Board Members present: Patrick Lanning, Ron Farmer, Sandra Bishop, Dorothy Anderson, and Henry Masterson

Others present: Randy Berggren, Debra Smith, Jennifer Joule, Jean Meyers, Roseanna McArthur, Dick Varner, John Yanov, Dick Helgeson, Marc Anderson, Jay L'Estrange, Mat Northway, Terry Bequette, Jim Maloney, Lance Robertson, Jim Origliosso, Scott Spettel, Jim Wiley and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene Minutes Recorder, and Mary Feldman, City of Eugene Deputy City Recorder.

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board (EWEB) order at 7:44 p.m.

AGENDA CHECK

It was decided to alter the agenda so as to give the oath of office to Henry Masterson prior to any other portion of the agenda.

OATH OF OFFICE FOR APPOINTED COMMISSIONER HENRY MASTERSON, FOR WARDS 6 AND 7

Deputy City Recorder Mary Feldman administered the oath of office to Commissioner Masterson. Commissioners and staff welcomed him.

APPROVAL OF THE CONSENT CALENDAR

Minutes

• October 15, 2002 Work Session, the January 21, 2003, Special Board Meeting, the February 4, 2003 Regular Board Meeting, and the February 6, 2003, Executive Session and Special Board Meeting.

Bylaws Extension

• Approval of recommendation for General Manager to extend the period for review of EWEB Bylaws until June 1, 2003.

Business Service Agreements

• PeaceHealth (Access EAP) - Employee Assistance Program - Human Resources - Corporate Services Division - $20,000

4. Advanced Security, Inc. - Contract Extension - Facilities Services Division - $30,000

Intergovernmental Agreement

• Intergovernmental Agreement - Santa Clara Water District, Irvington Drive Main Replacement - Water Division - $397,000 to be reimbursed at actual cost plus applicable overhead margins

Other

• Enabling Agreements for Financially Hedging Power Risk - Fiscal Services - Financial Services Division.

Vice President Farmer abstained himself from voting on Item (6) of the Consent Calendar due to a conflict of interest.

Commissioner Anderson moved, with a second from Commissioner Bishop, to approve the Consent Calendar with the exception of Item (6), which authorized the General Manager to enter into enabling agreements for financially hedging power risks. The motion carried unanimously.

ITEMS FROM BOARD MEMBERS

Commissioner Anderson asked if the Harrison letter had been answered. Mr. Berggren responded that a response would be developed.

Commissioner Anderson thanked the Board and staff for the cards and flowers she received while recovering from her recent surgery.

Continuing, Commissioner Anderson commented, regarding the issue of including a billing for the City's transportation fee in the EWEB bill, that she would be amenable to this if the current wastewater charge could be billed separately along with the fee. She said that if they took all the billing of City of Eugene issues and included them as a separate billing, then she would be agreeable to something like that.

Vice President Farmer reported that he and President Lanning had continued to work on the General Manager's salary and compensation plan. He said that this needed to be addressed at the Board level by 2006, adding that they had developed a methodology for the change. He stated that he and President Lanning were trying to work some of the changes into a plan for performance measurement in the present year.

Commissioner Bishop reported that she and Commissioner Masterson were going to tour the water filtration plant.

Regarding the staff memorandum from Marty Douglass, Public Affairs Manager, Commissioner Bishop stated that she had attended a meeting of the McKenzie Valley neighbors and that they were angry about the clear-cut around the canal. She stressed the importance of taking action to remedy the situation. She asserted that EWEB had promised to remove slash piles by June 30 and that this commitment must be met. Commissioner Bishop stated that there were also issues with the chevrons in river immediately downstream of the Walterville Canal intake. Vice President Farmer asked if there were environmental issues to consider when working on these. Mr. Berggren explained that the workers were waiting for the right "flow" conditions. Mr. Wiley added that there had been trouble with the chevrons when they were installed, due to high flow conditions, but that staff had to wait until the water level dropped in order to take a look at the problem.

