Board Members present: Patrick Lanning, Ron Farmer, Sandra Bishop, and Mel Menegat. Commissioner Dorothy Anderson was excused.

Others present: Randy Berggren, JoAnn Andersen, Marc Andersen, Tom Buckhouse, Terry Bequette, Ken Beeson, Marty Douglass, Mel Damewood, Dick Helgeson, Jim Origliosso, Debra Smith, Jim Wiley, Dick Varner, and Krista Hince of the EWEB staff; and Joe Sams, City of Eugene Minutes Recorder.

AGENDA CHECK

President Lanning convened the Eugene Water & Electric Board (EWEB) meeting to order at 7:40 p.m.

APPROVAL OF CONSENT CALENDAR

Minutes:

July 15, 2003 Work Session and Regular Session

August 19, 2003 Work Session and Regular Session

Bonneville Power Administration Rates:

BPA Pass Through Rate Action

Bid Award:

• RSCI - Meridian, Idaho - Carmen Turbine Cavitation and Butterfly Valve repairs - Electric Division - Not to Exceed $127,708

Business Service Contracts:

• Oracle Corp. - Oracle Database Administration - Information Services - Corporate Division- $28,000

• Xerox Corporation - High Volume Printing - Annual Maintenance Agreement - Information Services - Corporate Services - $117,000 for five years

Vice President Farmer pulled Consent Calendar Item 2 (BPA Pass Through Rate Action).

Vice President Farmer, seconded by Commissioner Menegat, moved to approve the remaining items on the consent calendar. The motion passed unanimously.

ITEMS FROM Board MEMBERS

Vice President Farmer encouraged management and staff to think about how to deal with raising the level of Leaburg Lake from a public relations stand point.

Vice President Farmer suggested a discussion on how the Board would finance the relicensing of Carmen Smith Hydro Electric project. He raised concern that at the current time the utility would not be able to finance relicensing the project.

Commissioner Bishop asked to be notified what would be on the menu before Board meetings. She said she was not able to eat some of the food served and raised concern over wasting food and money.

Commissioner Bishop said she would be gone from November 28, through December 9, 2003, and would miss the meeting scheduled on December 2.

Commissioner Bishop requested moving the November 4meeting to Monday, November 3 because the 4^th was an election day and she wouldn't be able to make the Board Meeting.

Commissioner Bishop said she had attended a McKenzie Citizens meeting. She noted that citizen attendance had dropped off. She said EWEB staff had worked very hard with the local citizens and had made a lot of progress. She said that much of the landscaping that had been locally handled was now being addressed by EWEB. General Manager Randy Berggren added that a certain level of aesthetics had to be maintained at the park.

President Lanning reported that he had attended a McKenzie Watershed Council meeting on September 11, 2003. He said the Friends of Leaburg Lake had attended the meeting to request cooperation from the Council members on issues such as a possible boat landing, the possible raising of the level of the lake, and creating an Ombudsman position on the EWEB Board to represent citizens in the McKenzie area. Public Affairs Manager Marty Douglas added that the Watershed Council had delayed taking a position that evening and would request some information from EWEB on its activities near Water Board Park.

President Lanning commended Marty Douglas and Gale Banry, Relicensing Manager, for their statements at the meeting.

In response to a question from Commissioner Bishop regarding whether the Board should provide direction to Commissioner Anderson, who was a charter member of the McKenzie Watershed Council, regarding issues EWEB was involved in, Mr. Douglas noted that the next Council meeting was not designated as the time when those issues would be dealt with.

Commissioner Bishop raised concern that Commissioner Anderson would be put in a defensive position if she were not briefed about local concerns and updated on the EWEB Board's positions on issues.

Mr. Douglas said he would write a brief informational memo for Commissioner Anderson.

President Lanning noted that public concern had been raised over EWEB sending its billing out of state to be handled. He said people were concerned over lack of local jobs. He added his own concern and stated his intention to talk with staff over the issue.

Vice President Farmer said there needed to be more customer education about the reason the billing was sent out.

CORRESPONDENCE

Mr. Berggren said the utility would have their Oasis Booth at the Eugene Celebration and said anyone interested in doing a shift should notify staff by that Friday.

