EUGENE WATER & ELECTRIC BOARD

REGULAR BOARD MEETING

EWEB BOARD ROOM

JUNE 7, 2005

7:30 P.M.

Board Members Present: Ron Farmer, President; Sandra Bishop, Vice President; John Simpson, Mel Menegat, Patrick Lanning, Commissioners.

Others Present: Randy Berggren, Debra Smith, Dick Helgeson, Marty Douglass, Gale Banry, Dick Varner, Jim Wiley, Tom Buckhouse, Ken Beeson, Roseanna McArthur, Terry Bequette, Krista Hince of the EWEB staff; Ruth Atcherson, minutes recorder for the City of Eugene.

President Farmer convened the Regular Board Meeting of the Eugene Water & Electric Board (EWEB).

AGENDA CHECK

There were no changes to the agenda.

PUBLIC INPUT

Norm Carter, McKenzie Highway, stated that he lived along the canal. Since the water level was raised, he had observed water on his property. He said the water had risen four feet above its bank on the hillside in places. He wanted someone to address this issue.

Additionally, Mr. Carter related that his daughter had an electrical fire due to EWEB equipment malfunction and had lost her appliances. He said EWEB asked that she replace her appliances and submits receipts for reimbursement. He stressed that his daughter did not have the resources to make such purchases, and neither did he, as he was on a fixed income.

President Farmer asked Mr. Wiley to follow up on the gentleman’s testimony.

Carrie Shaw, 42127 Holden Creek Lane, daughter of Mr. Carter, reported that the EWEB utility pole had caught fire on May 20. She said the transformer had been emitting a loud noise earlier in the year that had caused her alarm to the extent she had reported it to EWEB. She stated that EWEB workers had come to her house and installed a device to determine where the trouble lay and put in a work order. She related that while calling to ask for workers to do something about the transformer, she experienced a power surge that caused several household appliances to ignite. She had the power to her house turned off out of fear of further house fires. Ms. Shaw explained that she was now living with her three children in a house with no heat and no electricity. She said a claims adjuster reviewed the damage, took pictures, and made an itemized list of everything that had been affected. EWEB took the list from her and indicated that they needed more paperwork. She said could not afford to purchase new appliances.

Mr. Berggren assured her staff would follow up on her dilemma. President Farmer asked Mr. Wiley to speak with Ms. Shaw.

Vice President Bishop declared that someone should take care of her electricity problems “tomorrow.”

Mr. Carter added that the transformer had blown “everything.” He reiterated that he was not able to help his daughter buy new appliances.

Vice President Bishop said EWEB needed to remedy the unsafe condition immediately and then to find a creative way to replace the non-functioning appliances.

Commissioner Simpson thanked Mr. Carter and Ms. Shaw for driving down to testify.

APPROVAL OF CONSENT CALENDAR

Minutes

1. Minutes of the April 19, 2005, Work Session and Regular Board Meeting minutes, the May 3, 2005, Work Session and Regular Board Meeting Minutes, and the May 17, 2005, Work Session.

Business Service Agreements

2. Valmont-Newark – Transmission Structures – Electric Division - $199,296

3. Wesco Distribution, Inc. – Single Phase Pad-mounted Transformers (3 bushing) – Electric Division - $116,390

4. Miner & Miner – GIS Migration, Mapping System (Water & Electric) & Outage Management System - $422,400

5. OBEC Consulting Engineers – Trail Bridge Dam Spillway Hydraulic Barrier – Water Division - $8,900

6. USDA Forest Service – Willamette Forest – Collection Agreement – Bull Trout Population – Environmental Management Services – Corporate Services Division - $28,500

7. Triad Mechanical, Inc. – Trail Bridge Dam Hydraulic Barrier – Electric Division - $191,799

8. Motorola Corporation – Engineering/Design/Installation Services and Equipment for Microwave Radio System – Electric Division - $850,000

9. SelecTemp – Temporary Services – Information Services – Corporate Services - $29,040

Bond Resolution

10. Water Bond Refinancing Resolution No. 0508 – To request the City of Eugene to authorize the issuance of Water Utility Revenue Bonds for the purpose of obtaining interest cost savings. Two separate service of original bonds are involved. The Series 2000 Bonds and the Series 2002 bonds.

