Board Members present: Mike Dyer, Sandra Bishop, Dorothy Anderson, Peter Bartel, and Susie Smith.
Others present: Randy Berggren, Dean Ahlsten, JoAnn Andersen, Ken Beeson, Jim Bemis, Cathy Bloom, Debra Brewer, Cathy Hamilton, Brian Hawley, Steve Hill, Garry Kunkel, Debbie Lawder, Mike Logan, Charlie Morris, Jim Origliosso, Laurie Power, Scott Spettel, Dick Varner, Pat Ventura, John Yanov, and Krista Hince of the EWEB staff; Kim Kunkel, Minutes Recorder; and various members of the public.
President Dyer called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order.
AGENDA CHECK
President Dyer determined that there was consensus to approve the agenda, as written.
CONSENT CALENDAR
President Dyer noted that items presented for approval on the Consent Calendar included the following:
Vice President Bishop requested that consideration of the minutes of the February 1, 2000, Work Session and Regular Board Meeting, and the February 15, 2000, Work Session and Special Board Meeting be deferred to the next meeting.
President Dyer requested that Item 2, R&G Excavating, Inc., be removed from the Consent Calendar.
Vice President Bishop moved, seconded by Commissioner Anderson, to approve the Consent Calendar, with the exception of Items 1 and 2. The motion passed unanimously.
ITEMS FROM BOARD MEMBERS
Commissioner Smith reported that she and Commissioner Anderson recently had lunch with City of Eugene Planning and Development Director Paul Farmer. She said the discussion, which focused on the zoning code currently being reviewed by the Planning Commission, was productive.
CORRESPONDENCE
General Manager Randy Berggren invited the Board to attend the Northwest Energy Efficiency Alliance's signing ceremony to commemorate the next five years of funding. He said the event was scheduled for March 17.
Noting that he had distributed information regarding EWEB's audited financials, Mr. Berggren directed the Board to forward all related questions to Mr. Origliosso.
Mr. Berggren noted that a follow-up to EWEB's water storage contract approval was included in the meeting agenda packet. Commissioner Bartel stated that the follow-up memorandum confirmed his concern regarding EWEB's investment. He requested that Board discussion of this matter be included on a future meeting agenda.
Mr. Berggren reviewed draft agendas of the March 21 Work Session and Regular Board Meeting.
Referring to a memorandum entitled New Process for Siting Federal Courthouse, Commissioner Smith expressed her opinion that it would be "unacceptable" for EWEB to send a letter of interest pending the results of EWEB's "visioning process" for the EWEB headquarters site. Mr. Berggren clarified that the Federal Government would first announce its list of potential sites. He said EWEB would then 1) send a "letter of interest" pending the results of the "visioning process;" 2) send a "letter of interest" identifying specific areas to be considered; or 3) send no letter.
Commissioner Bartel stated that he would bring to the next meeting copies of an article concerning the architectural firm selected to manage the Federal Courthouse project.
Commissioner Smith stated that she was sensitive to the fact that in the long-term, the river edge was not the most appropriate location for EWEB's maintenance yard. She stated that perhaps a more publicly oriented facility could be sited there. She said she was willing to consider the possibility of some portion of EWEB's storage/maintenance areas being utilized for an alternative public purpose. Commissioner Smith said she was interested in learning how such an alternative purpose might integrate with EWEB's headquarters building; however the issue should be evaluated as part of the Mater Plan. President Dyer said he would also be willing to consider alternative uses of the storage/maintenance area. Commissioner Bartel said he would be interested only if such alternatives did no financial harm to rate payers.
PUBLIC INPUT
Mary Ellen Bennett, identifying herself as representing the Lane County Human Services Commission, invited Board members to attend a March 16 presentation and discussion regarding energy assistance for low-income individuals.
Bill Sokol, 240 Sunnyside Drive, stated that when EWEB agreed to provide water and electric service to Hyundai Semiconductor America, local citizens were assured that resources were adequate to meet the additional demand and that customer rates would not be increased as a result of this new customer. He said EWEB is now reporting that current power supplies are inadequate to meet the demand and is proposing water and electric rate increases. With regard EWEB's proposed telecommunications project, Mr. Sokol said he supported EWEB's involvement in the cable business, as the utility would provide good service and offer greater options than the current provider.
