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

Others present:  Randy Berggren, Debra Smith, Jim Origliosso, Dick Helgeson, Ken Beeson, Cathy Bloom, Tom Buckhouse, Marty Douglass, Jim Maloney, Libby Henry, and Krista Hince of the EWEB staff; Ruth Atcherson, City of Eugene Minutes Recorder.

President Farmer convened the work session of the Eugene Water & Electric Board (EWEB).

REGIONAL ISSUES UPDATE

Power Resource Division Director Dick Helgeson focused first on the Bonneville Power Administration (BPA) regional dialogue, included in the memorandum entitled Regional and Legislative Issues Update. He stated that this was a policy level conversation EWEB had entered into with the BPA regarding long-term power issues. He said this process began a little over a year ago with the initial intent to resolve issues that needed to be addressed prior to the 2007 rate case. He explained that there were some outstanding issues still unresolved as of February, mostly focused on issues concerning a potential for allocation of the federal base system (FBS). Additionally, he said the conversation also addressed what sorts of products the BPA would offer after 2011. He underscored that regardless of the form the contract assumed, EWEB sought to determine how better to manage the BPA costs and whether there were forms of agency governance or accountability that could be built into the BPA’s process that would allow for some customer oversight.

Mr. Helgeson reviewed the history of the most recent BPA system allocation, since the Northwest Power Act was passed in 1980. He explained that prior to the passage of the act regional loads were growing at five to seven percent per year and power deficits were forecasted for both the BPA and the Investor Operated Utilities (IOUs). He said BPA had issued a notice of insufficiencies.  About six nuclear plants were planned at that time, he related, the Trojan facility was on line and five Washington Public Power Supply System (WPPSS), only one of which was actually constructed.  He stated that the power act had set up the BPA as the default supplier for the region. Even with the nuclear plants, he said the BPA anticipated they would run out of power.  

Mr. Helgeson explained that the Regional Power Act had allowed the utilities to sign up with 20-year requirements contracts and place their load growth on the BPA. For their part, the BPA intended to acquire conservation and new resources to meet the load growth in accordance with the Regional Council’s Energy Plan. He said all of the costs for the new resources were to be melded into a single PF rate, in other words, the cost of load growth in the region was spread among all of the utilities. Shortly after this, he further explained, the load growth fell off, but the BPA continued to move aggressively into the conservation arena. 

Regarding the contracts put in place in 2001, Mr. Helgeson stated that the BPA had tried to regain some of the load it had lost in the 1990s. He said customers were given the opportunity to sign up for new contracts and to project load growth and this caused the BPA to be over-subscribed as all of the aluminum plants and customers signed up for the maximum. At that point, he recounted, the energy crisis struck, the BPA had found itself to be approximately 2,000 megawatts (MW) short, and it was forced to purchase its power on the market. 

Commissioner Simpson asked if aluminum plants had been on-line during the energy crisis.  Mr. Helgeson replied that the plants had been paid to shut down operations because it was cheaper to do that than it was to go out on the open market and purchase power. He reiterated that had it not been for the BPA’s obligation to serve whatever load brought to it and had it not been for the energy crisis, the wholesale rate shock witnessed in 2001 and 2002 would likely not have occurred. 

Mr. Helgeson outlined the BPA System Allocation – A New Post-2011 Approach. He briefly reviewed the federal-based system of major hydroelectric dams of the Columbia River Basin with the aid of a map. He noted the one nuclear-powered plant in Eastern Washington. He said there was approximately 7,000 MW of firm generating capacity, which meant this was the level of generation one could expect under the lowest water years of record. He stated that there were approximately 4,000 MW more typically available in an average year. 

Commissioner Simpson asked staff to explain the FBS. Mr. Helgeson replied that it was an acronym used to describe all of the federal hydropower resources and the one nuclear plant under the purview of the BPA. 

Mr. Helgeson delineated with a graph the BPA Loads & Resources 2007-16 Forecast. He said the graph demonstrated that this would be a “reasonably good time” to consider an allocation because it would not be prudent to wait until there was a deficit situation. He pointed out that the BPA projected that loads and resources would be either in a slight surplus or in balance until the year 2013. He related that this suggested that an allocation would be possible between now and 2011 so that it would preclude forcing the utility to purchase power out of Tier 2. 

