Cathy Bloom, Assistant Treasurer, reviewed the First Quarter Financial Statements dated May 17, 2005, with power points. She said the working cash was “in pretty good shape” for March 31. Net income, at $7.6 million, was very similar to the first quarter in 2004.

Regarding the Contribution Margin, Ms. Bloom said the outlook had improved, but was moving weakly. She explained that a negative $1.1 million margin left $2.3 million to put into the reserve.

Ms. Bloom indicated that spending from the capital budget was low for the first quarter, but this was typical as most capital projects were undertaken during the summer months. She anticipated the budget would be $2.4 million less than projected, based on projects staff now expected to defer until 2006 such as the Bethel Substation and fiber installation at Hayden Bridge and Waterville.

President Farmer wondered if it would be possible to project the capital expenditure budget on when it was planned on being spent. Ms. Bloom said it would be possible but the budget system would have to be changed from an annual basis to a monthly one.                         

Mr. Berggren noted that the $2.4 million lower-than-budget projection was a significant part of the contingency planning related to the Power Operating Reserve. He anticipated carrying something close to that number into the Capital Reserve at the end of the year in order to provide the Board choices later should the Operating Reserve not perform. He thought this could cause a review of the five-year capital plan and planned expenditures.

President Farmer commented that the numbers were not meaningful in this context. General Manager Randy Berggren said the numbers could be trended, so that the average of the first quarter over the last three years was taken into consideration in order to reflect seasonality. He pointed out, however, that the budget was highly dependent on the nature of the projects in the capital plan for a given year so that even trending might not be particularly precise.

Treasurer Jim Origliosso said staff tended to keep better track of the larger projects such as the Leaburg-Walterville project as it helped in planning for them, but were less able to determine what month the lesser capital expenditures would fall in. He underscored that capital endeavors were affected by the construction season and vagaries of the weather.

President Farmer felt concern that he could not know for certain whether he was meeting his fiduciary responsibility if he agreed that the budget was on track.           

Ms. Bloom continued her review. She explained that the operating budget was comprised of the non-power operations and management costs that were not variable. She said it was at 24 percent of budget. She expected to be at budget at year-end.           

Ms. Bloom briefly discussed the quarterly report for the water utility. She noted that the water utility sometimes borrowed from the electricity utility and paid interest when repaying the loan. She projected the capital budget to be within budget at the end of the year, but the operating budget was projected to be $100,000 lower.           

Regarding the steam utility, Ms. Bloom stated that revenue had improved because of the fall net increase.

President Farmer asked what the most important thing Ms. Bloom would note from the first quarter’s performance. Ms. Bloom responded that the most important things were that the contribution margin was only a negative $1.1 million and an additional $2 million would be going into the Power Reserve.

Mr. Berggren noted that as February drew to a close, the contribution margin had been approximately $7.5 million in the negative. He underscored the volatility  of the margin as it was tied to stream flows and generation. He said it was in the realm of being able to catch up if conditions continued to be favorable.

Mr. Origliosso provided a brief overview of the Financial Scorecard and the General Manager Financial Goal Status. 

In response to a question from Commissioner Simpson, Mr. Origliosso said that the utility hoped to meet the targets listed in the scorecard within three to four years. He added that asterisks on the scorecard indicated changed numbers. He explained that the targets had to be adjusted to be consistent with other utilities for rating purposes.

President Farmer asked for one more column to provide a comparison with numbers from one year earlier.  Mr. Origliosso indicated he would do so.           

Mr. Origliosso said staff currently projected that the Power/Operating Reserve would be close to fully funded by the end of the year.

Mr. Origliosso explained that the operating ratio was the percentage of revenue that it cost to operate the utility.

Regarding the pension reserve, Mr. Origliosso said the plan was still in the works.           

In response to a question from Vice President Bishop, Mr. Origliosso clarified that the pension reserve was the percent of the pension that was currently funded.

President Farmer wished to see a debt to equity ratio rather than a debt to asset ratio. He acknowledged it was a subtle difference but averred it was a major difference in terms of the use of debt.

In response to a question from Commissioner Simpson, Mr. Origliosso said the utility did not have a long history of tracking how many days’ cash it had on hand but it used to set a dollar amount for cash. He noted that this amount used to be $7 million. 