Mr. Berggren said a draft letter was prepared for Alan Zelenka regarding his appointment to the Oregon Climate Trust. He said if the Board, as a whole, wished to sign the letter then it could be sent out.

Mr. Berggren said there were letters for President Lanning to sign for legislators who helped the utility on various topics, thanking them for their support.

Vice President Farmer said he had concern over the wording in the letters that PERS was 'fixed'. He remarked that PERS was not remotely fixed.

Commissioner Bishop said she was very glad that the Board had the courage to thank those legislators who had helped the utility. She said the thank-you letters were a reflection of the reality of which legislators had helped the utility during the legislative session.

Mr. Berggren requested scheduling direction for setting up a four-hour Executive Session dealing with PERS issues.

BOARD AGENDAS

Mr. Berggren noted he had heard two requests for back ground information on the Carmen Smith Relicensing issue and information for Commissioner Anderson regarding requests for support from the McKenzie Watershed Council to the Friends of Leaburg Lake.

Mr. Berggren said there had been no changes from the last meeting on items for future Board agendas. He said he had updated all the Board agendas through the end of the year including routine items on agendas for Board governance and PERS issues. He said he would work with President Lanning on scheduling critical items.

Mr. Berggren said the October 7 meeting would include a brief Governance update but would focus mainly on budget discussions.

In response to a question from Commissioner Bishop regarding items that had been completed, Mr. Berggren said he would present the list quarterly.

PUBLIC INPUT

There were no members of the public wishing to speak.

BOARD GOVERNANCE

Mr. Berggren said a memo had been sent out with information on upcoming Governance sessions. He said draft procedures had been included in the memo and requested feedback on those from Board members. He said the feedback would be collected and used at future Board Governance discussions.

In response to a question from Vice President Farmer regarding his concern over listing completed items quarterly, Debra Smith, Telecommunications Project Manager, said staff could distribute copies monthly with a formal report on a quarterly basis.

Vice President Farmer suggested that Commissioners record their interactions with customers and share that information with staff.

In response to a question from Vice President Farmer regarding the definition of Formal Closure Memo, Mr. Berggren said it was a way of communicating from staffs perspective that an issue was closed.

Vice President Farmer requested information on how staff made the decision that an issue was closed.

Commissioner Menegat noted that he had received a call from a customer and had forwarded that call to staff. He noted he had told the customer to call him back if their issue were not solved. He said he was not interested in seeing a formal closure memo for inquiries of that sort. He raised concern over the level of paperwork.

Ms. Smith said the idea behind the closure memo was just an e-mail saying that the item had been addressed. She stressed the importance for a consistent framework to address customer issues and said the Board members could get as much or as little information as they desired.

ELECTRIC CAPITAL PLAN

Ken Beeson, Resource Project Manager and Jim Wiley, Electric Division Director, provided a power point presentation on the Electric Capital Plan. The presentation included information on the 2004 Capital Plan Development Process, the draft plan for 2004-2008, Capital Programs for 2004-2008, and Electric Capital Funding Assumptions 2004-2008.

Mr. Beeson said the work done had included a critical review of capital expenditures and funding levels driven by projection of significant shortfall between expenditures and sources of funds.

Mr. Beeson said one of staff's conclusions in April was that a rate action of six percent would be needed for the upcoming year for EWEB to eliminate its funding shortfall.

Mr. Beeson requested questions and feedback from the Board on the information presented.

In response to a question from Commissioner Bishop regarding electric distribution and system upgrades in response to Public Utility Commission (PUC) orders, Mr. Wiley said PUC had done an inspection in 2002 and had found the utility in violation of NEC compliance in that telecommunications companies were attaching equipment on poles incorrectly. He said the utility was fixing the problem by visiting every pole and taking corrective actions if necessary.

In response to a question from Commissioner Bishop regarding who would pay for the work, Mr. Wiley said the cost would be shared between the utility and telecom companies.

In response to a question from Commissioner Bishop regarding contractual language that would enable EWEB to recoup costs for doing the poll work, Mr. Wiley said rent for space on the poles had increased and added that telecom companies were paying a share of the costs to correct the poles.

Commissioner Bishop stressed the importance of adding contract language to address possible contingencies of this nature. Mr. Wiley said that language had already been added.