In response to a question from President Farmer, Mr. Helgeson said some customers, most notably the “Slice” customers, had an allocated percentage of the system that they had signed up for, but only about 23 percent of the system was currently subscribed in that way. 

President Farmer asked if the BPA was talking about taking the “Slice” and “Block” allocations and combining them to make a new type of allocation. Mr. Helgeson responded that what sort of methodology to use was one of the questions the BPA was faced with. He said the proposal that had come out of the Public Power Council was to take the original forecast used in the 2001 rate case and to allocate in proportion to the entitlements that were granted or the loads that were exhibited in those forecasts at that time. He related that the BPA had been concerned that ten years was a long period of time to elapse and the loads might not track as they were forecasted to. He thought this might allow some utilities to have more of an entitlement than was justified and some less. He stated that there were four or five competing methodologies, including a wholesale revamping of how load forecasts were determined.   

Mr. Helgeson underscored that now was the time to reevaluate the methodologies as the BPA was not currently facing a deficit. 

Mr. Helgeson clarified, for Vice President Bishop, that the only customers who had a fixed share of the system were the “Slice” customers, comprising 23 percent of the capability of the FBS.  He added that the notion was that everyone would have a percentage share of the existing resource. 

Mr. Helgeson felt that the advantage of being a public power resource was that it would give EWEB a greater assurance of long-term access to the existing federal resources at cost. He noted there had been some discussions of market-based rates and some concerns had been expressed regarding the long-term impacts of continued melding of higher cost resources with the PF rate. He said it was hoped that a Tier 1/Tier 2 approaches would ensure that EWEB could “draw a fence around” lower cost resources and have, through a 20-year contract, assurance of continued access to resources at an embedded cost. This would provide no further subsidy for load growth and each utility would have to make arrangements to meet its own load growth.  He thought placing the load on the BPA as there would be no prohibition on that, but the BPA would purchase resources in the Tier 2 rate pool to meet that need could still do this. He pointed out that a utility with no load growth or a utility with an allocated share that had “gone gangbusters” with its conservation program and had reduced its load below the entitlement could sell the portion it did not use. 

President Farmer asked if the advantages and concerns were relative to the BPA or relative to public utilities. Mr. Helgeson responded that public power, by consensus, felt associated with an allocation and this was an advantage. He related that concerns were on the part of some utilities but mostly from the BPA. In terms of concerns, he stated that the BPA was not very excited about “carving up the system,” as they had traditionally been in the role of managing the system and had a great degree of control over how the system was operated and what the pricing was. He added that the BPA also had a great deal of influence over what resources were built in the region. 

Mr. Helgeson, in response to another question from President Farmer, affirmed that dividing the system into smaller components would reduce risk for the BPA. He thought this was a pertinent point of discussion for them. He underscored, though, that the BPA was used to being in the role of default supplier and to being able to influence the market and manage and dispose of the power from the system. He felt that customers who would take their share of the “Slice” and begin to participate in the market directly would have implications for the BPA in its capacity as manager. He observed that for those in the agency who were concerned about risk or management at the federal level and who worried about making the treasury payment, spreading the risk and not having the BPA take on future risk could be perceived to be a good idea.

Mr. Helgeson felt there was concern on the part of many of the environmental interests and those who follow regional planning that by having a construct wherein utilities made their own decisions and investments would result in a decentralization of the planning role that the council had played and a dilution of some of the programs that were offered to fund conservation and renewable energy resources. He thought, in the event of such a division, there would likely be something in the contract that committed to a certain level of investment in such things. He added that some utilities were just used to distributing power at retail costs without having to make resource decisions. He questioned, from a values perspective, giving utilities the opportunity to make choices when they might make the “wrong choices.” 

In conclusion, Mr. Helgeson stated that these issues were the subjects of ongoing discussion.  He said the BPA was not likely to make a decision on it for a long time, and even if they did the details would take some time to work out. He averred it was something that EWEB and other members of the public power community were supporting. He said EWEB was involved in policy and technical forums in an effort to work out how this would develop. He underscored that EWEB wanted a fair and equitable allocation methodology, whether based on historical or forward-looking forecasts. He wanted to have something in place for at least 20 years because this was the time needed for EWEB to make viable resource investment decisions. He added that an attempt was being made to obtain greater accountability for and governance over the BPA. He noted that the latter was not likely to happen without some form of legislation. 