From a policy point of view, Mr. Origliosso stated that the utility was in the third year of reserve building. He said the Electric Capital Budget was the engine for the contingency plan. He related that staff now predicted that some projects would not be undertaken in this fiscal year and, as a result, the budget would be at $25.2 million, the difference to be allocated to the Capital Reserve Fund.

Commissioner Simpson asked what projects were not completed. Mr. Origliosso responded that $3.5 million had been budgeted for a Master Plan and it was now thought that the utility would only spend $1.5 million. He said some projects, related to improvements to the present building, had been taken out of the plan because of uncertainty regarding what course of action the Board would take with the utility’s potential move. 

President Farmer called the financial report a huge improvement over what the utility was doing at this time last year.

In closing, Mr. Origliosso said he saw in the report a response to the request for a contingency plan. He did not see anything alarming in the Contribution Margin numbers, though they were off. He thought they would still allow the utility to meet its reserve building targets for the year. He did not feel anything was trending in the wrong direction.

Mr. Berggren was not as comfortable as Mr. Origliosso with the Contribution Margin number. He felt the utility was fortunate to be where it was at the end of the first quarter. He stated that it was now known that the utility would not recover from the moisture situation. He said in an ideal situation with a 100 percent natural moisture season, the utility would realize $13 to $15 million more in revenue than budgeted. He still felt some alarm that the margin had fallen to an $8 million deficit earlier in the winter. For him, it called out the volatility of such numbers. He noted that the number was calculated every two weeks and had moved up, but he would not take it for granted.                         

President Farmer surmised it was fair to say that the utility had eliminated some of the risk by budgeting for an 85 percent hydro year, though it would never have the ability to get rid of the volatility.

Mr. Berggren walked the Board through the 2005 General Manager Goals Update – First Quarter, 2005 and the Operational Performance Measures. He noted that four operational performance measures (OPMs) were tracking worse than target at this point, but in all cases they were close and would most likely be met by the end of the year if not sooner. He attributed the electric system reliability OPM to a March outage. He predicted that, absent an increase in squirrel problems, this would improve. Similarly, a water main had broken in March, affecting the OPM for water reliability. 

In response to a question from Commissioner Simpson, Mr. Berggren stated that CAIDI stood for the Customer Average Interruption Duration Incidents and was the average of all outages.  Therefore a particularly long outage could move that number away from the goal number very quickly.           

Regarding Demand Side Management (DSM) acquisition, Mr. Berggren said though it was tracking below target, he anticipated it to be on target at year’s end. He noted that April had been strong and underscored that DSM acquisition was a very seasonal number.

Mr. Berggren explained that the OPMs for customer service were down. He said this was due to the high turnover of employees in that area. He stated that, after reaching full staffing in the previous year, EWEB had once again dropped by six full time equivalent (FTE) employees, but six new ones had undergone training and were about to be put to work on the phones.  He predicted this number would recover quickly as the utility moved forward.           

Commissioner Simpson asked for clarification on the percentage for call center availability.  Mr. Berggren responded that six percent represented the proportion of people who hang up before their calls can get answered.           

Commissioner Lanning asked what the average was for the time it took to connect. Mr. Origliosso replied that it was between two and three minutes. He pointed out that when there had been a lot of problems, the waiting time increased to eight minutes.           

Mr. Berggren projected that the utility would now be staffed at a level to maintain the 1994 and 1995 percent response rate.

Commissioner Simpson related that on Safety Day he spent over an hour monitoring Customer Service phone calls.              The employees’ expertise and the level of knowledge it took to handle the calls had impressed him. He asked how long training took for that position. Mr. Berggren responded that it took an average of six to eight weeks given the complexity of the system.

President Farmer said the American Public Power Association (APPA) had started a program to measure and compare metrics from one utility to another. He noted that he had asked Mr. Berggren to review it and see it if made sense for EWEB to participate in it. He referred to an article in the most recent APPA Magazine on the topic.           

Commissioner Simpson wished to commend Mr. Wiley for the good Service Average Interruption Frequency Incidents (SAIFI) rating. Mr. Berggren reiterated that the weather had been a contributing factor to the excellent safety ratings.