President Lanning welcomed Commissioner Masterson to the Board and thanked him for his willingness to serve the community.

President Lanning stated that he would like to maintain a meeting limit and end all meetings by 9:30 p.m.

Regarding the continued work on the compensation and salary package for the General Manager, President Lanning echoed Vice President Farmer and affirmed that the work was moving forward.

CORRESPONDENCE

General Manager Randy Berggren reported the following:

• Staff had provided the foundation for a response to the Etheridge letter.
• A Work Session was scheduled to address the financial policies of the utility.
• The Regular Board meeting would include discussions on the long-term power portfolio and a staff response to the 2003 financial tool kit.

PUBLIC INPUT

Patrick Donnelly of Leaburg expressed his outrage at the destruction along the scenic McKenzie highway. He felt that there was no representation of the 4,200 residents of the area in the EWEB administration. He felt that the behavior of the utility was rude. He said that he now lives in a clear cut and that the canal was filling up like a swamp. He wanted the utility to be accountable for its actions and to follow through with removal of the stumps and slash piles. He circulated a letter from Representative Peter DeFazio regarding this. He stated that the letter indicated that there were other options that the utility could have pursued.

Amy Danziger explained that she had been charged for re-connection fee for electric services in error as the utility had been clearly instructed as to what day to disconnect power and had disconnected one day early. Customer Services Director JoAnn Andersen met with her to resolve the issue.

David Parker praised EWEB for the work done so far with the philosophy that had contributed to the creation the "finest conservation program in the state." He related that the photo-voltaic program had been stopped on February 10 due to the financial crisis. He said that this created a $1.5 million impact to the local economy. He stated that local businesses had indicated a great deal of interest in the program but that this would now be curtailed. He urged EWEB to maintain the program, even if it was necessary to provide less support for it. He added that it was "okay" to raise rates in this time of financial trouble and that the increase only came to "two lattés a month."

Vincent McLellan complimented EWEB on its photo-voltaic and distributed generation programs. He said, for the money spent, it was a highly worthwhile program. He felt that the program greatly helped to educate the public. He noted that the large project on top of the Pacific Co-op building in downtown Eugene helped the public to understand the benefits of solar energy. He asserted that solar energy aided in the reduction of line loss and helped abet the peak hours, between noon and 6 p.m. He encouraged EWEB to continue the program.

Newt Lokin explained that he worked for Solar Assist since 1994. He commended EWEB for the long history of energy conservation and noble programs. He stated that these programs would continue to benefit energy customers into the future. He related that his business had participated in both the residential and commercial programs and had found them to be extremely helpful. He commented that EWEB was a leader in conservation at a time of critical energy decisions with a global impact and that, should EWEB balk at supporting solar energy, it would cause other utilities in the region to be more hesitant. He stressed that withdrawing support for the program also negatively impacted solar contractors.

Larry Braun, Cedar Flats, advocated for the elimination of the tiered rate structure. He stated that his rates had increased by 25 percent. He thought that part of the rate increase was due to poor decisions made by EWEB. He opposed the Contribution In Lieu of Tax (CILT) to the City of Eugene. He felt that the McKenzie Valley should form its own utility district and opined that EWEB was run solely for the benefit of the City of Eugene.

ELECTRIC FLAT RATE PROPOSAL

Senior Rates/Financial Analyst John Yanov welcomed Commissioner Masterson to the Board, then began his presentation, as outlined in the memorandum entitled Tiered vs. Flat Residential Electric Rates. He noted that there was no rate increase involved in this particular proposal.

In response to a question from Vice President Farmer, Mr. Yanov stated that a total of 72,000 households were affected by this.

Energy Management Services Manager Mat Northway estimated, at Vice President Farmer's request, that 25 percent of the customers used gas appliances, but that he thought that less than that heated with gas.

President Lanning asked if there was evidence that customers were increasing their energy conservation due to the tiered rates. Mr. Northway responded that some cuts in power usage were observed, but that it was difficult to determine what drove the cuts. He believed that the tiered rates had an impact on power usage.