Commissioner Menegat conveyed his support for with how staff was approaching the issue. He wished to attain more knowledge about the issues as he did not feel prepared enough to “jump in” and support a position, at this point. 

In response to a question from Vice President Bishop, Mr. Helgeson clarified that the translation of allocation entitlements and load growth into rates meant that EWEB paid its share of the cost as a percentage of the BPA budget and then received whatever output came from the system. Vice President Bishop asked what was meant by excess allocation entitlements. Mr. Helgeson replied that some utilities might not use their full allocations and would then “hand it back” to the BPA on an interim basis and receive revenue credits for it. 

Vice President Bishop asked how many rate classes there were to choose from. Mr. Helgeson responded that BPA rate cases were formulated in “somewhat of a black box” in ways that did not necessarily become enforceable contractually. He said the formula sought to nail down rates in a transparent way that would ensure all of the utilities that they were paying their fair share. 

In response to another question from Vice President Bishop, Mr. Helgeson stated that there would still be a regional power plan that looked at what regional utilities were doing and set benchmarks and portfolio standards for the region, gauging the extent to which utilities were taking actions consistent with those.  He thought that the BPA would still have regional obligations under the plan and the Regional Power Council would continue to govern it. He added, in response to another question, that the BPA was the funding source for the Regional Power Council.

Continuing, Vice President Bishop noted that it appeared that the BPA could offer a standard incremental cost rate to serve the entire load in excess of customers’ requirements. She was confused by the idea that there could be different statuses among utilities dependent upon entitlements and requirements. Mr. Helgeson responded that all of the new resources would go into a separate cost pool and there could be a melded rate for that Tier 2 pool in one suggestion and, in another, utilities would contract with the BPA for the output of a specific resource and have a fixed price based on the cost of that particular resource. 

Vice President Bishop asked how the priorities for the resources would be set. Mr. Helgeson explained that only those utilities that approached the BPA and contracted for it would receive it.  He assured her that the utilities would be served in the order of their requests and that the BPA would try to find the resources to meet the need.

Commissioner Simpson asked for a one-on-one session with Mr. Helgeson to review the issues update. He said he had many questions. Mr. Helgeson indicated he would be happy to do so.

President Farmer asked, in looking at the process, staff to comment on how much of what was being presented to EWEB was sincere and whether Mr. Helgeson thought the BPA might ultimately just do “what they want.” Mr. Helgeson felt the BPA had some internal issues and problems with how it had contracted with its customers in the past. He thought there were reasons why both the BPA and the Congressional delegation would support the direction that the BPA was taking. He noted there had been times in the past when Congress had sought to limit the BPA’s appropriations capability or had done things specifically to keep the BPA from continuing to acquire more federal resources. He also felt that the BPA was open to the interests of its customers, though they had a considerable amount of power on that side of the relationship. He averred that EWEB was in a “genuine dialogue” with the BPA and while the BPA was unlikely to want to do everything that EWEB wanted to do, the BPA was open to its ideas and concepts. However, he predicted the BPA would not agree to relinquish control. 

President Farmer asked how the decision-making process worked. Mr. Helgeson replied that there was an executive team and, in particular, a group of people who work with Steve Wright, the administrator, to make the decisions. President Farmer asked if there was an appeals process. Mr. Helgeson responded that litigation was the only means to try and change a decision made by the BPA. 

President Farmer said he was more concerned about the allocation than about the rates. Mr. Helgeson assured him that EWEB had rights under the Regional Power Act that could be subject to litigation if anything was put into place that would violate those terms. 

President Farmer observed that these were big policy issues. He did not think one-half hour of discussion would provide adequate direction for staff. He believed that these were the types of big policy issues that the Board should be working on in order to give staff a strong sense of direction. 

President Farmer indicated, based on EWEB’s strong position, that he favored the process wherein the utilities assumed the risk. 