President Dyer responded that the proposed rate increase was the result of a number of five-year contracts expiring. He said power costs have increased significantly over the past five years and the proposed rate increases are reflective of that inflation. Noting that Hyundai was on a separate power contract, President Dyer stressed that the proposed rate increases were not due to Hyundai's use of water or power. He noted that Hyundai's power rate, if the proposed rate increase is adopted, will increase substantially more than other rate payers in the community.
Chris Horton, 1085 Calvin Street, read into the record a written letter submitted to the Board. In summary, Mr. Horton stated that he was opposed to the salary increase recently awarded EWEB General Manager Randy Berggren. He said Mr. Berggren should follow the example set by Congressman Peter DeFazio and direct the Board to utilize his salary raise to better serve the public. In addition, Mr. Horton noted that of the many letters he sent to EWEB, he had received a response to only one. With regard to the proposed rate increases, Mr. Horton expressed his opinion that the EWEB Board considers only the opinions of its own membership and predicted that the Board would approve the rate increase regardless of public opinion. He stated that if the Board refuses to listen to the opinions of citizens, Commissioners should be removed and replaced.
PROPOSED WATER & ELECTRIC RATES
Noting that an agreement had not yet been reached regarding Hyundai's power supply, and water contract changes were pending, Dick Varner, Fiscal Services Supervisor, requested that the Board defer its approval of Hyundai's rates until negotiations are complete.
EWEB Accounting Analyst Pat Ventura stated that, other than the aforementioned Hyundai issues, negligible changes had been made to the Water Cost of Service Analysis proposal since the February 1 Board Meeting.
Mr. Ventura summarized the proposed water rates by noting that the overall rate increase would be 5.7 percent. He stated that, if approved, the proposed water rates would be implemented on April 1, 2000.
Referring to a memorandum included in the meeting agenda packet, EWEB Senior Rate/Financial Analyst John Yanov noted that a review of the 2000 Electric Rate Proposal was presented for consideration at the February 15 Board Meeting and the first of two public hearings was held. Noting that the second public hearing would follow his presentation that evening, Mr. Yanov said staff was requesting Board approval of the following adjustments to retail electric rates for each customer class:
Customer Class Rate Schedule Proposed Increase
Residential R-6 8.5 percent
Small General Service G-1 11.2 percent
Medium General Service G-2 -0.4 percent
Large General Service G-3 2.7 percent
Contract A N/A 10.4 percent
Contract B N/A 37.8 percent
Street Lighting J-3, J-4 23.7 percent
Private Lighting L-3 -21.8 percent
Mr. Yanov noted that, excluding the pending Hyundai rate changes, the rate adjustments represented an overall change of 6.2 percent. He stated that, if approved, the rate changes would be implemented in a two-phased approach beginning April 1, 2000.
PUBLIC HEARING ON PROPOSED WATER RATES
President Dyer opened the public hearing on proposed Water Rates.
Having determined there was no one present who wished to address the Board concerning this matter, President Dyer closed the public hearing.
PUBLIC HEARING ON PROPOSED ELECTRIC RATES
President Dyer opened the public hearing on proposed Electric Rates.
Tom Quesenberry, 50 North Danebo, identified himself as representing Willamette Industries, a manufacturer of medium density fiber board. Mr. Quesenberry stated that Willamette Industries currently pays $125,000 per month for electricity and the proposed nine percent increase for its customer class would have a significant financial impact and could mean the difference between profit and loss during some business months. In addition, Mr. Quesenberry stated that the average increase for other customers in the same class was 2.7 percent. He expressed concern that the proposed nine percent increase was not reflective of EWEB's true cost of service. Noting that Willamette Industries was at the "bottom" of the E-2 class, Mr. Quesenberry requested that EWEB perform a cost of service study specific to its facility to determine whether it qualifies for a special contract. Alternatively, he requested that EWEB allow Willamette Industries to seek an alternative supplier. He said, however, that Willamette Industries would prefer to retain EWEB as its supplier.
Cliff Barney, 3700 Babcock Lane, expressed opposition to the proposed 8.5 percent rate increase. He said the increase would have a profound impact on seniors and the "working poor." He reminded the Board that its decision would impact the economy of the entire community. Mr. Barney surmised that the rate increase was inflated due to EWEB's involvement in fiber optics.