Commissioner Bishop asked if it would be possible to adjust the rate structure to take into consideration the power usage of people with large families and large homes with all electric heat. Mr. Yanov felt that the tiers could be narrowed to two tiers.

PUBLIC HEARING - ELECTRIC FLAT RATE PROPOSAL

President Lanning opened the public hearing.

Pauleen Hudson, 1025 Taylor Street, said that changing to the flat rate structure would increase power costs to her home by 20 percent and that this would adversely affect her budget. She related that she had heart problems that prevented her from working and that, as it was, she paid her electric bill in payments. She felt that the tiered rate system encouraged conservation and that high usage customers should pay more. She supported maintaining the tiered rate structure.

Joe Downing, 3050 Whitbeck Boulevard, opposed tiered rates. He felt that utility bills should not be progressively tiered to usage. He advocated for focusing on peak usage.

Kit Kirkpatrick, 342 Rosewood Avenue, expressed appreciation for the work that the Board does. She stated that when the Board was stressing the importance of conservation during the last winter drought she had purchased efficient appliances and taken many stringent energy conservation measures. She felt that a return to a flat rate structure would be a disincentive to energy conservation and also would not reward the efforts that she and many others had made to restrict their energy usage.

Rob Handy, 455 &Mac189; River Road, commented that tax policy included both incentives and disincentives. He affirmed that it was good to reward people who had done their civic duty. He thought that, though some of the formulas might need to be changed, the tiered rates were in alignment with the framework and duty of EWEB to guide the community toward conservative energy usage.

Ruth Deumler, 1745 Fircrest, supported retaining tiered rates. She spoke on behalf of people with limited incomes, senior citizens, disabled citizens, and students, stating that a 36 percent increase created too much of an impact. She encouraged the utility to expand and reward energy conservation. She noted that the price of electricity had doubled over the past three years.

David Hinkley, 1350 Lawrence #6, called tiered rates an "abomination." He said that the utility should not be social engineers and that energy assistance was being provided to people who needed it. He also said felt that the utility paid no attention to the unique needs of rural customers. He advocated for recruiting Board members from the rural outlying areas that EWEB provides power for. He suggested that the CILT from the rural residents should be given to the county and not the City of Eugene.

Jo Lowry, 3255 Olive Street, explained that she owned a 40-year-old house that was all electric. She stated that she had done "everything" to conserve energy and listed some of the conservation measures she had employed. She stressed that she was not a luxury electricity user but still fell into the third tier. She opposed tiered rates.

Sean Boles, 105 North Adams, congratulated Commissioner Masterson. He supported employing the tiered rate structure. He stated that the tiered rate structure recognized resource limits, provided savings to 75 percent of utility users, encouraged conservation, and was compatible with City and EWEB policy. He noted that the chief complaints against the tiered rate structure were from people who used more energy and staff's assertion that the flat rate structure was easier to explain. He suggested that the Board should drop this issue and move onto something more important.

Eleanor Mulder, 2775 Emerald Street, advocated for maintaining the tiered rates. She stated that the utility was "doing the right thing " and encouraged energy conservation. She felt that more conservation education and more subsidization of weatherization for landlords and property owners would help people to accept the tiered rates. She commented that it seemed old-fashioned to encourage the past behavior of too much energy used.

Jim Seaberry, 3284 Stark Street, said that he had originally opposed tiered rates but that he had changed his mind since the structure had been instituted. He felt that it was bad management to sell an increase based on a tiered rate system to the public and then to throw it out 18 months later.

Jozef Zdizneiwski, 1025 Taylor Street, stated that in the ongoing drought conditions and the lowered availability of electric power from the Bonneville Power Administration (BPA) the tiered rate structure helped encourage conservation. He supported retaining tiered rates.

