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

Others present: Randy Berggren, JoAnn Andersen, Dick Helgeson, Tom Buckhouse, Jim Origliosso, Jim Wiley, Debra Smith, and Krista Hince of the EWEB staff; and John O'Connor, Facilitator.

President Lanning called the Special Board Meeting of the Eugene Water & Electric Board to order at 8:30 a.m.

At the request of Debra Smith, Telecommunications Project Manager, the Board and General Manager Randy Berggren reported on the results of their homework exercise. Staff recorded the results on flip charts.

Commissioner Masterson:

• Meets or exceeds, within tolerable limits, the needs of ratepayers-includes rates, customer service, water, and electric quality, etc.

Commissioner Anderson:

• To be the number one public utility in providing high-quality energy, water, and responsive service to our customers.

President Lanning:

• The difference between management and leadership: Management is about control and reaction, leadership is about vision. EWEB needs to provide leadership for the community--economically, environmentally, socially, politically, and symbolically. This happens in some areas, but other areas need improvement. When customers think of EWEB, they make connections with all those elements. If EWEB merely manages those elements, it ends up reacting and those in a leadership role end up being clear about where EWEB is going and why it is going there.

Vice President Farmer:

• Other things are nice, but customers only care about two things: reliability and reasonable cost.

Commissioner Bishop:

• Being the best utility means that 100 years from now everything written about public utilities mentions EWEB: EWEB has taken big risks, big gambles, made big mistakes, but never jeopardized basic customer satisfaction regarding reliability and reasonable costs within the ethics framework EWEB had.
• EWEB was already the best utility in the region and had a good reputation. How can it keep doing what it had been doing?
• A stable employee base was important. The Board consciously attempted to diversify the employment base in many ways.
• EWEB was a leader in the industry. First to try things, which means risk-taking.

Mr. Berggren:

• A measure of success would be that EWEB had the highest customer satisfaction rating of utilities in the nation. That required excellence in the governance of the utility that connected to the citizens in an authentic, direct way. EWEB was responsive to its customers and reflected their priorities and values.
• EWEB has a strong environmental ethic with a sustainability perspective that was an ever-present awareness that drove EWEB operations and policies.
• EWEB has the trust and confidence of its employees. It was a relationship of strength. Employees were passionate about and connected to their work for the best public utility.
• EWEB was entrepreneurial and innovative. EWEB was not the lowest cost provider but maintained a social obligation to its customers that placed it in a higher priced quartile.
• The best measure of EWEB's success is its customers.

Vice President Farmer asked if the public had been asked about its vision of what it would take for EWEB to be the best. He suggested the public's vision about cost could differ from Mr. Berggren's and the answer could be interesting. Mr. Berggren responded that his response related to governance as it related to the Board as representatives of the public as well as staff asking such questions of the public, seeking contemporary feedback from the customers about its priorities.

Corporate Services Director Roseanna McArthur noted that EWEB solicited information from its customers what was important to them, and cost and reliability were identified as highly important. When asked how well EWEB was doing in meeting their expectations, the public indicated EWEB was doing well. Even when rate increases were high, EWEB ranked at about 70 percent in terms of customer satisfaction. Vice President Farmer suggested that how the question was asked was important. If EWEB identified the tradeoffs between choices, the answer could change.

Commissioner Bishop did not think that EWEB could meet the ethical standards it set if it focused on being a low-cost utility.

President Lanning suggested a challenge that faced the Board was how to get its vision and values to match with those of employees. Mr. Berggren believed that over time, if the Board was strong in its sense of direction and acted on its values, employees would begin to self-select and choose whether to be in the organization. He acknowledged that took some time to change the culture of an organization.

Ms. McArthur cited Southwest Airlines as an example of an organization that had been able to use the values held by leadership to "create the institution." The company did not pay the highest salaries in the industry, but its employees felt a sense of loyalty, which was evidenced by its excellent customer service.

Commissioner Bishop stressed the importance of the hiring process as the first step in selecting employees who accept and embrace the ethics and service orientation of EWEB. She referred to the employees hired for customer service who had come from the telephone industry, and said that she was hearing from customers that in some instances those employees had not made the transition yet, and were not as service-oriented as other customer service representatives.

Speaking to Commissioner Bishop's remarks, President Lanning said that he had some experience with issues related to customer service, and he felt that there was a balance to be achieved between employee efficiency and effectiveness, and EWEB had to be careful to not shift too far to one side or the other. Commissioner Bishop agreed, and said some of the problems that were experienced by customers were probably driven by top-down directives related to the time spent by customer service representatives with customers. She suggested the Board should examine those policies. She said that EWEB should also give its employees more power so they know that they would not get in trouble for spending extra time on the telephone with a customer.

Ms. Smith suggested that creating clarity about the organization's goals helped to create a climate that allowed people to change. She recommended that the Board spend some time discussing its goals for customer service and satisfaction and where it wanted to be. That would help EWEB to create a climate that encouraged those values and where customer service representatives were aligned with the Board's goals.