Power Service Agreements

11. Cowlitz PUD Exchange – Approval for a 27-month power exchange.

12. McMinnville Water & Light – Power Scheduling and Services Agreement – reduce the range of services provided as well as reduce the monthly service fee

13. Weyerhaeuser – To extend the contract over a three-year time frame.

Commissioner Menegat pulled the minutes from the Work Session held on May 3.

Commissioner Simpson pulled the minutes from the Work Session held on May 17.

Vice President Bishop pulled the minutes from the Regular Session held on May 3 and the Work Session held on April 19.

Vice President Bishop stated for the record that the Board was not reviewing the final power service agreements contained in the Consent Calendar. She said while there had been a lot of good background information in the agenda packet, she did not feel she had the final version of the agreements.

Commissioner Simpson moved to approve the Consent Calendar with the exception of the meeting minutes listed under Consent Calendar item (1). Commissioner Menegat provided the second. The motion passed unanimously, 5:0.

ITEMS FROM BOARD MEMBERS

Commissioner Menegat reported that the Compensation Subcommittee had met. He related that the Subcommittee had begun a general conversation regarding General Manager Randy Berggren’s contract, which was slated to expire at the end of 2005. He said Mr. Berggren had been invited to the meeting scheduled for June 28 to participate in the discussion.

Vice President Bishop stated that the Fluoridation Bill had stalled in the State Legislature.

Vice President Bishop announced that she had received an invitation for all of the Board members to attend a Climate Change Forum, planned for June 14 at Oregon State University from 10 a.m. to 2 p.m. She noted that one portion of the discussion would center on the findings that came out of the Governor’s climate change group. She encouraged the Commissioners to attend.

Vice President Bishop asked how the meter exchange project was coming. She asked if people were being provided notice and whether specific neighborhoods were being targeted. Mr. Berggren indicated he could supply her with a status report. He added that EWEB was ahead of its goal.

Commissioner Lanning said the membership meeting of the Lane Council of Governments (LCOG) would be hosted by EWEB on June 23. He thanked Assistant Secretary Krista Hince for arranging for it. He related that LCOG had developed a Web-based evaluation system for its director both for Board members and internal staff. He said that process had concluded on June 3.

Commissioner Lanning reported that he had attended the Laurel Hill Neighborhood meeting and had discussed the placement of the new reservoir in that area. He said that Senior Water Engineer Jay Bozievich made a presentation and then he (Commissioner Lanning) followed and discussed issues regarding the potential sale of the EWEB property and hospital siting. He commented, “some of the misconceptions were amazing.” He noted Eugene City Councilor David Kelly followed him.

Commissioner Simpson said he would be absent June 16 and 17 because he would be driving to the American Public Power Conference (APPA). This would prevent his attendance at the 30 percent design review Board drop-in portion. He said Commissioner Menegat would still be available to attend and that he had asked Vice President Bishop to attend in his stead.

CORRESPONDENCE

Mr. Berggren reported the following:

· Board members could be receiving calls from constituents; a special customer survey related to customer service regarding billing and collections was underway.

· Board packets contained a copy of a letter sent to Roy Orr, Chief Executive of McKenzie-Willamette Medical Center; no response as yet.

· The joint meeting between Eugene Mayor Kitty Piercy and EWEB President Farmer had gone well.

· A second offer had been received from Arlie & Company; they asked the Board to review the offer and provide direction to the General Manager to begin negotiations for a binding agreement. He hoped for some direction from the Board.

President Farmer was unclear as to whether the Board should be in an Executive Session given that it was a discussion of a real estate transaction. Mr. Berggren thought it might be prudent to call such a session if the Board wished to give the General Manager direction in this regard. He asked if the Board was interested in engaging in a separate negotiation. He pointed out that in order to negotiate with another entity EWEB would have to withdraw from its current negotiation.

President Farmer related that he received a phone call from John Musumeci, owner of Arlie & Company. He said Mr. Musumeci had indicated there was nothing in the terms of the offer as presently submitted that was not negotiable. As such, he felt there was value in calling the Board into an Executive Session. He noted he also heard a rumor of another potential offer for the property.

