Board Members present: Mike Dyer, Sandra Bishop, Dorothy Anderson, Peter Bartel, and Susie Smith.

Others present: Randy Berggren, Dean Ahlsten. JoAnn Andersen, Cathy Bloom, Deborrah Brewer, Tom Buckhouse, Bert Dunn, Kathy Gray, Cathy Hamilton, Eric Hiaasen, Garry Kunkel, Jim Maloney, Mat Northway, Jim Origliosso, Laurie Power, Scott Spettel, Dick Varner, Pat Ventura, Debra Wright, and Krista Hince of the EWEB staff; and Kim Kunkel, Minutes Recorder.

President Dyer called the Work Session of the Eugene Water & Electric Board (EWEB) to order.

NEW RESOURCES ROUND TABLE DISCUSSION

Referring to a memorandum entitled New Resources Round Table, copies of which were included in the meeting agenda packet, EWEB Resource Planning Analyst Jim Maloney presented a brief overview of the proposed meeting agenda. He said the proposed agenda would include discussion of the following: 1) status update on IERP Action Plan; 2) regional perspective on supply adequacy; 3) renewable resource options; 4) BPA subscription update and initial analysis; 5) centralized generation options; and 6) round table discussion.

Referring to proposed agenda items 3 and 5, Commissioner Smith expressed concern that consideration of specific renewable resource and centralized generation options was premature, and suggested the Board first revisit its resource development criteria and the underlying values and principles generated by the resource development citizen advisory committee. She said she was uncomfortable basing a definition of the term "environmentally superior" upon a single project in which the utility was interested.

Mr. Berggren responded that staff needed direction from the Board as to whether to pursue the current new resource opportunities that were being considered. He said the discussion planned for the Work Session would provide the Board with a sense of the "flavor" of the projects being considered.

The other Board members expressed support for hearing the presentations, and engaging in Board discussion, on agenda items 3 and 5.

Mr. Maloney added to a future Board work list, posted in the meeting room: "Revisit CAC work on resources."

• Status Update on IERP Action Plan - "Strategies to Actions"

Recalling that the Board recently adopted Energy Resources 2000, Mr. Maloney explained that staff was currently working to refine the objectives included therein and draft the IERP Action Plan. He noted that on April 4, staff would present to the Board draft portions of the IERP Action Plan that will have been completed by that time.

• Regional Perspective on Supply Adequacy
  • What's the Picture on Loads and Resources?

Mr. Maloney prefaced this presentation by recalling that in 1974, an official notice of energy resource insufficiency was issued. He said this resulted in a "rush" to build generation resources.

With regard to why the region is again looking at the issue of energy resource insufficiency, Mr. Maloney explained that the west has experienced a dramatic population increase during the past 10 years. He said eight of the top-ten growing states in the nation are part of the WSCC. He encouraged the Board and others to keep this fact in mind throughout the presentation.

Referring to a series of overhead displays, Mr. Maloney stated that the Northwest Public Power Council (NWPPC) recently conducted a study concerning the adequacy of energy loads and resources. Mr. Maloney presented a brief overview of the Council's findings. Included among these findings were: 1) During winter months, [a load inadequacy occurred 24 percent of the time¹]; and 2) The region is highly dependent upon imports to meet load demand and restore the system when flexibility is needed. This ability of the hydroelectric system to be "flexed" beyond biological opinion guidelines sends an undesirable economic signal to potential project developers.

Mr. Maloney presented a brief overview of proposed added resources. He said the proposed additions were identified based upon on computer model which selected most cost-effective additions first.

Mr. Maloney stated that the NWPPC believes the region is at greatest risk of load inadequacy during the 2001-2004 time frame.

• A One in Four Chance of Insufficiency? Is it Real?

EWEB's Power Management & Planning Manager Scott Spettel stated that in terms of whether the risk of a "one in 4 chance of load insufficiency" was real, the load deficit facing investor-owned utilities may pose a problem. He stated that because the northwest was import- dependent, the changing role of inter-ties was a factor in the risk of load inadequacy.

President Dyer inquired as to the period during which the 24 percent chance of load insufficiency was predicted. Mr. Maloney said the insufficiency was predicted through 2004 Noting that the proposed resource additions include only 1000 megawatts of new resources added during that period, President Dyer inquired as to whether the proposed additions were sufficient to solve the problem. Mr. Maloney responded that the proposed additions would lower the probability of load inadequacy by reducing the amount of insufficiency, but would not eliminate the problem.

• Renewable Resource Options

Referring to series of overhead displays, Mr. Maloney presented a brief overview of possible renewable resource options, including the following:

• Wind

 

• Foote Creek Phase 4: Online September, 2000; Cost predicted at 3.5 cents or more.
• Wyoming 2: No additional avian issues; 25-50 megawatt project proposed; EWEB may aggregate; Cost predicted at 4-5 cents; Online at the end of the fourth quarter of 2001.
• State Line Project: 25-100 megawatts; Cost predicted at 2.7-4 cents. Price dependent on scale.
• Bonneville Environmental Foundation (BEF), Multiple northwest sites; Cost predicted at less than 4 cents per kilowatt.
• EWEB/Foote Creek expansion project yet to be determined.

