Board Members present: Dorothy Anderson, Peter Bartel, and Susie Smith. President Sandra Bishop and Commissioner Patrick Lanning were excused.
Others present: Randy Berggren, Dick Helgeson, Dick Varner, Marty Douglass, John Yanov, Cathy Hamilton, Gale Banry, Debra Wright, Dave Koski, Mel Damewood, members of the EWEB staff.
Vice President Anderson called the Regular Board Meeting of the Eugene Water & Electric Board (EWEB) to order.
AGENDA CHECK
Vice President Anderson indicated that item 4, Items from Board Members, would be moved to the end of the agenda.
APPROVAL OF CONSENT CALENDAR
Commissioner Smith, seconded by Commissioner Bartel, moved to approve the Consent Calendar as listed below:
Vice President Anderson said she had corrections to the minutes of the special meeting of October 17, 2001, and asked that they be withdrawn from the Consent Calendar.
Commissioner Smith amended her motion to withdraw the October 17 Work Session minutes. Commissioner Bartel seconded the amended motion. The motion to approve the Consent Calendar passed unanimously, 3:0.
CORRESPONDENCE
General Manager Randy Berggren reported that the public hearing on Eugene Water & Electric Board's west Eugene transmission line would occur on December 30 at 7:30 at Irving Elementary School in northwest Eugene, and that a public meeting on the proposed elimination of the Electric Revenue Allowance will also be held this Thursday night, here at EWEB in the Training Center at 7:00 p.m. He referred the Board to a memorandum regarding the Oregon Watershed Council's meeting to be held on December 4 at Eugene Water & Electric Board.
Mr. Berggren previewed the December 5 work session agenda.
Commissioner Smith expressed appreciation for the follow-up document on the Headquarters site letter to the City of Eugene Councilors.
Commissioner Bartel asked that the meeting of January 2, 2001, be changed to January 3, 2001. There was no objection. Mr. Berggren indicated he would check with other Board members to ensure that the date worked for them.
PUBLIC INPUT
Roxie Cuellar, Director of Government Affairs for the Lane County Homebuilders Association, said that staff was proposing a $60 increase in the water system development charges to keep up with the Engineering News Record (ENR) Construction Cost Index. She asked the Board to oppose the increase because the homebuilders could not afford it. She said that the price of low and moderate priced houses had maxed out and could not be raised, so builders were absorbing cost increases and not passing them onto buyers. The industry's goal was to make 10 to 20 percent on a house and that was down to five percent, and in the last year homebuilding in the community had slowed. She noted other proposed regulatory increases being considered by other agencies and said that they could not be absorbed by the homebuilders' members. Ms. Cuellar asked the Board to remember the many citizens employed in the construction industry.
PROPOSED 2001 BUDGET/WORK PLAN
Fiscal Services Supervisor Dick Varner joined the Board for the presentation. He provided an overview of the operating and capital budgets for the electric and water utilities.
Responding to a question from Commissioner Bartel regarding the impact of deregulation, Mr. Varner said that in southern California, constraints in natural gas transmission had caused the gas companies to interrupt their industrial customers' service and power plants. Power plants were being run on oil when gas was not available to keep them operating. He said that FERC had installed soft caps as a notional price of what was reasonable, while allowing people to bid higher if they could justify the higher price. The market price surpassed the soft caps nearly every day.
Commissioner Bartel asked how the region compared to other regions. Mr. Varner said that the west coast was lower than the east coast. Going into the winter, the latest reports were that the resource was very tight, particularly if any kind of cold weather happened.
Mr. Berggren said that there was an estimated 25 percent probability that the resource would be exhausted in a cold snap. It would not take much to send prices skyrocketing and reliability would rapidly become an issue.
Commissioner Bartel asked what would happen to low-income customers if rates increased. Mr. Varner said that it would put more emphasis on EWEB's universal service program. Commissioner Bartel asked if utility would have to increase program funds. Commissioner Smith said that the funding would not come from the federal government. Mr. Berggren suggested that the issue was one of many the Board would need to discuss. Mr. Varner noted that the increases contemplated were quite small compared to those requested by other utilities in the region.
Commissioner Smith believed that citizens would "flip" at the size of the contemplated increase. Increases three years in a row was very bad, and she was unsure three single digit increases three years in a row was a good idea. She suggested that a single two digit increase might be more appropriate. Mr. Berggren agreed. He said that the Board could discuss whether it wished to spread the increase out incrementally.
Commissioner Smith said that EWEB needed to educate the community immediately about what was going on in the energy market and what was driving EWEB's costs.
PUBLIC HEARING ON THE PROPOSED 2001 BUDGET/WORK PLAN
Vice President Anderson opened the public hearing.
Cindy Weeldreyer, Lane County Board of Commissioners, 125 East 8th Avenue, encouraged the Board to continue its efforts in spreading affordable telecommunications throughout the community. She thanked the Board for its participation in an effort to hook up the rural communities of Lane County.
Vice President Anderson closed the public hearing. She noted another opportunity for public comment would occur on December 5.