Mr. Berggren stated that the regional issues discussion would be a recurring theme in work sessions. Mr. Helgeson added that he would be returning on a quarterly basis. 

President Farmer wished to see a healthy debate about these issues among the Board members, once the Board members were better educated about them.

Vice President Bishop indicated that she had no qualms about the direction that the EWEB staff was taking with the BPA. She said the Integrated Energy Resource Plan (IERP) process directly related to it and provided clear direction to staff. 

Mr. Helgeson continued his presentation. He stated that the BPA would be resetting base rates based on updated budgets and load forecasts for 2007 through 2009. He reported that the BPA was adamant about not making its budget the subject of a rate case and did not allow a utility to litigate what the budget was. He said the BPA, separate from the rate case, conducted a process called the Power Function Review wherein they walked customers through the review and took in feedback and, on that basis, made some adjustments to the budget for different portions of their operation. This helped to determine the “going in” cost represented in the rate proposal. He emphasized that this was the opportunity for EWEB to influence the BPA cost structure and to better understand everything the BPA $2.8 billion budget encompassed. 

Mr. Helgeson delineated the distribution of costs with a BPA FY2002-2006 Costs pie chart. He pointed out that the power purchases made to cover the over-subscription in 2001 had left the BPA stuck with high cost contracts and buy-backs for power that it had to remarket at a lower price. He explained that this comprised 29 percent of the total cost. He noted that utilities questioned why these contracts were still the circumstance three to four years beyond the energy crisis.  However, he said, the contracts were all up as of the beginning of the next rate period and this represented an opportunity for rates to decline somewhat.

In response to a question from Commissioner Simpson, Mr. Helgeson stated that the BPA had sought in making the contracts, varying in terms from one to five years, to cover the over-subscription of its power output. He said generally those contracts were all higher than current market rates.

Mr. Helgeson reviewed the BPA Cost Trends and the Cost Increase/Decrease by Category.  Looking to the pie chart BPA FY2007-09 Costs, he pointed out that the BPA was anticipating a $100 million reduction in what it would need to collect. He predicted that most of the savings would be redistributed within the BPA budget to pay for debt service and deferred maintenance, but there was potential for rates to decline. He thought the BPA could reasonably reduce wholesale rates by 10 to 15 percent. He reported that the Joint Customers recommended that the cost for power be reduced from $31 to $27 per megawatt hour (MWH). 

President Farmer asked if the federal base system had to go through the same dam relicensing process with the Federal Energy Regulatory Commission (FERC) that EWEB had to undergo. Mr. Helgeson responded that they were not under the jurisdiction of FERC, though they did voluntarily comply with a lot of the applicable legislation.

Commissioner Simpson asked for clarification on what the change in the residential exchange was given that it seemed to be a 100 percent increase. Mr. Helgeson explained that the residential exchange on the payments that the BPA made to the IOUs for the difference between the BPA’s average rate and the market rate and was something written into the Regional Act because the IOUs did not have preference access to the federal base system. He noted that this had “morphed” considerably since the passage of the Act in ways that made that number much higher than it might have otherwise been and this was the subject of some ongoing lawsuits. He added that the reason that it was going up so significantly was due in part to the increase in the market forward prices and the agreement the BPA had made with the IOUs to buy back the benefits they were getting through the exchange. 

Mr. Helgeson stated that the Power Function Review would be completed in June and EWEB would receive a report from the administrator summarizing how it would weigh into the rate process.

Mr. Helgeson moved on to issues related to fish recovery. He commented that the level of acrimony regarding these issues in the region made it sometimes difficult to maintain a dialogue on the issues. He reviewed the attachment entitled Fish Recovery Issues. He noted that the slice of the pie graph he previously referred to that was labeled fish and wildlife only comprised the direct program costs that the BPA “wrote checks for.” He asserted that a much larger portion of the BPA budget was actually associated with this work. He said there were no clearly documented performance standards or cost/benefit criteria that allowed prioritization of how these funds were used. He averred this did not mean that there was not good work being done on fish issues. However, in looking at the program as a whole, he felt it was difficult to ascertain the mechanics of how the money was being spent and whether it was being driven toward the highest impact for the benefit of the fisheries. He noted there was no clear definition of the BPA’s obligation as the Act instructed the BPA to “mitigate” and “enhance.” 

