EUGENE WATER & ELECTRIC BOARD
SPECIAL BOARD MEETING
EWEB BOARD ROOM
MARCH 15, 2005
6:30 P.M.
Board Members present: Ron Farmer, Sandra Bishop, Mel Menegat, and John Simpson. Commissioner Patrick Lanning was excused.
Others present: Randy Berggren, Dick Varner, Debra Smith, Jim Origliosso, Roseanna McArthur, Jim Wiley, and Judy Chase of the EWEB staff; Lynn Taylor, City of Eugene minutes recorder.
President Farmer convened the Special Board Meeting of the Eugene Water & Electric Board (EWEB) at 6:20 p.m.
AGENDA CHECK
Because the meeting was advertised as starting at 6:30 p.m., Vice President Bishop asked that Public Input be moved to later on the agenda following the discussion of Board Agendas. There were no objections to moving the item.
APPROVAL OF CONSENT CALENDAR
Minutes
Vice President Bishop pulled items #2, 5 and 6, business service agreements with Good Company and Portland General Electric.
Commissioner Menegat, seconded by Commissioner Simpson, moved approval of the Consent Calendar with the exception of items #2, 5 and 6. The motion passed unanimously, 4:0.
ITEMS FROM BOARD MEMBERS
Commissioner Simpson reported that he had attended a meeting of residents from the Crest Drive and Friendly Street areas on March 14, 2005, and discussion was focused on the potential sale of EWEB’s headquarters site and use of the College Hill reservoir. He said discussion of the reservoir related to possible provision of handicap access to that facility in accordance with Americans with Disabilities Act (ADA). He said that while the facility was not a park EWEB had taken actions that encouraged casual use, such as painting jogging lines. He said that the two most popular uses were Eugene Astronomical Society Star Parties and 4th of July fireworks viewing. He asked to meet with staff from EWEB’s Water Division and public relations to discuss the issue further from the staff perspective. He wanted to report back to neighborhood leaders, specifically Tom Keating, with EWEB’s perspective on the possibility of installing a ramp. He recognized concerns about potential liabilities and asked to have the matter investigated further.
President Farmer said that an extensive backgrounder had been provided to the Board earlier and a copy would be made available to Commissioner Simpson to help explain the issues and concerns.
General Manager Randy Berggren observed that EWEB’s position had remained consistent and while casual use was not prohibited, the facility was infrastructure and never intended to be a public facility. He said the issues of risk and security were more significant since September 11, 2001, and EWEB had avoided a formal discussion of public use and handicap access. He said if there was continued pressure for a more formal arrangement it was likely that the facility would be secured.
Vice President Bishop added that the neighborhood had been informed that the probable consequence of continuing to push for access would be total restriction of any uses.
Commissioner Simpson announced he had attended a Springfield Utility Board (SUB) meeting and the main topic was a presentation about automatic meter reading. He said it appeared that SUB was looking into the matter.
Vice President Bishop reported that the Public Utility Commission (PUC) had denied the Portland General Electric (PGE) sale. She cited the order, which stated the commission was denying the application because it sounds like the potential harms of the transaction would outweigh the potential benefits. She said that placed EWEB and other public utilities in an interesting position because of legislation that had been introduced to establish a public corporation to purchase PGE. She said that the City of Portland was also considering purchasing PGE
Mr. Berggren commented that the subject of PGE would be part of the discussion of legislative issues at the next Board meeting. He said the PGE situation had a number of implications for EWEB including the Trojan relationship with PGE, would a newly formed public entity have access to Bonneville Power Administration (Bonneville) preference, and what would be the nature of a new entity formed through legislative process.
President Farmer noted that the Enron Board of Directors had passed a resolution that stated if the sale was not completed Enron would sell shares and PGE would be a private entity.
Vice President Bishop shared an article from the Salem Statesman Journal regarding the affect of fluoride in the geothermal areas of Yellowstone Park on the elk population. She said that studies had determined that elk in geothermal areas lived shortened lives because of the ingestion of fluoride.
Commissioner Menegat said he met with the Whiteaker Community Council and discussed concerns about tree trimming and water conservation. He said that EWEB’s arborist, Ron Dyer, explained tree-trimming procedures to the group and it was a productive meeting.
President Farmer said he would be meeting with the bond rating agencies on March 17 and 18, 2005.
CORRESPONDENCE
General Manager Randy Berggren reported the following:
Commissioner Simpson asked that comments for the headquarters site sale be aggregated into broad categories to provide a sense of pros and cons and general themes in the comments
In response to a question from Vice President Bishop, Mr. Berggren said the public hearings for McKenzie Willamette/Triad would be held on March 16 and 29, 2005.