Vice President Farmer wanted to ensure the organization's values were in line with the ratepayers, and he did not think the Board knew if that was the case. He thought there was value in finding out what those values were. Mr. Berggren suggested that it was a governance challenge to understand the diversity of the values held by different people and then determine how to act from there. Vice President Farmer believed he knew the values held by people when it came to how long they would wait on the telephone, but he did not know if they would pay more not to wait so long.

Commissioner Anderson did not believe the average ratepayer cared about much beyond the fact the lights turned on, the water was running, and the bill was not too high. Vice President Farmer concurred. He reiterated that ratepayers were concerned about reliability and reasonable cost.

Commissioner Anderson believed that the Board needed to identify EWEB's long-term values and test its work with the customers. Commissioner Bishop agreed.

The Commissioners briefly discussed the nature of the surveys EWEB's currently conducted.

Commissioner Bishop said that the Board was elected to represent the people, who did not have the time or inclination to make the kind of value judgment that the Board was talking about. People wanted their water, power, and a low bill. She said that it was the Board's challenge to determine how to represent those people. She believed that the Board represented the community's values by virtue of their election to the Board.

Commissioner Anderson was unsure that the Board could ask its customers about the tradeoffs that Vice President Farmer had earlier referred to. Vice President Farmer agreed it was a difficult question to ask but he did not think that the ratepayers were unable to express their values and opinions.

The Commissioners took a brief recess.

MISSION/PURPOSE DISCUSSION

Facilitator John O'Connor, Facilitator, joined the Board for the remainder of the agenda.

Mr. O'Connor solicited the Board's thoughts on the current mission statement, which staff recorded on flip charts.

• Distinction between customers and citizens of Eugene
• Is there value in the distinction?
• Customer versus shareholder in the context of private entity
• Why is there a difference?
• Customer/owner
• Is level of responsiveness to customers and owners different?
• Owners/citizens vote on funding-customers don't!
• What about commercial and industrial customers? Being in city has no representation benefits
• Contribution-in-lieu-of-taxes (CILT) on top of nonowner revenues does not benefit nonowners
• There are obligations to serve issues embedded
• Difference between meeting needs and being an outstanding provider - for instance 2001 ST debt and reserve depletion

REVIEW OF BOARD OPERATING PRINCIPLES

Ms. Smith provided the Board with copies of the operating principles developed in 1997.

Mr. O'Connor solicited Commissioner Anderson's view on how well the operating principles were working. Commissioner Anderson believed that the Board could do better. She said that development of the principles had been difficult. Commissioners had compromised to reach a consensus. She acknowledged she had not been happy with the results at the time the principles were developed, and she endorsed a further discussion of the principles to ensure they were the right ones.

Mr. Berggren agreed with Commissioner Anderson about the difficulty of the process, noting that it had occurred in the context of pending deregulation, which had an unknown impact. What staff had developed as EWEB's preferred market niche in a future deregulated environment had offended members of the Board at that time, and they lost confidence that staff understood the organization's values and ethics, particularly around the environment. The strategy was not reflective of the Board's principles, which were not written down. The Commissioners had directed staff to undertake the task for finding a consensus among Board members regarding the operating principles, which essentially had not been revised since that time.

Vice President Farmer clarified the definition of "renewables" with staff and the Board briefly discussed EWEB's investment in renewable energy and the definition of "sustainability."

Mr. O'Connor solicited the Board's thoughts on additions and revisions to the operating principles. Staff recorded the discussion as bullet points on flip charts.

• Add adaptability
• Not in agreement on definitions
• Work on definitions after values
• "Queue up" values discussion
• Quality

• Leadership
• Environmental stewardship
• Public Ownership/accountability
• Integrity, ethics, respect and fairness
• Value for customers
• Individual difference and creativity
• Business success
• Current mission does not embody issue of sustainability
• How do renewables and distributed generation (DG) fit together?
• How to balance price position with desire for renewables
• Kitzhaber sustainability is broader-would these points be a better placeholder?
• Sustainable-social, economic and environmental
• What is our social and economic obligation to our community? For instance - economic development
• Environmental is part of sustainability but not the defining point. You can be sustainable without environmental
• What is time frame for sustainable?

Commissioner Bishop suggested that the Board postpone future discussion of sustainability until it had former Governor Kitzhaber's definition. Mr. Berggren agreed, suggesting the Board clarify its principles and get better agreement about how the word was defined. There was general agreement.

Vice President Farmer suggested that the Board consider taking the first two statements under sustainability and put them in a category entitled "environmental." President Lanning and Commissioners concurred.

The Board took a brief recess.

Mr. O'Connor requested agreement about the bullets related to sustainability. He summarized the points made as follows:

• sustainability has an environmental definition as well as a fiscal definition and a social definition. He suggested that more input from staff might be necessary.

Commissioner Anderson expressed concern that the Board was getting away from the idea of long-range, unchanging bases for EWEB's operations, one of which was the value of public ownership.