Vice President Bishop did not think policy could be discussed within the legal parameters of an Executive Session. She underscored that EWEB was a public agency and averred its business was the business of the public.

President Farmer commented that what was important to him was to ensure unanimity of the Board. He stated that a discussion of a specific offer or specific conditions of an offer should be held in Executive Session.

Commissioner Lanning said the utility had specific needs and the Board needed to focus on those specific needs. He wanted Mr. Berggren to look into the parameters of the Executive Session, but he thought such a session should be utilized and followed by a public session.

Commissioner Simpson agreed, adding that there were several things he felt should be discussed in the Executive Session.

President Farmer stressed that the most important thing was to help the General Manager understand how to move forward.

BOARD AGENDAS

Mr. Berggren reviewed the Eugene Water & Electric Board: Board Agenda Report: June 7, 2005. He said not much had changed and there were no new agenda items.

BUDGET AMENDMENT NO. 2

Treasurer Jim Origliosso explained that Board policy required staff to bring a proposal when a major capital project had exceeded its budget in the electric utility by 20 percent or more. He said the budget amendment was to meet this requirement. He underscored that the work had not been done at this point. He asked Electric Division Director Jim Wiley and Energy Resource Project Manager Gale Banry to discuss the scope of the project.

Mr. Wiley clarified that the budget amendment was due to the costs of the studies to determine the impact the Carmen Smith project would have on aquatic and plant life, recreation, and historical aspects of the area. He said EWEB had chosen the initial consultation package with the Federal Energy Regulation Commission (FERC). He provided a power point presentation that delineated the study processes and some of the results that had been obtained. He noted that Resource Agencies had wanted studies that EWEB did not feel were applicable. He said in order to minimize costs EWEB suggested doing initial work and then deciding how to proceed from there. Due to this, some of the studies increased in scope and some had decreased. He commented that unfortunately more studies had increased than decreased.

In response to a question from President Farmer, Mr. Wiley said the studies were not all completed, but the results from the initial studies had been submitted to Resource Agencies.

Mr. Banry remarked that Resource Agencies sometimes took issue with the methodology of a study.

In response to a question from Commissioner Simpson, Mr. Banry explained that some studies were planned for 2004 and some were planned to span 2004 and 2005 so that a full picture of things such as fish populations could be ascertained.

President Farmer asked how many of the 23 studies had finished with satisfactory results. Mr. Banry replied that none of the studies were fully completed. He cited as an example the recreation studies, one conducted in 2004 and one underway, the results of which would be combined. He pointed out that some studies, such as the botanical studies, could only be conducted certain times of the year because of the life cycles of plants.

Mr. Wiley reviewed the formula for determining kilowatt potential from hydroelectric facilities related to stream flow. He explained how the Carmen Smith facility was utilized to augment power needs during peak power usage.

In response to a question from President Farmer, Mr. Wiley said the value in Smith was that it collected two watersheds, increasing flow capacity. He noted that EWEB did fluctuate the Smith reservoir.

Mr. Banry explained that the amount of storage capacity was only 24 hours worth of generation.

Commissioner Simpson asked why the Carmen power plant was not running at peak capacity at all times. Mr. Wiley responded that the utility would do so if there was enough water available in it.

President Farmer asked if he meant there was not enough water for the capacity of the turbine. Mr. Wiley replied that one did not design turbine capacity for 100 percent load factor. Mr. Banry clarified that running the turbine 24 hours per day would drain the reservoir.

Continuing, Mr. Wiley said the agency had a renewed interest in cutthroat trout that could cost the utility approximately $28 million to provide mitigation for.

President Farmer asked what the purpose of the studies was. Mr. Banry replied that the stretch below the Carmen diversion was volcanic and very porous and was dry for part of the year. He said there was concern that the cutthroat, which was predominantly up in the stretch of the river above the reservoir, could be entrained to move to the Smith Reservoir. He stated that the lower stretch of the McKenzie River was not dewatered by the project.