President Farmer asked if staff had developed a bulleted list of those issues related to McKenzie Willamette about which the public was still unclear. Assistant to the General Manager Debra Smith replied that staff was in the process of compiling the information and developing recommendations on where to best direct public information efforts.
Vice President Bishop said it was her understanding that EWEB commissioners would be unable to accept an invitation to travel because of the policy prohibiting accepting gifts. Mr. Berggren replied that the determination might be made on a case-by-case basis, based on EWEB’s relationship with the entity extending the invitation and whether there was a defined business purpose. He would request an opinion on the subject.
BOARD AGENDAS
Mr. Berggren provided an overview of the Eugene Water & Electric Board: Board Agenda Report; March 15, 2005. He said there were no outstanding backgrounders. He listed seven pending agenda items and asked the Board to discuss each and determine whether it should be approved and scheduled on a future Board agenda:
Mr. Berggren noted that Item 4 (Approach to future legislative representation) had been scheduled for discussion at the August 2005 retreat and Item 3 (Process for amending minutes) was approved but not yet scheduled.
Mr. Berggren explained that Item 1 (Coburg Power Plant) had resulted from a request for specific time on the agenda to discuss the Coburg Power Plant and request that EWEB, as a local public power provider, take a position on the issue.
President Farmer said he wanted to hear all sides of an issue before taking a position. Mr. Berggren said it would be necessary to determine the Board’s intent regarding the Coburg Power Plant before scheduling the presentation and in order to receive a well-rounded perspective the Board should extend an invitation to the developers to make a presentation. He encouraged the Board to decide if it wished to become a public forum for the conversation around the power plant.
Commissioner Menegat cautioned against becoming a public forum. He said the power plant was still in development and the Board did not know what was being proposed. He did not think the subject should be an ongoing item for the Board’s consideration.
Commissioner Simpson did not object to being a public forum for discussion of the power plant. He did not anticipate the Board acting on the basis of a presentation by those opposed to the plant; any action or comments should occur after there had been an opportunity to hear from all sides. Mr. Berggren asked if it was Commissioner Simpson’s intent to have the Board weigh in on whether the plant should be built.
Commissioner Simpson said that was not necessarily an outcome but a public forum would give both sides an opportunity to present their cases to the Board. He thought that individual Board members could express their personal opinions.
Vice President Bishop stated that the Board had no responsibility to solicit information from the opposing side of the issue. She said the request for agenda time was made by a group of community members and the Board needed to stay focused on responding to that and not complicate the issue by creating a public forum for all parties. She noted that the nature of the project had changed considerably since the request was made and there might no longer be a desire to address the Board.
President Farmer saw no need to spend agenda time on the matter, although it could be raised again at some point in the future. He determined that it was the consensus of the Board to remove Item 1 from the list of pending agenda items
Vice President Bishop related that the Live Steam Museum vision was well organized and Tom Snyder had requested 15 minutes on a Board agenda to discuss it. She said the concept fit well with what EWEB was considering for the site and asked if there was a way to involve Mr. Snyder with that effort. She said the item was a reminder of the need to develop a master plan for the site regardless of whether the site was sold.
Commissioner Simpson said a number of constituents had inquired about plans for the building. He was interested in hearing what Mr. Snyder had to say and how that might fit into the larger vision of an energy park on the site.
Commissioner Menegat said he was in favor of a presentation with the stipulation that it be concise and limited to 15 minutes, but felt it might be premature at the present time because of uncertainty about the site’s future. He suggested leaving the item on the pending list. Mr. Berggren suggested that the Board approve the item and he would consult with President Farmer and determine the appropriate time to schedule a presentation.
President Farmer agreed with Mr. Berggren’s suggestion. He did not want “master plan” efforts on individual buildings.
Vice President Bishop asked for clarification on timing of the item. She asked that the item be scheduled before the Board’s September 2005 meeting.
President Farmer determined there was consensus to approve the item and determine an appropriate date for the presentation prior to September 2005.
Mr. Berggren said that Item 3 (Process for amending minutes) had been approved and would be scheduled with other Board governance issues.
Mr. Berggren commented that Item 4 (approach to future legislative representation) related to Vice President Bishop’s concern about the use of contract versus in-house lobbyists. He said EWEB had a lobbyist on contract for the current legislative session and the item could be scheduled for discussion towards the end of the session. He said it was tentatively scheduled for discussion at the August 2005 retreat and he welcomed any input from commissioners to help frame the conversation. President Farmer determined there was consensus with Mr. Berggren’s suggestion to schedule the item on the agenda for the August retreat.
Mr. Berggren remarked that a backgrounder on Item 5 (Board participation on regional power organizations) had been provided to the Board but staff had not received any direction on whether to schedule the item for discussion.
President Farmer determined there was consensus to schedule a presentation and discussion on the item at a future meeting. He asked that the questions of how representatives were designated and for what periods of time be added to the discussion.