President Dyer clarified that the average rate increase for all customers was 6.2 percent. Commissioner Smith explained that in 1999, due to a number of financial issues, EWEB was facing a 10 percent rate increase. She said six percent was used as a budget assumption at the time and, following the completion of the cost of service analysis, the actual proposed rate increase was adjusted to 6.2 percent based on the data yielded by the study.
George Hecht identifying himself as Director of Campus Operations at the University of Oregon, described himself as a "disappointed customer." He said the proposed electric rate increase would cost the University of Oregon approximately $130,000, more than $10,000 per month, which amounted to more than a nine percent increase in its rate. Reading from a letter he submitted to the Board, Mr. Hecht summarized a number of concerns, including: 1) the "revenue requirements" posture of the cost of service analysis; 2) the study was based upon rigid "old thinking" cost accounting principles rather than modern approaches, such as Activity Based Costing; 3) the format of EWEB's billing statement, in that it does not distinguish between every aspect of the charge; and 4) that the nine percent increase strikes the University at a time during which budgets are being cut by two percent. In conclusion, Mr. Hecht requested that the Board authorize and direct staff to complete a cost of service analysis for the University using Activity Based Cost accounting principles, and move toward a contract arrangement for service, as with other large users such as Hyundai or Weyerhaeuser. He said the University's daily use is already on the borderline for large commercial users, and new facilities currently under construction would surely increase this use.
Elena Sainz identified herself as a self-employed business person and said she wanted to "put a face" on the proposed rate increases. She said an increase of eight percent was significant for individuals on fixed incomes or earning minimum wage. Noting that she earns three times minimum wage, Ms. Sainz said she struggles to pay her electric bills during the winter months. She said her mother, who is disabled, keeps her home cold because she cannot afford to keep it warm. Ms. Sainz acknowledged that EWEB is a business, but reminded the Board that the utility is in the business of selling "basic living needs."
Howard Bennett, 1835 East 28th Avenue, expressed opposition to the proposed increases. Noting that he conserves energy and opted to purchase 100 percent "green power" and experienced a significant increase in his power bills, Mr. Bennett observed that using less energy, and a wiser resource, costs more. He said EWEB's proposal impacts the lowest user with the highest percentage increase and does not encourage wise use of energy. He said it was time that wise users' rates be lower than those who do not strive to conserve.
Bill McMahon, identifying himself as representing Weyerhaeuser (EWEB's largest user), stated that the proposed increase to Weyerhaeuser's rate was 10 percent, or $1 million per year. Noting that Weyerhaeuser received copies of the cost of service analysis only three weeks earlier, Mr. McMahon said Board action on the proposed increase was premature. Noting that Weyerhaeuser had a number of unanswered questions concerning specific line items, Mr. McMahon requested that the Board defer action on Weyerhaeuser's rates until it had an opportunity to thoroughly review and obtain clarification regarding the study.
Commissioner Anderson inquired as to the amount of time requested by Weyerhaeuser. Mr. McMahon suggested one month.
Al Kritz identified himself as a "middle class" employee in the Emergency Medical Services field. Noting that he finds it difficult to afford the cost of living in Eugene, Mr. Kritz said a rate increase of nine percent was significant. He said he found it interesting that local leaders do not talk about the high cost of living in Eugene. Noting that he wanted to "put a face on the issue," Mr. Kritz requested that the Board pause and consider a smaller rate increase. He suggested that EWEB form a citizen advisory committee to study the proposal prior to implementing the rate increase. Mr. Kritz volunteered to serve on such a committee.
Charles Biggs, 2405 Willakenzie, inquired as to whether EWEB had identified its proposed capital improvements prior to knowing how much money was available. He said rate payers cannot afford the rate increases that are being proposed. He wondered how many of EWEB's customers might switch to natural gas as the result of the increases. Mr. Biggs said it was his understanding that EWEB's general service charge was to pay for ongoing capital improvements. He said the eight percent capital improvement funding shortfall seemed high.
Commissioner Anderson responded that EWEB cannot use water system development charges for electric facility construction.
Having determined there was were no other members of the public present who wished to address the Board, President Dyer closed the public hearing.