Continuing, Mr. Berggren asked for feedback on the Goal and Initiative Updates – First Quarter, 2005.

President Farmer said the one area that needed forward progression was to better inform the public as to why the utility was considering moving all or part of its functions. He related that he had spoken to many people at neighborhood meetings and none of them seemed to understand that the utility had problems with the current site and, he added, none of them seemed to have any idea about the Carmen-Smith relicensing project.

Mr. Berggren noted that the utility had been moving toward crafting another informative “bill stuffer.” He thought there would be ample opportunities to address this in the near-term if decisions were made on the scope of the project. He remarked that some concern had been expressed that staff should be more proactive in keeping the Board apprised of issues. He asked how staff was doing in that regard.           

President Farmer said he felt comfortable with the issue, though he felt he was somewhat at an advantage as he, in his capacity as President, helped to craft the agendas.

Commissioner Menegat said he was comfortable with the information the Board was receiving. He commented that when Board members went out to neighborhood groups, Intergovernmental Affairs Coordinator Deborrah Smith, External Communications Coordinator Lance Robertson, and Public Affairs Manager Marty Douglass did a good job of keeping them current on the issues. He added that he also referred to the EWEB Web site at times. He averred that everything he needed to talk about was there.           

Regarding the quarterly opinion pieces for the editorial page, Mr. Berggren stated that the draft for the next one was out, though he could not guarantee it would be printed.           

In response to a question from Vice President Bishop, Mr. Berggren said there had been a long-standing question about the degree to which EWEB should spend money to sponsor or provide time to employees to participate in various community activities. He added that there was no shortage of outside interests among employees. He observed that there had never been a clear sense of strategy nor to what degree the utility should sponsor the work and spend more money. He felt it created feelings of inequity to provide support to one employee’s interest and not to another. He also thought it important that EWEB not be affiliated with one issue over another outside its normal functions.

Mr. Berggren directed the Board’s attention to the memorandum on the Carmen-Smith Financing Strategy Update. He reported that staff was meeting weekly with its project team group, which included representatives of the Relicensing Steering Committee. He said the team was beginning to do the logic diagrams about what kinds of things were of influence and what effects they caused. He stated that the team was beginning to learn how big of an impact on the results different actions would have. Once all of the cost/benefit work was done, he said the Board would be asked how much it wanted to do. He referred to two draft graphs, copies of which were provided to the Board. He called the second one his “funnel” graph, as it looked something like a tornado. He explained that it sought to divine what kinds of effects the various assumptions could have on “some expected outcome” for what it would cost to build Carmen-Smith and whether it had a positive cost ratio. He called this the “uncertainty analysis.” He said the top of the funnel, the Market Price Scenario, was the largest uncertainty. 

Commissioner Menegat appreciated the “competing financial obligations” piece of the analysis because he said the Board would be looking at all of the items on the list. He felt this would help him look “more globally” at what was happening with the utility as opposed to charging in and building a new facility. 

Vice President Bishop asked if transmission costs had been taken into consideration. Mr. Berggren affirmed that they were. He pointed to the fourth line up from the bottom of the graph and explained that the number referred to transmission as it related to the Carmen-Smith project and was one of the lesser uncertainties of the project. 

Commissioner Simpson asked what the significance was of the year 2010 in regard to lost generation on the graph. Mr. Berggren replied that it was based on the assumption that the construction would begin that year and it would be shut down. He said staff would continue to work on this and would seek to build a diverse set of views to provide a more rounded idea of the options. 

            President Farmer commented that risks lay on both sides of the issue, whether to sell or upgrade the facility. He averred that the only way to address the risk would be to shorten the time it took to repay it. He said this drove the need to have an equity position in order to reduce the time it took to pay it back. 

In light of the time left for the work session, President Farmer asked Commissioners if they wanted to proceed and cover some of the agenda for the regular meeting. The Commissioners indicated that they supported moving on with (4) Items from Board Members and (5) Correspondence.

ITEMS FROM BOARD MEMBERS (moved from Regular Board Agenda)

Commissioner Menegat shared that he had attended Safety Day. He said he was present for Mr. Wiley’s vacuum truck demonstration. He thought it was a great system as it worked efficiently and helped to prevent injuries.