TELECOMMUNICATIONS PUBLIC AGENCY NETWORK PRICING POLICIES AND INTERGOVERNMENTAL AGREEMENTS
The Board was joined by Debra Wright, Risk/Purchasing Manager and Ken Beeson, Telecommunications Project Manager, for the presentation on the Public Agency Network (PAN) pricing policies and intergovernmental agreement. Ms. Wright noted staff members present and said they were instrumental in developing the Intergovernmental Agreement (IGA). She discussed the background of the PAN.
Ms. Wright reviewed the details of the IGA, which established the public agency network and identified agency responsibilities. She described the details of the network.
Ms. Wright noted the 12 members of the PAN: Eugene Water & Electric Board, City of Eugene, Springfield Utility Board, City of Springfield, Lane County, Lane Council of Governments, Lane Transit District, Springfield School District 19, School District 4J, University of Oregon, Lane Educational Service District, and Lane Community College. She said that EWEB would operate and maintain the network and other agencies would provide fiber.
Ms. Wright discussed next steps in process, suggesting it could be completed in 60 days, giving the Board the opportunity to formally approve the IGA. Responding to a question from Commissioner Bartel, Ms. Wright anticipated legal review by the legal counsels of the agencies involved, so the next iteration of the document the board saw would have had that review. If the Board had real concerns, she suggested members voice them now. Commissioner Bartel said that he was generally okay with the direction the process was going and would share specific concerns with Ms. Wright. He was unsure about whether EWEB should be first or last to approve the IGA. He said as clarification comes in terms of staff and Board commitments to the elements of the IGA, that might help him determine the answer to his question. Ms. Wright invited Commissioner Bartel to review the drafts of the IGA as it evolved.
Vice President Anderson suggested that the item come back to the Board when EWEB's legal counsel had an opportunity to review it. Ms. Wright agreed.
The Board indicated conceptual thumbs up to the IGA.
Ms. Wright reviewed the recommended pricing policies.
Commissioner Bartel asked how maintenance issues would be addressed. Ms. Wright said that a majority vote of the forum would dictate the outcome. She said that EWEB could not act independently in making such a determination. Staff indicated that a situation such as that mentioned by Commissioner Bartel was unlikely to arise. Commissioner Smith said that the PAN should have some form of agreed upon adjustment method so the Board was not in the position of having to make those decisions that were in conflict with the other partners. Staff indicated the annual update would be the rate adjustment opportunity. Ms. Wright agreed. Fiber in the air might be priced differently from O&M.
Ms. Wright overviewed a pricing example for the common equipment.
Ms. Wright indicated she would return on December 5 seeking action on the pricing policies.
STEAMS FUEL CHARGE ADJUSTMENT
Mr. Varner, Fiscal Services Supervisor, reminded the Board of an interim rate increase it approved earlier. He said that staff had returned with a new recommendation for rates. He said that fuel costs had risen but staff costs had fallen during the summer shutdown to balance out the deficit for the calendar year. Budgeted fuel costs for next year resulted in the $9 rate increase staff was recommending. He reviewed some rate options for the Board to consider.
Responding to a question from Commissioner Bartel, Dick Helgeson, Director of Water & Steam Divisions, noted the range of customers affected and the likely impact on their monthly billings. He noted no changes in the base rate had been made for ten years. He did not minimize the impact of the increase, however. He said that following the last increase EWEB had done outreach to impacted customers and worked with them to fine tune their systems so they worked well. He hoped some of that impact would be moderated by work EWEB did with its customers to make their systems work better.
Commissioner Bartel was concerned by the total of the increase over one year (30 percent). He said that at a certain point with large customers, the increases had an impact on profitability. He had been concerned about EWEB's remaining in the steam business and the potential of transitioning away from the service and helping customers to do the same. He asked if EWEB should be looking at an exit strategy, and what that might be. Commissioner Smith pointed out the alternative for most customers was the skyrocketing gas market.
Mr. Helgeson said he was concerned from the standpoint of the customers and from a competitive standpoint. In the past the operation had been heavily subsidized by the electric utility and had been operating in the black for ten years. Extraneous factors have caused the increases not in our control, and was concerned about the business position that puts us in. Staff is doing work on strategies to address long-term, particularly if gas prices stay high. He hoped to be able to report on an alternative involving cogeneration soon. In terms of a phase out strategy, he suggested that would have to play out given the realities of people's buildings over a three to five year period, and it would probably involve low interest loans from EWEB to fund conversion, or stretch out period and EWEB would still pick up some costs. He said that the question was given current circumstances and Board's determination to run in the black, should rates be increased. He said if the Board did not take action it was positioning the operation for a deficit that would have to be met from other sources.
Commissioner Bartel said his comments should not diminish the work done by staff to make the operation work. He believed that EWEB was nearing a crunch time when it had to rethink what it was doing and stop a band-aid approach. He said that the customers involved might not have good alternatives to turn to, but at a certain point he did not feel comfortable passing on rate increase after rate increase without having an alternative to offer to the customer. Vice President Anderson suggested it was the responsibility of the customers to seek alternatives. The customers had requested the service. Commissioner Smith agreed. Commissioner Bartel said that with the rate increases they might not be so supportive.
