Board Members present: Sandra Bishop, Dorothy Anderson, and Peter Bartel. President Mike Dyer and Commissioner Susie Smith were excused.
Others present: Randy Berggren, Gale Banry, Terry Bequette, Ken Beeson, Tom Buckhouse, Cathy Hamilton, Everett Jordan, Garry Kunkel, Roseanna McArthur, Laurie Power, Scott Spettel, Dick Varner, Debra Wright, Dick Varner, John Yanov, and Krista Hince of the EWEB staff; Frank Nearing, KLCC Radio; Jim Benedict, EWEB Special Counsel; Kim Kunkel, Minutes Recorder; and various members of the public.
Noting the absence of President Dyer, Vice President Bishop called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) to order.
AGENDA CHECK
Vice President Bishop determined that there was consensus to approve the agenda, as written.
APPROVAL OF CONSENT CALENDAR
Vice President Bishop noted that items presented for approval on the Consent Calendar included the following:
Commissioner Anderson requested that consideration of the February 15, 2000, Special Board Meeting minutes be pulled from the Consent Calendar.
Commissioner Bartel moved, seconded by Commissioner Anderson, to approve the Consent Calendar, with the exception of the February 15, 2000, Special Board Meeting minutes. The motion passed unanimously.
ITEMS FROM BOARD MEMBERS
Vice President Bishop reported that on March 17, she and EWEB General Manager Randy Berggren traveled to Vancouver, Washington to tour a solar power plant and attend a press conference during which both the Oregon and Washington governors spoke. She noted that the solar plant has developed a new method of growing silicon crystals.
CORRESPONDENCE
Mr. Berggren reminded the Board of the March 29 Work Session on EWEB's Master Plan. In addition, he reminded Commissioners of the Board Retreat scheduled for April 14-15.
Mr. Berggren reviewed agendas for the April 4 Work Session and Board Meeting.
PUBLIC INPUT
Eric Fullar identified himself as a local "network professional" and reiterated a number of points he made in a written statement submitted to the Board several weeks prior, including: 1) his support for EWEB's Telecommunications Project; 2) analysis of the future of broadband telecommunications is extremely difficult, much like predicting the future importance of roadways was in 1915; and 3) encourage EWEB to collaborate with telecommunications service providers, as they will have a stake in the final "product."
PROPOSED ELECTRIC RATE FOR LARGE GENERAL SERVICE CLASS
Referring to a memorandum entitled Large Customer Rates, copies of which were included in the meeting agenda packet, Mr. Yanov recalled that during the March 7 Board Meeting, some large customers spoke before the Board and requested additional time to meet with EWEB staff to discuss issues they had with the cost of service analysis. He said staff has since conferred with Large General Service Class representatives in an effort to clarify those issues.
With regard to EWEB's "Contract A" rates, Mr. Varner reported that staff explained to Weyerhaeuser representatives the major cost drivers behind the increase in Contract A rates. He said the primary drivers are power supply cost increases since the Contract A rates were last established at the beginning of 1998, and a change in methodology for allocating debt service costs.
Mr. Varner said EWEB responded to Weyerhaeuser's concern regarding the allocation of conservation in the Cost of Service Analysis (COSA) by explaining that it includes approximately 5 percent of revenue requirements to cover direct conservation costs and an additional allocation to cover indirect costs associated with conservation. He said EWEB provided Weyerhaeuser with an analysis that indicates EWEB has been spending an average of $500,000 per year on incentives for its facility.
Mr. Varner said staff's impression was that the phase-in of the COSA impacts already included in the rate proposal had addressed Weyerhaeuser's concerns to the extent possible without changing the fundamental basis for the COSA.
Vice President Bishop inquired as to whether a decision by EWEB, based upon changing revenue demands, to not phase-in the second rate adjustment would impact other customers. Mr. Varner responded that the impacts would vary among small, medium, and large general service customers. He said the Board can always decide to not implement anticipated rate increases. Mr. Varner said staff would not propose implementation of the second phase until an updated COSA was conducted to determine the rate action appropriate at the time.
With regard to EWEB's "Contract B" rates, Mr. Varner reported that staff was continuing negotiations with Hyundai and were hopeful in terms of reaching a resolution in the next several weeks. He said EWEB was working on a power supply arrangement which appears to have promise in reducing the near term power supply cost impact on Hyundai without adversely impacting the power supply costs of any other customer class. He said this should make other cost allocation issues relatively less significant.
Mr. Varner said Hyundai has asked EWEB to consider extending the existing agreement by 15 months, to March 31, 2003, for three reasons: 1) Hyundai has considerable uncertainty in its business and would like more certainty about power supply costs; 2) Hyundai is considering whether to build another phase in Eugene and would not want to be negotiating power supply for the new phase and the existing phase at the same time; and 3) Hyundai is considering co-generation at its site and wants to make sure it has power supply secured through the evaluation and potential construction time. Mr. Varner stated that in its initial review of Hyundai's request, EWEB staff has no major objections.