Commissioner Menegat reported that he attended the recent meeting of the Jefferson/Westside Neighbors. He noted that Commissioner Simpson would report on it.           

Continuing, Commissioner Menegat related that he had visited San Francisco, California, and read of a controversy regarding power transmission while there. He explained that power was being brought into the Bay Area from a coal-fired power generation facility. Residents wanted the energy but did not want it to be produced by a plant that generated pollution. Mr. Berggren noted that a $15 million facility in Wyoming was the power provider.

Vice President Bishop said she also attended the Jefferson/Westside Neighbors meeting. She noted that approximately 15 people had attended it. She complimented Commissioner Simpson on his presentation, adding that she had been quite impressed by the aerial photograph of the EWEB site.             

Vice President Bishop also attended Safety Break Day. She liked the demonstrations with the miniatures that showed how to avoid potential accidents.             

Additionally, Vice President Bishop reported that she received a call from a new radio station, KOPT, requesting an interview. She had found the questions to be complicated and full of inaccuracies. She felt it was not an effective interview.  She said she would ask the radio reporter to talk to Mr. Robertson, should she call again.           

In closing, Vice President Bishop surmised that the fluoride bill was dead in a State House committee. 

Commissioner Lanning stated that he would be attending the Laurel Hill Citizens meeting on May 19. He indicated he would be talking with Mr. Robertson regarding his presentation and that EWEB’s Water Engineer Jay Bozievich would be at the meeting as well. 

Commissioner Lanning reported that Assistant Secretary to the Board Krista Hince was diligently working on plans for attendance to the APPA conference in June by Commissioners Simpson, himself, and President Farmer. He pointed out that this would mean there would be no quorum on June 21.

Commissioner Simpson looked forward to attending the APPA conference in June.             

Commissioner Simpson related that he attended the Safety Break Day. He commented that he was particularly interested in the infrared imaging equipment and the proactive scheduled maintenance the utility was conducting on the electrical system using those tools. He also liked the hydraulic valve actuator device, which reduced the wear and tear on workers. He said after answering phones for an hour, he was given a comprehensive tour of the Steam Generation facility. He added that he had “chatted” with Mel Damewood about the 30 percent design process.

Commissioner Simpson reported on his attendance to the Jefferson/Westside Neighbors meeting at which the major topic of conversation had been the potential move of the headquarters.              He noted that Eugene Mayor Kitty Piercy had been in attendance. He commented that he had spoken with the Mayor in her office on May 16. He remarked that, while he did not speak about EWEB related topics at the time, he felt the meeting he had with her furthered the goal of fostering good relationships with the Mayor and City Council of Eugene. 

Commissioner Simpson apologized for not being able to be present for the Leaburg Lake raise. He said he went after 5 p.m. and it seemed it had gone well. 

President Farmer averred he deserved a gold star for being the only one who wore his blue safety shirt to Safety Break Day.             

President Farmer remarked that the most recent issue of the APPA Magazine also had a good article on governance. He encouraged the other Commissioners to read it. He said the article recommended that Commissioners “keep their noses in the business of the utility but keep their fingers out of it.” 

Continuing, President Farmer reported on his individual meetings with Mayor Piercy and Eugene City Manager Dennis Taylor regarding the potential move. He also had attended a reception for the Chief Executive Officer (CEO) for Triad Medical Center, who was in the area to celebrate McKenzie-Willamette Hospital’s 50^th anniversary. He noted that he was there as a representative of the Eugene Area Chamber of Commerce and not EWEB. 

CORRESPONDENCE (moved from Regular Agenda)

Mr. Berggren stated that copies of several EWEB’s publications were included in the Board packets for Commissioners’ perusal.

Mr. Berggren asked for more Board discussion on the College Hill Reservoir access request.  He said Mr. Douglass had sent a memorandum on May 3 and subsequent to this he had conferred with Commissioner Simpson and Vice President Bishop. He said they thought it would be a proactive move to write an opinion piece for the Register-Guard and head off any public dissension that might arise from the potential closure of the reservoir to the public. He stated that staff had taken a more personal approach, meeting with various stakeholders and working with them face-to-face in order to keep the issue local. 