John Heinz, 632 Fairfield, spoke in opposition to flat rates. He felt that 18 months was not a long enough period of time to adequately analyze the impact of tiered rates. He agreed with the previous speaker that the utility had no control over the snow pack and no control over BPA power rates. He stressed that the only control the utility had was over the usage of electricity. He likened the tiered rate structure to the "carrot-stick approach" and supported its retention.

David Parker encouraged the Board to stay with the tiered rate structure. He stressed the importance of maintaining consistency in the Board's actions. He said that, looking to the future, the population was predicted to substantially increase in Lane County, and that the only way to address the increasing need for power was through conservation. He called conservation the "best resource available." He asked, and Mr. Yanov confirmed, that 75 percent of energy users have lower bills with tiered rates.

Ted Hyde, 2421 Madrona Drive, supported the tiered rate structure. He felt that tiered rates encouraged stewardship of the environment and conservation.

Camilla Pratt, 120 West Broadway, called EWEB a leader among publicly owned utilities. She felt that the tiered rate structure should have been employed "20 years ago." She stressed that she was a senior citizen on a fixed income and did not want to pay more so that higher energy users could pay less.

Vincent McLellan, Lowell, supported the tiered-rate structure. He stated that the more power that energy customers used, the more the power cost. He stressed that there were energy efficient solutions available for all tiers.

Kevin Franken, 1745 Fir Crest Drive, spoke in support of the tiered rate structure. He felt that EWEB would be going against the grain of public sentiment should it choose to revoke the rate structure. He stated that he was a poor student of the University of Oregon and could not afford to pay more. He commented that customer confusion was not a good excuse to revert to the flat rate structure. He added that paying more to use more electricity made sense.

There being no one else who wished to speak, President Lanning closed the public hearing.

Commissioner Bishop likened the tiered rate system to a "blunt instrument." She felt that there had been much public feedback that it needed to be changed.

Commissioner Anderson commented that the third tier was hit hard by the structure, but that she was not ready to support a change back to the flat rate structure.

Vice President Farmer related that he had heard many complaints regarding the tiered rate structure from large families and senior citizens with large homes. He said that he had reservations about tinkering with the tiers, adding that the utility could "social engineer this to death." He felt that the focus on conservation was too narrow and that tiered rates also encouraged the use of fossil fuels.

Commissioner Masterson commented that the Board should not micro-manage, but rather should look at the alternatives prepared by staff to determine how the system could be improved.

In response to a question from Commissioner Anderson, Mr. Yanov said that to soften the impact of the tiered rate structure the utility should increase the amount of tiers to five and not reduce the tiers to two. He noted that the tiered structure that EWEB uses was not unusual, adding that the third tier in Seattle was comprised of 1 percent of the population.

President Lanning shared some of the same concerns that Commissioner Bishop and Vice President Farmer expressed. He commented that he had expected to hear opposition to tiered rates at the hearing. He welcomed staff feedback on the concerns raised and opinions expressed by the members of the public who testified. He clarified, at staff's request, that he would like to find out if there had been a substantial increase in energy conservation and that he would like more information on the tiered rates that the City of Seattle was utilizing.

Mr. Berggren remarked that the situation was complicated by the 35 percent increase in power costs as it was difficult to quantify exactly where an increase in conservation measures used by customers had resulted from. He added that he felt somewhat opposed to a five tier rate as it was unclear as to how to finesse such a thing.

Vice President Farmer stressed that he was philosophically opposed to having all-electric customers subsidize gas users.

Commissioner Bishop commented that she had faith that EWEB customers would not cease to employ conservation measures should the utility revert to the flat rate structure. She added that the statement that 75 percent of the utility customers were saving money was misleading and stressed that 100 percent of EWEB customers were experiencing an increase in their utility bills.

Commissioner Anderson said that she would like to increase the first tier, leave the second tier as it was, and lessen the amount that the third tier was charged.

President Lanning declared that this was not the time to tinker with the structure of the tiers.

Vice President Farmer reiterated his support for a return to the flat rate structure.

Commissioner Bishop advocated for a return to the flat rate structure.

