining some of the nuances of how the City approached public input to help inform the Board in its determination as to how it wished to proceed with its own public input process
• The annual EWEB holiday party was scheduled for December 11 at the Lane County Fairgrounds.
ITEMS FROM BOARD MEMBERS (moved over from the Special Board Meeting)
Commissioner Anderson shared that the McKenzie Watershed Council (MWC) had written a letter asking the Oregon Department of Transportation (ODOT) not to designate Highway 126 as a freight route.
Commissioner Menegat reported that he attended the second Western Generation Agency budget meeting. He said the agency was in the process of identifying questions and concerns that relate to the budget. He thought the budget would be adopted at the next meeting.
Vice President Bishop thanked the staff for the shirts received during the SHARP presentation. She noted that one of the presenters from OSHA, Bob Brady, had passed away two days after the presentation in a freak accident. She acknowledged that the Board had also received a copy of the Union agreement at the luncheon.
Vice President Bishop reported that she attended the Founding Fathers of Energy Efficiency Forum in Portland the previous week. Three speakers presented at the meeting and she particularly enjoyed the talk given by Art Rosenfeld. She noted that Commissioner-elect John Simpson attended as well. Additionally, she and Mr. Simpson had recently attended the Northwest Energy Coalition at which time a resolution having to do with a wind project in Washington was considered.
Vice President Bishop related that EWEB staff-person, Steve Newcomb, attended a meeting regarding the possible designation of the McKenzie Highway as a freight route. She said a letter had been drafted which she had asked staff to withhold until she could change how a portion of it was written.
In addition, Vice President Bishop asked if there was a possibility of utilizing an identifying number for customers other than social security numbers. She had received customer feedback indicating opposition to using them. Mr. Berggren offered to look into it and provide a memorandum regarding current procedures and possible options for changing the procedures.
Vice President Bishop reported that she met with Mayor-elect Kitty Piercy. She related that Ms. Piercy indicated that she was interested in working closely with EWEB on issues.
President Lanning acknowledged the hard work that staff did to receive the SHARP award and thanked everyone for the shirt.
President Lanning also wished to thank staff for the microphone platforms attached to the sound system speakers provided to help sound quality for television and radio reporting. He thanked staff for the new timer as well.
President Lanning commented that the public should be made aware of the Board's public input response procedure, noting that it was a topic for a future Board governance discussion.
President Lanning adjourned the meeting at 7:27 p.m.