Mr. Helgeson reviewed the graph entitled Historic Population and Total Commercial and Sport Harvest of Salmon and Steelhead in the Columbia River 1938-2004. He observed that the fish runs seemed healthy and had been increasing based on the count at the BPA dam. He discussed the Fish and Wildlife Cumulative Expenditures, noting that the “foregone revenue” was a debatable issue in terms of how the figures were interpreted. He stated that the federal government and ratepayers in fish-related programs had invested cumulatively $6 billion. He pointed out, in the graph that delineated the BPA’s Total Fish & Wildlife Program: Total Annual Average Cost to All BPA Rate Payers, that the $356.9 million figure was the BPA’s estimate of foregone revenues associated with the operation of the system for fish mitigation enhancement purposes, such as spilling water over the dams to aid fish migration. He supposed the fairness of including this as a cost was debatable, but the reality was that rates were higher as a result of having less water available for power production. 

Mr. Helgeson discussed the retail rate impact of the fish and wildlife costs to the BPA, estimated to be approximately $160 per residential customer per year. He noted that the Public Power Council (PPC) was now charging a $40,000 supplemental fish assessment and that EWEB had paid a part of this. He said he did not want to pay it in its entirety prior to checking in with the Board. He stated that Ms. Henry had been involved for the past year on specific issues of lobbying and public information. He asked her to speak about her work in the State Legislature. 

LEGISLATIVE UPDATE

Legislative Lobbyist, Libby Henry, said in recent years the cost of energy from the BPA had gone “up and up” and it was time to take a closer look at the fish recovery plan. She did not think the Public Utility Commission (PUC) had taken an active role but was now more interested in participating, especially given that during the last summer the BPA had spilled water over three dams for a month to expedite the passage of fish. She noted that the cost in lost power generation was believed to be $88 million.  While the power community rarely agreed upon such figures, she related that it had largely agreed on this one and did not think that the spillage was cost effective. She stated that all of the utilities, the BPA, the Federal agency for the utilities, and three governors agreed that a closer look into the fish recovery plan was called for. The Governor of Oregon was the lone exception. 

Ms. Henry reported that approximately 100 wild fish passed through the dams, though thousands of hatchery fish had passed, and this contributed to concerns about the cost effectiveness of foregoing the power revenue. She noted that Governor Kulongoski thought the count was not correct and the amount of spill should be increased. She related that the power community thought this was of great concern. She highlighted the conflict between the power plan and the fish plan, adding that the environmental community had sued because they had thought the fish plan to be insufficient. She said the judge had come up with a “biological opinion” that instructed the people to come up with another fish plan that would meet a “no jeopardy standard” for salmon. She indicated that most people were amenable to the opinion, but Governor Kulongoski did not agree that the plan was sufficient for salmon recovery. She said he entered into the fray with the threat of another suit, though she and others were lobbying the governor not to sue and also not to come up with his own plan, thought to both increase the spillage over the dams and the drawdowns of reservoirs. She said the BPA had offered to meet with the governor to try to convince him that this suit was not a good idea for the fish or the Columbia River. As a result, the BPA had numerous meetings with the governor, but she was not privy to what had been discussed. She heard, however, that the BPA had thought they had succeeded in convincing the governor’s staff that his plan would hurt river operations and would not help fish.

Meanwhile, Ms. Henry continued, there were hearings about it and a press conference at the Capitol at which Representative Debbie Farr spoke regarding the costs of the fish plan in relation to the results. She said what had happened since then was that the lobbyists were trying to bring some political pressure to bear and the delegations elsewhere, particularly on the east side, were unhappy with the direction the State of Oregon was taking with this and, specifically, with the disregard for the need for water rights for irrigation and commerce on the river. She reported that Congressman Larry Craig of Idaho told the Port of Portland that if the governor persisted with the lawsuit on the biological opinion, the State of Idaho would withhold money from the dredging project at the port. To date, she said, the governor was now pushing his programs, the environmentalists would be filing a preliminary injunction on April 9 after which other interested parties had 21 days to file, and it appeared the governor would not file. 