Vice President Bishop said she did not have the information she needed. She could not recall if there were structural problems to contend with in the reservoir.  Mr. Berggren provided her with a copy of the memorandum.

Vice President Bishop asked if there were any definitive flaws in the structure of the reservoir. Mr. Berggren replied that the reservoir met its design code for its intended use.

Commissioner Simpson asked why stairs were constructed around the exterior of the reservoir. Mr. Berggren responded that the stairs provided access to the top of the structure.              He said in 1936 there had been discussion with the City about some playground access on top of it or some sort of public use in addition to the needs the utility had to maintain the facility.           

Water Engineering Manager Mel Damewood clarified that the utility did need the stairway to access the reservoir for maintenance and repairs

Commissioner Simpson wished to take proactive stance on the issue to avoid coming off as “anti-community.” He said he was not set on an “op-ed” piece but sought to inform the community in some manner. He suggested making surrounding property owners aware of the potential closure or possibly stargazer groups that use it for their purposes. He also suggested placing notices on the structure itself. He stated that while he wished to hear public opinion on the issue, he did not think it would sway his opinion. He had serious concerns about the liability that the reservoir presented. He related that he heard that over 100 people would sit on top of the reservoir to watch 4^th of July fireworks. He questioned the capacity the roof had for holding up that much weight.

Mr. Douglass reported that staff planned to meet with concerned parties in order to inform them what the utility’s course of action would be and why. He liked the idea of posting a sign on the facility. But he felt the best course of action was to talk with all of the stakeholders prior taking action. He stated that the utility would be looking at all of the reservoirs and had already fenced some of them. 

Commissioner Simpson asked if both reservoirs would be fenced and whether they would be far enough from the reservoirs that people could not touch them. Mr. Damewood affirmed that this was the plan. He underscored that the purpose of fencing would be to physically separate the public from access to the reservoirs.

Vice President Bishop asked why the utility wanted to fence the reservoirs and who decided that this was how to proceed. Mr. Berggren explained that this was staff’s recommendation due, in part, to vulnerability assessments made after the tragic events of September 11, 2001. He underscored that the assessment had resulted in a strong recommendation that the utility close off access to its production, storage, and transmission facilities for the purpose of managing safe drinking water.

Vice President Bishop surmised that the utility had waited four years to take this action. Mr. Berggren responded that staff had not waited four years, as the vulnerability assessment had not been conducted on September 11, 2001. Mr. Damewood added that the assessment was completed in January 2003, and the utility had prioritized its higher priority security measures over the reservoir.             

Vice President Bishop was not convinced that the only way to maintain the integrity of water quality would be to fence off what had been used for decades by the public. She predicted it would be a public relations nightmare. 

President Farmer supported denying people access to EWEB facilities so long as it was done across the board. Regarding notification, he advocated for being very proactive and talking to stakeholders and so on. He did not think it necessary to inform everyone in the City, given that only a small portion of the population actually used the reservoir.

Commissioner Lanning asked if it would be possible to build a viewing area on the property.              Mr. Berggren responded that the intent was not to fence off the entire reservoir site. Mr. Damewood added that staff had not designed the fence at this point and would be taking a closer look at all of the possibilities.           

Mr. Douglass averred there would be plenty of time to consult stakeholders in advance of the change.

In response to Commissioner Lanning, Mr. Berggren stated that neighborhood input would be solicited in the design of the fencing project.           

Commissioner Lanning said, given that EWEB had a single-source water supply, he supported maintaining the safety and integrity of the system. He suggested that Mr. Douglass and a Commissioner meet with area residents.

Commissioner Simpson asked when the reservoir had been planned to be fenced, had the access issue not been raised.              Mr. Damewood replied that the plan was to take a look at all of the reservoirs and evaluate vulnerability and how to secure each one. He said the utility had been doing this for several years, but had stalled on this reservoir given the political context. In response to another question from Commissioner Simpson, he said no plans had been made to install intrusion alarms.           

Mr. Berggren surmised that the Board majority favored moving forward with public outreach and subsequent plans to use fencing to keep the public away from the College Hill reservoir.           

President Farmer adjourned the meeting at 7:31 p.m.