With regard to EWEB's Large General Service class, Mr. Yanov reported that in reviewing the COSA in detail with EWEB's customers, staff has identified two allocation errors. He said the first error concerns secondary distribution transformer expenses. He said some of these were erroneously allocated to Contracts A and B which do not take service at secondary voltages. Mr. Yanov stated that staff does not believe it is necessary to reopen consideration of the rates of the classes already decided since the impact on those classes is within the margin for error of the COSA allocation as a whole.
Mr. Yanov explained that the second error involved not allocating any Electric Marketing cost to Contracts A or B; however, this error reduces the COSA requirement for the Large General Service Class by a little under one percent.
Mr. Yanov explained that a second issue revolves around the perceived large increases for customers served at primary who are included in this new Large General Service class. He stated that under the old rate schedules, a customer who received primary service would have a bill which was 10 to 15 percent lower than a similarly sized customer which received service as secondary voltages. In the new COSA, EWEB's results indicate that the bill differential should be closer to two or three percent. Mr. Yanov stated that staff believes it would be fair of EWEB to mitigate the impacts on large, primary customers by offering them a phase in similar to small customers and Contract A customers. He said this can be accomplished by offering a somewhat larger differential between primary and secondary service than indicated in the COSA. He said this would moderate the bill increases for large, primary customers and give smaller bill decreases to large, secondary customers. Mr. Yanov said there would be no impact on other customers classes.
Mr. Yanov said a third issue relates to contracts for University of Oregon and Willamette Industries. He said these two customers peak at over 9.5 megawatts with relatively high load factors. He said that in both cases, they are bringing on new loads this year which will place them very near the 10 megawatt cutoff for the Large General Service class. He noted that both customers plan to add additional load which would definitely place them over the 10 megawatt cutoff. Mr. Yanov said staff believes it is therefore timely to begin negotiations on separate service contracts, followed by COSA work, to price the implementation of the new contracts. He said staff estimates that it will take three to six months to develop the new contracts and conduct the COSA work.
Mr. Yanov reviewed staff's recommendations concerning EWEB's Large General Service class, as follows:
PUBLIC HEARING ON PROPOSED ELECTRIC RATES FOR LARGE GENERAL SERVICE CLASS
Vice President Bishop opened the public hearing on proposed electric rates for Large General Service class customers.
Tom Quesenberry, speaking on behalf of Willamette Industries' employees and management team, expressed support for Board approval of staff's recommendation and expressed appreciation for the additional time Willamette Industries was given to review the COSA. Mr. Quesenberry said Willamette Industries wants to "pay its share"of the cost of service and believes that a contract would accomplish that. With regard to the three-to-six month time frame for completing the contract, Mr. Quesenberry encouraged EWEB to complete the contract in three months.
Vice President Bishop closed the public hearing.
PROPOSED ELECTRIC RATES FOR LARGE GENERAL SERVICE CLASS
Mr. Yanov requested Board approval of the five recommendations reviewed by staff and included in the March 16, 2000, memorandum entitled Large Customer Rates.
Commissioner Anderson moved, seconded by Commissioner Bartel, to approve the five recommendations reviewed by staff and included in the March 16, 2000, memorandum entitled Large Customer Rates, with the understanding that staff would complete the contracts with the U of O and Willamette Industries in an expedient manner. The motion passed unanimously.
UPDATE ON ENDANGERED SPECIES ACT CONSULTATION
Referring to a memorandum entitled Endangered Species Act (ESA) and EWEB Operations, copies of which were included in the meeting agenda packet, Environmental Manager Laurie Power presented an overview of three ESA sections that are particularly pertinent to EWEB and reviewed actions EWEB is pursuing to ensure its compliance with the Act for EWEB's non hydro-related activities.
Referring to a series of overhead projections, Ms. Power presented a brief overview of species included and proposed for inclusion on the Endangered Species List.
Ms. Power presented an overview of several "key" sections of the ESA, as follows:
Ms. Power reviews a list of activities "very likely" to result in take and those that "may result" in take. She then presented a brief overview of exceptions to Section 4(d) that are designed to encourage local action and development of programs tailored to local conditions. She said an example of an approved program includes NMFS evaluation of activity and existing programs and determination that no additional protection is needed. (Examples: habitat restoration activities, properly screened water diversion devices, routine road maintenance in Oregon, etc.)
Ms. Power presented an overview of the many activities for which EWEB may have to undergo consultation.
EWEB Relicensing Project Manager Gale Banry presented a brief overview of EWEB's ongoing discussions, "Section 7 consultations," with FERC and two federal fisheries agencies, National Marine Fisheries Services and U.S. Fish and Wildlife Service regarding the impacts of EWEB's McKenzie hydro projects on listed fish. EWEB has created an innovative approach that, to date, appears to be working well.
Mr. Banry presented an overview of the proposed ESA schedule in terms of drafting/finalizing a Biological Assessment (BA) and generating/obtaining approval of a Biological Opinion (BO). He said appropriate action, based upon the FERC decision, would be taken at the conclusion of the ESA process. He said the ESA process is scheduled to conclude during the summer of 2001.