Continuing, Ms. Henry said the other vein in which fish costs were being looked at was at the State Legislature level with regard to the Oregon Department of Fish and Wildlife (ODFW) budget.  She asserted that the concern lay in that there was a lack of accountability for the money, no appropriations process and no reviewing the programs that were funded to measure how successful they were. She averred that, at the Legislature, this was viewed as free money and part of the goal of the utility lobbyists was to raise the awareness that this was real money that came from the utility’s ratepayers. 

Ms. Henry sought direction from the Board as to whether she could continue on this issue.  She thought it could be beneficial to break down the cost piece of the fish issue in utility bills and ask customers for feedback. 

Energy Resource Projects Manager Jim Maloney agreed with a lot of the information that Ms. Henry had provided but he had a significant difference of opinion about the costs being attributed solely to fish recovery. He opined that telling the public that $350 million was lost in foregone power sales due to the fish plan was a big disinformation program. He underscored that the eastside irrigators remove millions of acre-feet of water from the river that could otherwise be generating electricity. He stressed that every 100 MW of cost-effective conservation not acquired by utilities in the region would leave water in the river to generate more energy and the utilities would not have to buy more power. He stated that the BPA was reimbursed for pumping up fish costs and, as such, it was in the BPA’s best interest to make those numbers as high as possible. He asserted that it was also in the utilities best interest to “have a whipping boy” and salmon were very “handy” when serving in that capacity. He questioned whether all of the costs could be laid at the feet of salmon and cited irrigation costs for 2001 which were estimated to be between $1 and $2 billion in foregone power revenue for the BPA. He averred that the BPA had refused to revisit the irrigation information since 1996. He felt there were a number of big issues that the PPC had not been forthcoming on and advised the Board to look very carefully into them.  

President Farmer commented that regardless of where one fell on the fish issue, the amount of money being spent was huge. He hoped that spending that much money would get more fish in the river. He could not believe how much money was cumulatively spent with so little result. 

Mr. Maloney responded that the power side of the business averred the agencies were not spending the money appropriately. He said it had been suggested that the removal of the Snake River Dams would save $200 million per year in total costs. He asserted it was more expensive to keep those dams in place, noting that the EWEB Commissioners had voted in 1999 to keep removal of the dams in the regional debate. He pointed out that in the last National Oceanic and Atmospheric Administration (NOAA) opinion that Ms. Henry referred to, the Snake River Dams were taken off the table and would now be treated as if they had always been there. He called this apiece of the tremendous waste that went on by misimplementing what could be viable fish and wildlife programs. 

President Farmer reiterated that he did not see the fish gaining the ground that they should be gaining for the amount of money that was being spent. 

Mr. Maloney remarked that the Northwest Energy Coalition (NWEC) would agree with President Farmer. 

Vice President Bishop commented that it was a little difficult for her to accept the amount of money listed as foregone revenue. She, however, recognized that the costs were passed on to EWEB customers. 

In response to a question from Vice President Bishop, Mr. Helgeson stated that EWEB was a member of the Public Power Council (PPC) and sat on the Executive Committee. He said the voluntary supplemental fish assessment had potential to become a mandatory assessment and could force EWEB to make some decisions about its level of participation in the PPC.

Mr. Helgeson wished to comment in response to Mr. Maloney. He thought one of the most frustrating things in going to meetings on this difficult issue was the amount of rhetoric on both sides of it and that people talked “past each other” and found no common ground. He wanted to become well educated on what the problems were and how rates were impacted.

President Farmer said it seemed the utility should advocate for money given to the State to be spent on the issues for which it was dedicated.

Vice President Bishop asked if any amicus briefs had been filed. Ms. Henry replied that she did not know, but there could be. She reiterated her concern that the judge would be more sympathetic to the State of Oregon than the rest of the region. 