Vice President Anderson did not think the utility had a choice but to pass on the rate increase. Commissioner Smith agreed saying she didn't think there was more to be squeezed out of the service, which was being run as cheaply as possible. She agreed there might be a threshold at which the businesses buying steam might have to reevaluate the service but during the last major outreach they had indicated interest in retaining the service. She said it would be valuable to ask again, but questioned what choice the Board had in this instance. She thought it had no discretion, as the only other option was to subsidize the steam business with another operation. There was no cost cutting option available to the Board, although she acknowledged that it was distasteful to pass on the increase.
Commissioner Bartel understood the practical implications of the issue but questioned at what point the utility reached out to the customers and asked when they wanted to bail out. He felt that EWEB was reaching a price threshold at which it needed to get out there and ask customers what they wanted now that five years had passed since the last such discussion.
Mr. Helgeson said that staff was considering the range of options and the master planning process addressed the plant element of the question. He agreed it would be valuable for EWEB to touch base with its customers but did not want to threaten them with cessation of the service when it did so. The issues raised by Commissioner Bartel were in the work plan.
Mr. Berggren suggested that there was an issue of sequencing. He did not think that EWEB was ready to talk to the customers yet. He wanted a better understanding of the master plan implications and the potential of cogeneration. If the plant could co-locate with the U of O, that had substantial implications. That combination could affect significantly the discussion EWEB had with its customers.
Mr. Varner pointed out that EWEB did not know what the cost of the other options available to customers was, and whether they were a better economic alternative. Mr. Helgeson said staff understood Commissioner Bartel's concerns and were committed to examining them through the work plan.
Commissioner Smith spoke enthusiastically about the cogeneration potential.
Commissioner Smith, seconded by Commissioner Bartel, moved approval of fuel charges recommended by staff.
Commissioner Smith commended staff for their work with the key account people.
The motion passed unanimously, 3:0.
WATER SYSTEM DEVELOPMENT CHARGE ADJUSTMENT
Senior Rates/Financial Analyst John Yanov presented information on a proposed adjustment to the water system development charges (SDC). Staff was proposing a 3.3 percent increase, effective in January 2001. He noted that SDC revenues were projected to between $1.3 and $1.4 million, reduced from previous years.
Commissioner Smith, seconded by Commissioner Bartel, moved to approve the recommended increase in the water system development charges of 3.3 percent.
Responding to a question from Commissioner Bartel, Mr. Yanov said that the utility would not have the same revenue streams that it would have over the past few years. Mr. Helgeson said that if EWEB's rates are not keeping pace with cost of construction, combined with reduced income stream, will put in some jeopardy.
Responding to a question from Commissioner Bartel, Commissioner Smith said that by law the methodology would have to be changed to include a factor that was intended to fill a gap in revenues. Mr. Berggren said it would be contrary to the utility's philosophy as well.
Mr. Berggren said we need to cover cost escalators because at some point SDC would not cover those.
Mr. Helgeson indicated that, were the motion to pass, staff would send out information to affected rate payers. He noted that the customers were given benefit of the old rate and a 90-day period to make payment. If a project is in the pipeline prior to the effective date of the rate change a developer will be able to avoid the additional $60.
The motion passed unanimously, 3:0.
CONTRACT AWARD FOR MONTGOMERY WATSON CONSULTING
Project Manager Gale Banry joined the Board to discuss the contract award for Montgomery Watson Consulting. He reviewed the details of the contract and noted reasons for the cost shifts and increases.
Commissioner Smith said that the report on the item was great and she found it very helpful.
Vice President Anderson asked if the agencies were still pushing the flow issue. Mr. Banry said yes and no; NMFS indicated that because of the impacts of minimum flow near Walterville and the Endangered Species Act listing it might have recommendations. Oregon Department of Fish and Wildlife had responded by indicating it thought the issue had been addressed.
Commissioner Bartel, seconded by Commissioner Smith, moved to approve the contract.
ITEMS REMOVED FROM CONSENT CALENDAR
Vice President Anderson made the following changes to the October 17 Special Board meeting:
Page 1, last paragraph, first line: "had not been successful in maintaining adequate solar access provision."
Regarding page 2, second and last sentences: "She noted that she tried to explain to the committee that EWEB may not leave its current site and we would not make that decision until afer the consultants completed their analysis." "She commented that one of the consultants, a few of the committee members, and some of the staff for the committee, wanted EWEB to move off its site."
Commissioner Bartel, seconded by Commissioner Smith, to approve the minutes as revised. The motion passed unanimously, 3:0.
ITEMS FROM BOARD MEMBERS
Board members reviewed and revised a letter from the Board to the Eugene City Council. Vice President Anderson recommended that the letter go out under the signatures of the Board members present. Commissioners' Smith and Bartel agreed.
Commissioner Bartel, seconded by Commissioner Smith, moved approval of the letter as amended by the Board. The motion passed unanimously, 3:0.
The meeting adjourned at 7:55 p.m.
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Assistant Secretary President