Ms. Power said she would return to the Board for quarterly check- ins with the Board regarding the ESA process.
TELECOMMUNICATIONS DEVELOPMENT -- AGENCY FIBER LEASING
Referring to a memorandum entitled Telecommunications Agency Fiber Leasing, copies of which were included in the meeting agenda packet, Purchasing/Risk Manager Debra Wright and EWEB Telecommunications Project Manager Ken Beeson presented an update on the status of agency telecommunications fiber leasing and solicited comments and questions from Commissioners.
Ms. Wright recalled that the Telecommunications Phase II Vision is to "Develop a locally owned and managed high speed broadband network throughout the City of Eugene that provides:
Ms. Wright then recalled what the joint resolution passed by the EWEB Board and City Council states that "In the planning, development and implementation of EWEB's Telecommunications Activities, EWEB shall: 'Work with local public agencies , including general governments, schools, and other organized public telecommunications consortia to develop a cost-effective and universally accessible system to serve public needs.'"
Ms. Wright reported that EWEB is currently working through issues of terms and pricing in its recent and renewed discussions with original Fiber Optic Group (FOG) members.
Commissioner Bartel said he would like additional information regarding how the proposed pricing was calculated. He said an agency's "ability to pay" seemed like a separate issue. Mr. Beeson responded that EWEB has few models to emulate in terms of leasing and pricing dark fiber. He stated that in terms of leasing fiber to local agencies, such as schools, EWEB was concerned with recovering its costs while providing a valuable service. He said local agencies appear to consider the proposed pricing reasonable.
Ms. Wright stated that, given the financial difficulties of the school districts, connecting local high schools to fiber was questionable. She said it would likely depend on whether the schools obtain additional revenue in May. She stated that if schools are connected, the Board must determine its stance on offering different rates to different agencies based on their ability to pay.
TRANSFER OF SMITH FALLS LICENSE
Referring to a memorandum entitled Smith Falls Hydroelectric Project, copies of which were included in the meeting agenda packet, Jim Benedict presented a brief overview concerning the transfer of Smith Falls Hydroelectric Project assets and the associated time line. Mr. Benedict stated that the transfer would be completed prior to the end of 2000.
Mr. Benedict stated that if the transfer was approved by the Board, staff would submit an application for transfer of the FERC license within the next couple of weeks. He said staff expects FERC approval in early fall of 2000. Mr. Benedict stated that in the interim, staff would work on other tasks related to the transfer.
Commissioner Bartel moved, seconded by Commissioner Anderson, to approve a resolution authorizing the General Manager to execute any and all contracts and agreements necessary to transfer the assets of the Smith Falls Project to EWEB ownership. The motion passed unanimously.
PURCHASING EXEMPTION FOR POWER RELATED FINANCIAL INSTRUMENTS
Referring to a memorandum entitled Exemption to Bid for Power Related Financial Transactions, copies of which were included in the meeting agenda packet, Ms. Wright stated that in April, she would request Board approval of a resolution authorizing exemption from competitive bidding process for financial instruments related to the procurement of electric power.
PUBLIC HEARING ON PURCHASING EXEMPTION FOR POWER RELATED FINANCIAL INSTRUMENTS
Vice President Bishop opened the public hearing.
Having determined that there were no members of the pubic present who wished to address the Board, Vice President Bishop closed the public hearing.
UPDATE ON RESOURCE ACQUISITION DECISIONS
Referring to an overhead display, Scott Spettel presented an overview of the following EWEB renewable resource project options:
Hydroelectric:
As the result of a brief Board discussion concerning the contractor who would build the project, Commissioner Bartel cautioned staff against utilizing a contractor with whom EWEB has experienced difficulties in the past.
Commissioner Bartel inquired as to the level of staff and financial investment involved in reviewing and assessing the viability of this project.
Mr. Spettel responded that some staff time, measured in hours rather than weeks would be required for staff to complete a "due diligence" review of the project. He estimated that 40 hours of staff time would be required for an adequate review.
Wind project alternatives--timing dictated by tax credit expiration:
Noting that the preceding was a preview of what was to come, Mr. Spettel said a more refined proposal of EWEB renewable resource project options was forthcoming.
ITEMS REMOVED FROM CONSENT CALENDAR
Referring to the attendance section on page 1 of the February 15, 2000, Special Board Meeting minutes, Commissioner Anderson noted that Jim Thraikill's name was misspelled.
Referring to page 2 of the minutes, Commissioner Anderson requested that the first sentence under Items From Board Members be amended to read: "At Orval Etter's request, Commissioner Anderson distributed part of his testimony he had not been able to read at the City Council's public hearing on EWEB's proposed Telecommunications Charter Amendment."
Commissioner Bartel moved, seconded by Commissioner Anderson, to approve the minutes of the February 15, 2000, Special Board Meeting, as amended. The motion passed unanimously.
The meeting adjourned at 10:05 p.m.
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Assistant Secretary President