Referring to Item 6 (Board liaison to Region 2050 work), Vice President Bishop stated her interest in having the Board represented on the regional planning group, Region 2050. Ms. Smith said that options for Board representation would be explored, but under the current construct utilities were included on the technical advisory committee rather than the planning body. She said the best way for EWEB to stay connected with the Region 2050 project was through its Lane Council of Governments (LCOG) representative. She said that including EWEB on the planning body would require a change in the rules and the LCOG representative would be the best way to approach the subject. She said there were ways that staff could keep the Board better informed about Region 2050.
President Farmer determined there was consensus to remove the item from the list of pending agenda items.
Vice President Bishop remarked that Item 7 (Board representative to City Sustainability work) represented a good opportunity for the Board to get in sync with the Eugene City Council by participating in the City’s sustainability initiative. She suggested informing Mayor Piercy of the Board’s interest in having a commissioner participate on the committee. Ms. Smith said that EWEB staff had notified City staff of the Board’s interest.
President Farmer determined there was consensus that the item did not need to be scheduled as a discussion item on an agenda and that a letter should be sent to Mayor Piercy expressing the Board’s interest in having a commissioner participate.
Mr. Berggren reviewed the April 5, 2005, Board meeting agenda:
PUBLIC INPUT
There was no one present wishing to speak.
Commissioner Simpson stated that two constituents were opposed to lowering rates; one felt the money should go to the electrical reserve and the other characterized the rate action as a public relations ploy.
SPRING RATE PROPOSAL FOR 2005
Fiscal Services Supervisor Dick Varner explained that in 2001 Bonneville set five-year rates and put into place four adjustment mechanisms that operated on either a six-month or annual basis and provided flexibility to changes rates either up or down depending on conditions. He listed the cost recovery adjustment clauses (CRAC):
Commissioner Simpson asked if the adjustments manifested as rate changes or lump sum payments. Mr. Varner replied that the Slice True-up was a lump sum payment.
Continuing, Mr. Varner said that because Bonneville could change rates every six months, the Board approved customer service policies and procedures that required EWEB’s review of its rates every six months to determine whether a pass through of Bonneville costs was appropriate. He reviewed previous rate actions as a result of that policy. He said the proposed action resulted from Bonneville’s increase of the Load Based CRAC by 4.5 percent and revision of the Slice True-up forecast for 2005. He related that EWEB’s share of the Slice True-up was $2.2 million less than it expected to pay in December 2005. As a consequence of Bonneville’s actions, he said the amount EWEB needed to collect from customers during the April through September 2005 timeframe was about $1 million less. He said the proposal was to reduce the energy rates to all customers by $0.0011 per kilowatt-hour, or a 1.6 percent average decrease, in order to pass the benefit through to customers. He noted the savings would be somewhat less to residential customers and somewhat less to commercial and industrial customers.
Mr. Varner reviewed Resolution No. 0505 that would authorize the General Manager to implement the rate decrease to residential, small, medium and large commercial customers, and Contracts C and D. He said that contracts with Weyerhaeuser-Springfield and Hynix were not affected by the action as their rates were set under a separate process.
Commissioner Simpson asked if there would be a rate increase action in the fall because of drought conditions. Mr. Varner replied that was not certain at this point as a number of factors were involved. He said there was potential for a Safety Net CRAC that would reflect the impact of the drought. He said the block product was only about one third of EWEB’s Bonneville take and the impact would be relatively small. He said work was scheduled on contingency plans to address the impact of a drought on EWEB’s power portfolio.
President Farmer asked what was driving the Slice True-up decrease. Mr. Varner replied that the Bonneville debt optimization plan and type of refinancing it anticipated were major factors.
Commission Simpson asked if future rate actions would be decreased if the Board did not authorize the proposed action. Mr. Varner said it was highly dependent on Bonneville’s actions and October 2006 Bonneville prices.
Commissioner Simpson asked how long the Board’s policy to pass through Bonneville’s adjustments to ratepayers had been in effect. Mr. Varner said the policy had been formally in place since the fall of 2001 because of lack of certainty about Bonneville’s pricing over the next five years.
President Farmer requested a one-page summary of the four adjustment mechanisms, timing, what they related to and how they worked together. He asked how much of EWEB’s anticipated five to six percent general rate change in the spring of 2006 would be used to fund increases in debt service. Mr. Varner replied that approximately half of the increase would be for debt service increases.
President Farmer stated he had no problem with the debt service component of the rate change but was concerned with the cost escalation component. Mr. Varner said the rate change would be part of the July 2005 discussion surrounding preparation of the 2006 budget.
PUBLIC HEARING ON SPRING RATE PROPOSAL FOR 2005
President Farmer opened the public hearing.