Mr. Beeson discussed the proposals for the sale of Portland General Electric (PGE) and how EWEB looked at it going forward. He recalled that as Enron had worked through its bankruptcy and the sale of PGE, EWEB had monitored it closely and had intervened in the Public Utility Commission (PUC) proceeding in 2004 around the proposed purchase of PGE by Texas Pacific Group (TPG). He noted that the PUC had ruled against that purchase proposal. He reported that EWEB had asked the PUC to require PGE to post a security bond to cover unforeseen costs. He said the concern lay in, given their financial situation going forward, EWEB wanted to make sure that PGE as a managing partner in the Trojan nuclear facility would continue to be financially capable of discharging their obligation with respect to that facility. He related that PGE had objected to this, stating that when and if additional costs were required, the PUC would approve of them as a rate proceeding. 

Energy Resource Projects Manager Ken Beeson reported that EWEB had also intervened in the recent EFSC (Energy Facility Siting Council) review of the PGE site certificate for Trojan and this was still pending.  He emphasized that EWEB staff representatives were working closely with legal counsel and the BPA on this. He listed the following principles that were utilized as a framework for viewing proposals for PGE that came forward:

• That the PGE customer base should remain intact;
• That the obligation for the Trojan Nuclear Plant would go to the new owner or owning entity and the Trojan Decommission Fund would go to that new entity;
• That any new entity, whether proposed by the State or the City of Portland or another group, should be capable of being a real utility and should be able to issue debt, to raise rates to cover costs, and to assume the licenses and permits associated with the Trojan facility and deal with its spent fuel.

Ms. Henry stated that a bill had been drafted to accomplish those goals, copies of which were included in Board packets. She related that it had been with mixed feelings that the bill had been submitted, as the utility did not want to announce its liability in the Trojan facility. She said Representative Farr had made an appointment with the Speaker of the House in order to get the bill introduced and the bill would be introduced in the House Environmental Committee in the next week.

In response to a question from Vice President Bishop, Ms. Henry affirmed that the bill was exclusive to the Trojan facility.

President Farmer asked if Ms. Henry thought the bill would pass. Ms. Henry replied that she felt it would pass easily. She commented that it was difficult to responsibly oppose a bill that contained many positive elements in the shutdown of a nuclear plant. 

Ms. Henry outlined the four options that had arisen since the PUC had denied the request to purchase PGE, as follows:

• TPG could decide not to appeal the PUC ruling;
• The stock could be redistributed, acceptable to the customers, and PGE would be retained as an Oregon utility;
• A mutual proposal could be made – a combination between a cooperative and a PUC regulated utility paid for by surcharges on the power bill;
• The City of Portland was moving forward with its proposal to purchase PGE and was in the process of determining a financing plan.

She said, in terms of process, the City of Portland had the “jump” on everybody, but in terms of politics they were looked at as the least popular of the viable proposals as PGE served six counties and 52 cities. She reported that Senate Bill 518 was the operative legislation at the moment and had been set forth by the Citizens Utility Board (CUB) representing the customers and investor-owned utilities, the industrial customers, and the commercial customers. She said the three parties had drafted this bill for the purchase of PGE that ultimately would make PGE a state agency paid for through state bonds. She called it an interesting bill as the utility would be run by an appointed board that would meet quarterly, its members to be paid $125,000 each annually, and there would be no public meetings, public records, and no public contracting. She remarked that the bill did not resemble a public power entity. She related that the three parties had tried to continue drafting and making it look more like a public entity that would be acceptable to everyone. 

Initially, Ms. Henry reported, the drafters of the bill had not welcomed input from the public power providers, but they had “wormed” their way in. The result had been a list of issues:

• Would this new utility have access to the BPA preference power?
• Would existing contracts be offered, as many of the utilities had general transmission agreements with PGE?
• What would happen to territorial allocation, would borders remain secure?
• What would the government structure look like?
• What would domain authority be confined to, e.g. would it have the right to condemn property?
• Would it have the ability to do joint projects under “190” agreements?
• Would it be subject to public records law?
• How would it meet its commitments regarding the Trojan Nuclear facility?

She stressed that the public utilities had a vested interest in what the new utility would look like. She stated that the big issue was access to preference power. The public utilities had come to the table with amendments that dictated that all current arrangements regarding the residential exchange should remain in place, the customers should have the benefit of the exchange, and the new utility would not be allowed to accept preference power offerings. She reported that this was not taken well and the public utilities were told that if they were successful in placing that language into the bill they would be “effectively killing public power in Oregon.”