PROPOSED WATER & ELECTRIC RATES DISCUSSION
Commissioner Smith assured members of the public that there was "no shortage" of sensitivity by the Board or members of the staff with regard to the impacts of the proposed rate increases. She explained that at the beginning of 1999, EWEB experienced a number of "cost drivers," such as Public Employee Retirement System (PERS) changes, which may not be apparent to rate payers. She clarified that EWEB does not generate a budget based on desired expenditures and then raise rates accordingly. She said a number of strategically advantageous five-year contract are expiring and EWEB is facing cost increases. Commissioner Smith noted that EWEB spent a great deal of time working with a group of volunteers to consider all possible cost saving measures. Noting that numerous public meetings were held concerning these cost increases and potential strategies by which they might be mitigated, Commissioner Smith said it is difficult when the Board does not hear from the public until a rate increase is actually proposed. She reiterated that the factors behind the rate increase proposal were more complex than they might appear, and said staff was making every effort to keep EWEB's costs down.
Commissioner Anderson noted that the Board has struggled over the years with the question of whether to implement smaller, more frequent rate increases, or larger, infrequent rate increases. She said the Board attempted to keep cutting costs to avoid rate increases altogether; however, given the recent cost increase, a rate increase was now necessary.
Noting that it was never easy to make a decision such as this, Vice President Bishop said she had looked forward to reviewing the cost of service analysis results because she had assumed that residential customers were paying more than their share of the utility's cost of providing service. She said the results of the study, however, revealed that some businesses were paying too much and, in fact, were subsidizing residential customers. She said EWEB's intention was to adjust the rates based on the actual cost of service so that all customer services are paying their "fair share" of the costs. She said EWEB has a policy against "cross-subsidization," a situation in which one customer class is paying the costs of another. Vice President Bishop encouraged all citizens struggling with paying their water and electric to contact EWEB staff and determine their eligibility for low-income assistance or other services offered by the utility.
President Dyer stated that he does not like implementing rate increases. He said he wished that the proposed increase was lower or that an increase of any amount was not necessary. He agreed that EWEB must continue to address how it spends its money. President Dyer noted that the Board did unanimously approve the budget. With regard to assisting low-income customers, President Dyer said EWEB was presently considering a program that would dedicate funds to assist low-income customers in paying their bills. In addition, President Dyer encouraged citizens who are able, to contribute to Energy Share, EWEB's existing low-income assistance program. In conclusion, President Dyer stated that EWEB's rates continued to be low, relative to other utilities.
Noting that all customers contribute to the cost of providing service, Commissioner Smith said she could not fathom removing from the larger cost of service analysis all large customers who request individual consideration. She said she could support, however, taking time to review with Weyerhaeuser or a contract user the cost of service analysis as a means by which to promote understanding. Mr. Yanov stated that both the University of Oregon and Willamette Industries may be eligible for specific service contracts.
President Dyer recommended allowing the University of Oregon additional time to review the cost of service analysis. Mr. Hecht said the University could conclude its review by April 1.
Noting that EWEB was in the middle of a budget process, and these issues should have been raised earlier, Vice President Bishop said negotiations regarding separate contracts should begin at the onset of the next budget cycle. President Dyer agreed with Vice President Bishop's suggestion to defer consideration of separate contracts for the University of Oregon and Willamette Industries to the next budget process.
Commissioner Bartel expressed support for allowing the businesses additional time to review the cost of service analysis.
Vice President Smith moved to accept the proposed Water rates for an average increase of 5.7 percent and the proposed Electric rate for an average increase of 6.2 percent, as detailed in staff's presentation and the memorandum dated March1, 2000; with the exception of the Large General Service class, pending the conclusion of negotiations with staff on March 21.
Commissioner Anderson requested that the motion be amended to state that University of Oregon and Willamette Industries representatives would report back to the Board during its next meeting. Vice President Bishop accepted the proposed amendment.
Commissioner Anderson seconded the motion. The motion passed unanimously.
(The Board took a short break)
Noting the late hour and the number of items remaining on the agenda, President Dyer suggested deferring discussion of the Coal Gas Site Work to the next meeting. The other Commissioners expressed support for President Dyer's suggestion.
TELECOMMUNICATIONS RESOLUTION
EWEB Telecommunications Project Manager Ken Beeson stated that minor edits made to the March 2 version of the proposed City of Eugene Joint Telecommunications Resolution were distributed to Board members for their review.