• Hydroelectric
• Tieton Hydro: 3 average megawatts; Cost predicted at 2-3.5 cents; Peaks in summer/fall.

Mr. Maloney stated that one question facing the Board was whether to spend staff resources on additional hydroelectric investments.

C. Landfill Gas

Coffin Butte: 3.5-4 cents per kilowatt; Online 2000-2001 time frame.

Commissioner Bartel said he was uncomfortable with this project because it involved transporting local "garbage" to another county.

Mr. Spettel briefly reviewed the many time constraint issues EWEB was facing in terms of making decisions regarding renewable resource options.

BPA Subscription Update and Initial Analysis

Power Marketing Analyst Eric Hiaasen explained that BPA's rate case was scheduled for completion in late April. He said staff would return to the Board in May with an analysis of the next EWEB/BPA contract, to be implemented following the expiration of the current 20-year contract.

Mr. Hiaasen recalled that basically BPA currently offers the following three subscription options: 1) partial requirements; 2) block purchases; and 3) and "slice of system." Mr. Hiaasen presented a brief overview of the three subscription options and their associated risks, as follows:

Partial Requirements

BPA follows EWEB's "load wiggle"

EWEB delivers a specified amount of its own load; BPA delivers load demand beyond that projected by EWEB

BPA demand charge increases the per/kilowatt cost

Block Purchases

EWEB responsible for following the "wiggle" of its own load

Because EWEB can spread out the BPA demand charges, the per kilowatt cost is lower

EWEB has greater market exposure and therefore more risk

Slice of Product

BPA would not follow EWEB's "load wiggle"

"Slice of Product" entitlement set for the first year of production and BPA would provide for no load growth

EWEB uses its own resources to follow its load, and utilizes the "slice" to follow loads in excess of its own resources

More flexible resource

EWEB assumes the risk of energy resource purchase decisions.

Mr. Hiaasen reviewed how the amount of the "slice" to which EWEB would be entitled was calculated.

Mr. Hiaasen distributed and reviewed Draft Subscription Results, which he said were based upon a scenario in which medium case load and price forecasts were used.

Centralized Generation Options

Mr. Spettel explained that staff had identified three "generic" centralized generation options, as follows: 1) locate in premium locations in terms of transmission and markets (lowest cost points in northwest); 2) locate at good gas supply and transmission site; and 3)build generation in Eugene.

With regard to specific generation projects, Mr. Berggren said the Umatilla 500 megawatt project was one of several strategies being considered. He noted that EWEB and its partners would shape the project and present it to a private developer for construction. Mr. Berggren said staff would like to confirm or deny EWEB's interest in the project by April.

Commissioner Smith inquired as to whether the Umatilla project could be a cogeneration project. Mr. Origliosso responded that there was a prison site nearby which might serve as a thermal load. Mr. Berggren stated that EWEB still has considerable latitude in shaping the project in a manner that would be responsive to environmental issues.

Round Table Discussion

Commissioner Smith requested that the issues of 1) power partnerships; 2) contractual purchaser options; and 3) the future of OURCA in terms of joint leverage and project sharing be added to the future Board work list. Mr. Maloney said the next work session on new resources would include a presentation of additional contractual purchaser options.

Vice President Bishop said she would not want EWEB to summarily dismiss new resource opportunities. She said she was interested in many aspects of the Umatilla project. She noted that the project provided a unique opportunity for EWEB to form a powerful partnership with the tribes.

In addition, Vice President Bishop stated that BPA's "slice of system" option appeared favorable; however, she acknowledged that additional information from staff might sway her opinion.

Citing the principle of "if it sounds too good to be true, it probably is, Commissioner Bartel said he was highly skeptical regarding the Umatilla project. He expressed concern as to whether EWEB's current staff resources were adequate to manage and oversee the project on an ongoing basis. In addition, Commissioner Bartel questioned how the proposed project fit into EWEB's Resource Plan.

President Dyer expressed support for pursuing the Umatilla project, noting that he generally favors larger projects. He said a number of options exist with regard to EWEB's relationship to the project. He said, for example, EWEB could elect to take very little power from the project. In terms of the project's alignment with EWEB's Resource Plan, President Dyer said the Board must use its guiding principles, and the work of the citizen advisory committee, and apply those principles to frame the project. He said EWEB could dedicate revenue from the project toward renewables.

Commissioner Smith stated that because the Umatilla project was large and EWEB was currently overextended in terms of staff resources, she did not favor pursuing the project. In addition, she said it was her understanding that EWEB's stated goal of dedicating one percent toward renewables was a goal, as opposed to a commitment. Commissioner Smith stated that to support the proposed project, she would want to see a clear and substantial "match" between the project and a renewables package.

The meeting adjourned at 7:40 p.m.

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Assistant Secretary President