• A second value was sustainability, both economic and environmental.

Commissioner Anderson said that, in other words, she was discussing assurance of the long-term availability of the resources necessary for EWEB to do its job. She cited as another value the flexibility to adapt changing needs and technology, or an openness to new ideas and change. If the Board could agree on those basic things, it could get into more details.

Commissioners agreed with Commissioner Anderson about the need for EWEB to be open to change as a value. Ms. Smith concurred with Commissioners Anderson and Masterson as to the value of the need for openness so the organization was sufficiently agile to respond to change.

Mr. Berggren observed that much of EWEB's strategic work was based on complexity theory, and complexity theory was adaptive. He said that there was a sort of science known as adaptive change management theory, developed around the question of how the world worked in a contemporary sense. He agreed that adaptability was an important principle that was embedded in how EWEB did its work, but it was not overtly acknowledged as such.

Commissioner Bishop questioned where EWEB's long-range values actually appeared. Ms. McArthur said that the values of the organization "were what they were"; one could not make them up. The Executive Team struggled with that question because there were some values that it would like to have, but when it looked for them, "they were not there yet." She cited cost management, noting that it was necessary to a well-managed organization, and EWEB worked at it, but it did not come as naturally to EWEB as an organization as did other things. Ms. McArthur referred the Board to a list of values developed by staff that Ms. Smith had listed on a flip chart. She said that the values were essentially those things that the organization had cared about over time.

Ms. Smith reviewed the key values identified by staff:

• integrity and honesty, doing the right thing;

2) quality and reliability and customer service;

3) a strong environmental ethic acknowledging the consequences;

4) the safety of the community, employees, and environment;

5) community citizenship;

6) hard work, individual productivity, and continuous improvement;

7) innovation; and

8) employees as a critical asset.

Ms. Smith indicated she would provide copies of the values to the Board.

Mr. Berggren said that the Board could seek to clarify and define its values, but he believed that when the Board began to identify those values, that created a sort of date-certain impetus for change. He suggested that the values actually could serve as a foundation for the Board's operating principles, which could speak to each value at a high level as well as address the issue of organizational ethics and the Board's obligation to the public in managing the organization. Mr. Berggren said that the Board then needed to evaluate the relative priorities of those values.

Vice President Farmer believed it was essential to set priorities because values could be contradictory. Mr. Berggren agreed. Vice President Farmer suggested that the Board establish its mission, establish its values, and then develop the operating principles that would allow the Board to implement those values.

Commissioner Anderson acknowledged Ms. McArthur's statement about the nature of the values. She noted that the Board changed with elections and resignations and future Boards might have different values. She suggested that the Board accept the values and develop the operating principles, keeping those values in mind. Ms. McArthur said that while the values might "be what they are," they may not be right, so part of what needed to happen was that the Board needed to identify additional values that the staff failed to identify.

Mr. Berggren said that Commissioner Anderson's point was well taken; the paradox of governance in such a public institution was that there was often more stability in the organization than on the Board. When he thought strategically about the future, he considered turnover on the Board as an uncertainty as well as a risk. If three new Board members shared a different idea about what it meant to be the best public utility, the implications of that in terms of his matching the organization to those expectations were significant.

President Lanning concurred with the remarks of Mr. Berggren and suggested that to some extent, the Board represented the diversity of the community. He held his own values and attempted to be open to the values of others because he represented people with views different from his own. He suggested that the development of values was a balancing act given the different people and views involved.

Commissioner Bishop commended the discussion, and said it touched on the value of public ownership to which Commissioner Anderson had earlier referred. She questioned why a libertarian would want to be on the Board unless it was their goal to sell the utility. However, she acknowledged it was possible for such an individual to be sufficiently flexible to be on the Board and "do the right thing." She said that she attempted to divorce her personal value system from Board decisions and to make decisions in the best long-term interest of EWEB. She acknowledged the fact the Board changed all the time, and the challenge that represented to maintaining consistent values. She stressed the value of education for new Board members in terms of the value of, for example, public ownership.

Vice President Farmer did not think it was good to have values that essentially represented a "snap shot in time" and recommended that future Boards periodically review the values.

Ms. Smith envisioned a process whereby the Board would examine the current value structure of the organization and identify those things that members would like to see changed. Staff would then work with the Board to develop a climate that would allow the changes to occur.

Responding to a question from Commissioner Masterson, Mr. Berggren anticipated that two upcoming Board meetings would be dedicated to a discussion of governance, which include further discussion of the Board's values as well as a discussion of bylaws.

Responding to a question from Commissioner Bishop about next steps, Mr. Berggren reiterated that he anticipated the Board would have a discussion about values, and he anticipated the outcome of that would be that the values would be documented by staff.

Ms. Smith distributed copies of the evaluation form.

Commissioner Bishop congratulated all Board members and staff on the process.

Commissioner Lanning adjourned the meeting at 11:45 a.m.

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Assistant Secretary President