Referring to a memorandum and attachment, copies of which were included in the meeting agenda packet, Mr. Beeson presented a brief overview of the history and evolution of the proposed resolution, and said staff believes that the terms of the resolution are consistent with EWEB's objectives for development of the Phase II telecommunications system as well as the conditions contained in the February 15, 2000, EWEB resolution concerning public process related to the Phase II development work. He said the joint resolution had been reviewed and approved by EWEB legal counsel. Mr. Beeson said it was staff's recommendation that the Board approve the City of Eugene Joint Telecommunications Resolution.
Commissioner Bartel inquired as to the likelihood of City Council becoming involved in the substance of the Telecommunications Project, beyond that of the project time line. Mr. Beeson said the joint resolution allows Council to "weigh in" on the project time line. Commissioner Bartel stated that, given the complexity of the project, and his past experiences of Council involvement in non-City affairs, the boundaries of Council authority should be narrowly defined. He said he would not support the joint resolution if it allows City Council to alter the substance of the project in any way.
Vice President Bishop expressed support for including the proposed amendment to the City Charter on the May ballot. She said she did not think a joint resolution was necessary, given that EWEB passed a resolution on February 15 which stated that all points would be negotiated between City and EWEB staff. Vice President Bishop expressed concern regarding potential Council interference in an EWEB business line, and said the joint resolution may create a "dangerous" precedent. She said the City has no legal jurisdiction over EWEB operations, which are under the adequate oversight of the Board.
Commissioner Bartel moved, seconded by Commissioner Anderson, to approve the City Of Eugene Joint Telecommunications Resolution.
President Dyer echoed Vice President Bishop's concerns. In addition, he expressed concern regarding EWEB's promises to provide "cost-effective" access to the Internet, for example. He stated that because he did not think EWEB could guarantee some of the promises it was making, he would vote "no" on the resolution.
Vice President Bishop reiterated her concern that the joint resolution may set an unfavorable precedent. She said she would vote "yes" on the resolution because doing so was the next step in placing the Charter Amendment on the May ballot. She said placing the Charter Amendment on the ballot would allow for public discussion and afford a degree of legal protection needed in the event legal challenges are posed.
The motion passed, 4:1, with President Dyer opposed.
PURCHASING EXEMPTION FOR POWER RELATED FINANCIAL INSTRUMENTS
Referring to a memorandum dated March 2, 2000, copies of which were included in the meeting agenda packet, EWEB Purchasing/Risk Manager Debra Wright explained that the existing Wholesale Power Risk Management Policies adopted by the Board in November of 1998 authorize the trading of financial agreements with approved counter parties, with a term up to one year. She said industry practice for this type of trading is to pre-approve trading counter parties, price transactions as needed, and enter into the most cost-effective transaction. She said use of this practice requires an exemption to competitive bidding as provided for in the Oregon Revised Statutes.
Ms. Wright explained that during the 1999 legislative session, House Bill 3218 was passed, giving municipal electric utilities the express right to "enter into transactions with other persons or entities for the production, supply or delivery of electricity on an economic, dependable and cost-effective basis, including financial products, contracts, and other service contracts that reduce the risk of economic losses in the transactions." She said the bill was signed by the Governor on July 12, 1999, and became effective on October 21, 1999.
Ms. Wright said it was staff's belief that the use of financial transactions as authorized by HB 3218 is consistent with the use as authorized in the Wholesale Power Risk Management Polices. She said staff was therefore requesting that the Board, in its role as local Contract Review Board, issue an exemption from competitive bidding for this class of contracts.
Commissioner Smith said she was experiencing a growing discomfort with the frequency of competitive bidding exemptions and would appreciate a summary comparing the frequency of EWEB's exemptions to that of other public agencies. Mr. Berggren agreed to provide a summary.
The Board expressed support for issuing an exemption from competitive bidding for power related financial transactions. Ms. Wright said the matter would be presented to the Board again on March 21 and a public hearing would be scheduled.
ITEMS REMOVED FROM CONSENT CALENDAR
Referring to Consent Calendar Item 2, R&G Excavating, Inc., President Dyer requested clarification concerning how potential change orders, over a specified dollar amount, would be approved. Dick Helgeson, Director of Water & Steam Divisions, clarified that staff would present the Board with regular updates concerning change orders.
President Dyer moved, seconded by Commissioner Bartel, to approve Consent Calendar Item 2. The motion passed unanimously.
The meeting adjourned at 10:25 p.m.
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Assistant Secretary President