In response to a question from Commissioner Menegat regarding communication equipment in 2005, Mr. Beeson noted that it was a new telephone switch that would be added.

In response to a question from Vice President Farmer regarding the dollar amount of a 5.7 percent increase, Mr. Beeson said it would represent approximately $8 million annually.

Vice President Farmer stressed the importance of the financial plan not using debt. He expressed his favor for a pay-as-you-go program. He called for a discussion at the Board level about what the right level for capital expenditures would be. He opined that $5 million was not enough. He said the Board needed to have a discussion about whether it wanted to raise rates to create a surplus for capital expenditures.

In response to a question from Vice President Farmer regarding whether staff had a recommendation on reserve levels, Mr. Wiley said staff were preparing that recommendation. Mr. Berggren noted that, in the past, the amount had been approximately $10 million or one year's ongoing expenditures. He said the maximum would be approximately $15 million.

In response to a question from Vice President Farmer regarding adding positions for the capital project work, Mr. Beeson said the projects would require additional FTE but noted that this would be in the form of contract labor whose costs were already included in the projections.

In response to a question from President Lanning regarding whether disaster planning and security planning was a part of the plan, Mr. Wiley said some security work at the dams was included in the plan but noted that it would be preliminary work.

WATER CAPITAL PLAN

Mel Damewood, Water Engineering Manager, provided a Powerpoint presentation on the Water Capital Plan. The presentation included information on Water Capital Improvement Plan highlights, a five-year capital plan summary, issues that needed resolving, and a project level overview of the 2004 capital budget.

Mr. Damewood said the Plan heavily relied on the previous year's capital plan as a base. He said the Water Division was within the range of capital cost projections versus funding availability for the next five years and no rate action was needed to cover costs.

In response to a question from President Lanning regarding the source of uncertainty around the ground water project, Mr. Damewood said the uncertainty was around the ability of the utility to obtain water rights. Dick Helgeson, Water & Steam Division Director, added that amendments had been made in the application to respond to issues that were raised by the Water Resources Department (WRD) and others. He said there had been a favorable reading on the amendments that had been made and he expected that the application for water rights would move forward. He noted that the issues were more complex than had initially been expected by staff.

In response to a question from Commissioner Bishop regarding capital from other divisions, Mr. Damewood said a certain percentage of capital work was undertaken for the facilities division, and Customer Service Division that changed the projected figures.

In response to a question from Vice President Farmer regarding the meaning of Capital Reimbursements, Mr. Damewood said this was a project developed to offset developer contribution and aide.

In response to a question from Vice President Farmer regarding road rehabilitation costs relative to the road tax and transportation system fees, Mr. Helgeson said the utility was obligated to move its infrastructure from the right-of-way, at its own cost, if major road work was being done. He noted that the utility had not seen a lot of that kind of work but noted that the City was predicting a significant amount of that work being done in the future. He said the amount projected in the staff report was based on the predictions made by the City of Eugene.

ITEMS REMOVED FROM THE CONSENT CALENDAR

BPA Pass Through Rate Action

In response to a question from Vice President Farmer regarding the deviation from policy in Fall of 2002, Dick Varner said staff had decided the number was so small that it did not warrant Board attention.

Vice President Farmer said any amount required Board discussion and attention. He said the Board needed to think about the public information aspect of a pass through of rate actions. He said the customer would only care about the bottom line on rate increases. He called for a Board discussion on how the rate action needed to be taken into the larger context of the entire rate picture.

Commissioner Bishop agreed and said the item was not appropriate for a Consent Calendar item.

Commissioner Bishop, seconded by Vice President Farmer, moved to put the item on a Regular Board Meeting agenda so there would be adequate time to discuss the item in context with other potential rate actions.

Mr. Varner said he would like action on the item before November 1, 2003.

President Lanning noted that the Board had said it was comfortable with putting the item on the Consent Calendar. He noted that he had been uncomfortable with seeing the item discussed in the Register-Guard.

Vice President Farmer stressed the importance of discussing the rate pass through in context with other potential rate actions.

The motion passed unanimously.

The meeting adjourned at 9:45 p.m.

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Assistant Secretary President