Vice President Bishop asked how they could possibly be eligible to get preference power and to get the residential exchange. Ms. Henry responded that some utilities had qualified for both.

Ms. Henry called the conversation “very lively.” She said the drafters of the bill had several reasons why the proposal for PGE should go through, including that it would make the majority of power in Oregon publicly owned, it would not place that much of a load on the resources, and it would not cost that much. She related that she was informed that should the language regarding the residential exchange and preference power be insisted upon, they would tell the world that public power killed public power in Oregon. She stated that she informed them that she was willing to compromise if there could be some language that would not expose EWEB to rate increases included in their bill. She indicated that the bill was scheduled to be heard on April 7. She noted that the governor had a group of people that was meeting with all of the interested parties, including EWEB.  She felt the bill was very confusing to lawmakers and had observed there was no leadership in either House that had taken on the bill. 

Continuing, Ms. Henry reported that there would be an announcement from Enron later in the week.  She was uncertain what it would contain other than that there would be a stock distribution.  She said a plan to sell stock would take the City of Portland and the State of Oregon out of the equation because government entities could not legally buy stock. This would effectively take the issue off the table.

President Farmer observed that, though EWEB espoused public power, it seemed that EWEB did not want other places to have it because the utility did not want its own rates to go up. He called this a philosophical dilemma, though he acknowledged that he would ultimately fall on the “selfish side” given that he represented the ratepayers. Ms. Henry agreed, but averred that the other thing one needed to look at was what “kind of an animal” the proposal sought to create and whether it really qualified as public power. She noted that the coalition had included public records and public meetings in its most recent version but had overlooked public contracting.

Ms. Henry highlighted the bill requiring mandatory fluoridation, which had moved from the House to the Senate. She explained that the bill said if a utility had the money, it must implement fluoridation in its system. She advocated for reiteration that it was a local issue. She stressed that it was voted down locally several times. She noted that the dentists had lobbied strongly for fluoridation, stating that it would save the Oregon Health Plan a lot of money.

Vice President Bishop opposed fluoridation. She agreed it was an issue of local control.

Ms. Henry stated that two anti-fluoridation bills were up before the Senate as well. She said there was sentiments in the Senate that they did not want to take the issue on. She related that she had suggested to the Senate President that he hold a public hearing in the City of Eugene.

Ms. Henry reported that the big bill EWEB supported in this session had to do with water rights and permits. She explained that a municipality could get a water right and use the water and then it would get the water certificated, allowing this water right into perpetuity. She related that EWEB applied for permits to reserve water for itself going into the future and the permits were granted with the understanding that there were definite plans to use the water. She said the League of Oregon Cities, in response to an issue that had arisen in the Coos Bay area, sought to set up criteria that would assure that a municipality could take certain actions to preserve a water permit into the future. She stated that the bill was currently in the House Water Committee and the environmental group, Water Watch, had been unsuccessful in its attempt to include amendments that would add environmental criteria to the bill. She noted that some stories of abuse of water permits had surfaced, though none of them involved a major municipality.

In response to a question from President Farmer, Ms. Henry affirmed that water rights applied to wells. 

In response to another question from President Farmer, Mr. Helgeson said EWEB had 300 cubic feet per second (CFS) of water rights but was currently using 100 CFS.

In closing, Ms. Henry cited a bill of particular concern. She explained that the City of Klamath Falls in partnership with Pacific Power Marketing (PPM) had drafted a bill in response to a decision that its public-private partnership was not tax exempt. She said, as a public utility, EWEB was concerned about its public-private partnership with Weyco and had asked the Revenue Department to look at it. She reported that the test lay in the possessory interest and, as the generator was owned by EWEB, the department indicated that it did not need to be taxed. She stated that Seattle City Light and Tacoma were part owners of the inter-tie with the BPA that came through Oregon and it came to light that they were taxed on this. In response, she related, they had hired a lobbyist to help exempt them from taxation. She said this raised the question of whether EWEB paid taxes and whether it undertook joint ventures. She predicted this would not be the only time this issue would arise. 

President Farmer adjourned the meeting at 7:37 p.m.