Commissioner Masterson suggested moving forward with the tiered rates. He commented that it may be too soon to tell if the system needed fixing. He felt that the Board needed to move forward from this and focus on the budget crisis.

President Lanning expressed a strong concern that tiered rates were not accomplishing what they were set forth to do. He related that feedback he had received via email and the telephone was somewhat evenly split. He felt that the Board needed more feedback from staff and from the community.

Mr. Berggren offered to provide a general response to concerns raised about the subsidization of natural gas users by electric power users.

ELECTRIC RATE INCREASE

Mr. Berggren explained that the utility was on a critical path in terms of the Board being able to act on a rate increase by June. He stated that, should the rate action be deferred until October, the time element was not so critical, but that the Board had not identified and reached consensus on enough reductions to make the delay a fiscally responsible move.

Vice President Farmer suggested that pushing the commercial paper payments back by two months could add $1 million.

Mr. Berggren stressed that a rate increase would be unquestionably necessary in October and that a delay could only be accomplished by making the tool kit reductions.

Mr. Varner stated that looking at the tool kit level of $8 or $9 million, a delay of a rate increase to October would force the surcharge to be left on the bill two to four months beyond 2005, providing there had been adequate rainfall.

Mr. Yanov related that other public utilities were holding public hearings and advocating a 5 percent increase to electric rates. Mr. Berggren added that if the April, 2003, BPA rate increase was not passed through to customers, the utility will have swallowed two rate actions.

Mr. Varner added that EWEB had under-recovered the BPA cost from October of 2001 to April of 2002 due to the Slice true-up bill in the amount of $5 million.

Mr. Yanov projected that the BPA was looking at continuous increases in power costs.

In response to a questions from President Lanning, Mr. Varner said that more data would not be available until August.

Vice President Farmer reiterated his support for $8.8 million in the tool kit for 2003, adding that he felt that the rate increase should be instituted in October of 2003. He stressed the importance of publicizing the efforts the Board was making to keep rates from going up.

ELECTRIC RATE INCREASE PUBLIC HEARING

President Lanning opened the public hearing, and noted that the first speaker was addressing tiered rates as he had been unable to arrive earlier in the meeting.

Don Maher, 2794 Lycium Way, stated that he had taken many conservation measures. He said that tiered rates had raised his rates and that he was unable to take any further conservation measures, so far as he knew.

Jim Seaberry commented that the Board needed more data and encouraged staff to provide the data in a timely manner. He opposed the increase, stating that he could not afford it.

David Parker urged the utility to keep the .3 percent of gross revenue conservation adder. He related that he had a business interest in Southern California and that the utility there had a five tier rate structure. He said that people at the fifth tier were paying 27 cents per kilowatt hour. He stressed that the utility was only looking to increase rates from 8 cents to 8.5 cents per kilowatt hour. He reiterated that a BPA rate increase should be passed through to the customers.

There being no one else wishing to speak President Lanning closed the public hearing.

Commissioner Anderson favored increasing rates in the spring.

In response to a question from Commissioner Anderson, Mr. Varner stated that the next stream flow numbers would be available on March 20. He projected that stream flow would be at 80 to 85 percent of normal generation. He added that forecasts come out every two weeks and there would likely be one more forecast prior to a potential rate action in April.

President Lanning summarized the discussion by saying that it seemed that Board sentiment indicated that the rate increase should be instituted in October, 2003.

ITEMS REMOVED FROM THE CONSENT CALENDAR

Vice President Farmer explained that he had recused himself from Consent Calendar Item (6) due to a conflict of interest.

Commissioner Bishop moved to adopt the memorandum dated February 6, 2003, empowering the General Manager with the authority to enter into enabling agreements for financially hedging power-related risks. Commissioner Anderson provided the second. The motion carried unanimously, with one abstention (Vice President Farmer).

President Lanning adjourned the meeting at 10:29 p.m.

_____________ ______________________________________

Assistant Secretary President