There being no one wishing to speak, President Farmer closed the hearing.
SPRING RATE PROPOSAL FOR 2005
Vice President Bishop, seconded by Commissioner Menegat, moved to adopt Resolution No. 0505 to allow pass through of all of the Bonneville Power Administration rate change, which was a decrease in the amount of $0.0011 per kilowatt hour or approximately 1.6 percent average.
Vice President Bishop remarked that although the amount of decrease was small the action was consistent with the Board’s policy to pass through fluctuations in Bonneville rates. She was pleased it would result in a slight decrease in electric bills.
The motion passed unanimously, 4:0.
SUPPLEMENTAL ELECTRIC BOND RESOLUTION NO. 0506
Treasurer Jim Origliosso explained that all electric bond sales had two basic resolutions; one was passed as a mass resolution in 1986 and all bonds had to conform to those requirements. He said when another bond sale occurred it referred back to the master resolution and also required a supplemental resolution that amended the master resolution for the particulars of the bond sale that year. He said that Resolution No. 0506 was a supplemental bond resolution.
Mr. Origliosso indicated the Resolution was for the Carmen Smith relicensing application and the purchase of property for the new headquarters site and the 30 percent design study. He said the Carmen Smith license application was a new authorization that was approved by the City Council in December 2004. He said the other authorization related to the new headquarters land and design study dated back to a 2001 $50 million authorization for general capital improvements. He said the Resolution authorized bonds up to $11.25 million and was a parameter resolution that would provide him and Assistant Treasurer Cathy Bloom with the authority to proceed with the bond sale. He pointed out that the amounts requested were not the entire amounts authorized for both of the projects because of a need to manage the debt load and not borrow money prior to the need for it.
Vice President Bishop objected to definitive statements in the resolution regarding construction of a new headquarters facility when the Board had made no decision on the matter. Mr. Origliosso replied that he understood her concern but the City Council had requested the inclusion of that language.
Commissioner Simpson asked if the Carmen Smith funds would cover the cost of studies. Mr. Berggren said that the studies were part of the license application and the fund would pay for the entire package.
Commissioner Simpson, seconded by Commissioner Menegat, moved to approve Resolution No. 0506. The motion passed unanimously, 4:0.
ITEMS REMOVED FROM THE CONSENT CALENDAR
Vice President Bishop asked for clarification of the contract with Good Company. Roseanna McArthur, Corporate Services Director, replied that the contract represented a unique opportunity through partnerships with other agencies to keep pesticides out of the river by encouraging organic farming practices. She said the contract was for a one-year period with renewal options up to five years and Good Company would collect baseline information about agriculture activities in the McKenzie watershed and analyze the data.
Vice President Bishop asked who would have access to the data. Ms. McArthur replied that all partners would have access to the data and she could provide more detailed information about project partners’ involvement and contributions.
President Farmer declared that he had a conversation with the owner of the Good Company and would therefore abstain from voting on the contract.
Commissioner Simpson, seconded by Vice President Bishop, moved to approve Consent Calendar Item 2, a contract with Good Company. The motion passed, 3:0; President Farmer abstaining.
Vice President Bishop expressed alarm about Portland General Electric’s (PGE) contract expenditures that did not have Board approval, failure of the staff to request an extension for a contract that expired in December 2003, and whether funds had been budgeted for those expenditures. Mr. Berggren explained that staff had anticipated renegotiating a new contract with PGE and initially extended the contract on a month-to-month basis; however, negotiations slowed when contract language could not be agreed upon and the need for an extension request was overlooked.
Electric Division Director Jim Wiley said that there had always been a contract in place because of the monthly renewals and the funds were in the budget.
Mr. Berggren noted that efforts were under way to cure the disconnect between operations and purchasing.
In response to a question from Commissioner Simpson, Mr. Origliosso said that new procedures that strengthened controls and Board authority were being put in place, but some things had slipped through during the review of open purchase orders.
Vice President Bishop asked if discovery of the problem had triggered an internal review of other contracts for similar issues. Mr. Origliosso replied that the new procedures would detect problems and implement controls to prevent future occurrences.
Vice President Bishop asked if there was one person with oversight of all contracts. Mr. Origliosso replied that the Risk Manager had that responsibility.
Vice President Bishop asked what the consequences would be if the Board declined to approve the contract expenditures. Mr. Berggren said the expenditures would become an unauthorized expense.
Vice President Bishop asked that in the future Consent Calendar items related to funds already spent and for which action was a “rubber stamp” be distinguished from those items that required discussion.
Commissioner Simpson, seconded by Commissioner Menegat, moved to approve Consent Calendar Items 5 and 6, contracts with Portland General Electric. The motion passed unanimously, 4:0.
President Farmer adjourned the meeting at 8:25 p.m.
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Assistant Secretary President