Mr. Wiley stated that one increase in study scope was a look at the point at where the river cross-sections because it was thought that more bull trout could spawn there. He said another item of interest was whether Smith Creek should be “watered up” because there had been rumors that bull trout were in that creek at one time. This could mean EWEB would have to build fish ladders and install fish screens to provide the fish connectivity between the Trail Bridge Reservoir and Smith Reservoir at a price tag of approximately $56 million. He said EWEB was studying it because one proposal that EWEB might make would be to replace the habitat for the bull trout instead of investing this kind of money on such mitigation measures.

In response to a question from Commissioner Simpson, Mr. Banry stated that there would be studies of dissolved gases coming from the Carmen plant in the coming year.

Mr. Banry said, in response to follow-up questions from Commissioner Simpson, that there were no fish screens at the intake of the Carmen penstock.

Mr. Wiley indicated that EWEB was studying replacement of the runners in the Carmen power plant. He said staff was studying when to hold off on the replacement and when to hold the outage period that it would take to undertake the replacement; these items were slated to be included in the Carmen Smith finance strategy that would be coming before the Board.

Additionally, Mr. Wiley noted that the clearing that allowed a transmission line along Deer Creek had been suggested to be increasing the water temperature to the detriment of fish stock. He thought it possible that EWEB would be asked to study this and potentially mitigate the situation.

Mr. Wiley conveyed staff’s estimation that it would cost $5.7 million to complete the work and write the initial application. Capital costs were predicted to be $11.6 million.

Mr. Origliosso presented the Budget Amendment for the capital project for the year 2005 and information on the cost to complete beyond this year. He said the Carmen Smith project had come to be understood to be a big part of the way the EWEB would be doing business over the coming years. In addition to being a capital project, he averred Carmen Smith was also an activity that took much EWEB staff labor. He recommended that beginning in 2005 EWEB labor be excluded from the capital costs of this project, so in other words the $13.5 million originally requested would become $11.6 million; the 2005 component of the total was $3,045,560, the amount contained in the budget amendment before the Board at the present meeting.

Mr. Origliosso recalled that in the previous year EWEB had sought additional bond authorization for Carmen Smith in the amount of $10 million. This authorization had been given and EWEB had issued $8 million. He related that the headquarters relocation had been authorized for $5.4 million, but only $2.5 million had been issued. He understood that the current plan would be to conduct the 30 percent design and bring a bond proposal before the voters.

Commissioner Simpson asked if some of the money could be used for deferred maintenance. Mr. Origliosso responded that this was not an allowed use for such funds.

Mr. Origliosso proposed that the $2.9 million remaining for the headquarters capital project be shifted for the project. He thought EWEB would have to borrow this amount plus another $1.5 million to meet the estimate of $11.6 million.

Mr. Berggren pointed out that the operations and maintenance budget would have to “suck up” the added staff expense.

Mr. Origliosso said the next step, pending approval of the budget amendment, would be to bring a contract amendment to the next meeting that would provide authorization for the consultant and to finish the studies.

Mr. Berggren commented that this was frustrating work from the management perspective. He said there had been no shortage of effort to try to mitigate costs. He acknowledged the order of magnitude of costs and underscored that should these studies not disprove that what Resource Agencies wanted for mitigation was not scientifically justified, EWEB was not likely to prevail. He stressed that any study that could be removed could potentially jeopardize the resulting sound science and forces the project to cost $50 million more. He recommended spending the money in order to reach the decision point.

Commissioner Simpson asked if the studies had revealed any major hurdles to date. Mr. Banry responded that no specific hurdles had been identified to date. He predicted connectivity would be a big issue at all locations. He said, in response to another question from Commissioner Simpson, that the two largest projects stood out as integral and were the two biggest costs, but there were no studies that stood out as something that could be deferred or eliminated.

Vice President Bishop supported moving forward. She conveyed her concern that EWEB should still have enough money to complete its master planning process.

Commissioner Menegat supported the amendment, adding that it was just something that EWEB needed to move forward on. He averred it was important to do it right the first time so that EWEB would not have to pay later.

President Farmer reiterated the need for a Carmen Smith strategy. He thought it was disconcerting to vote on a $3 million amendment before the strategy was completed. He was worried about striking $300,000 out of labor costs for the rest of operations. He felt it seemed like the utility had found that “awfully easy” when it had struggled in the past to find such resources.

President Farmer expressed concern that someone could take the position that salmon should go over Trailbridge Dam. He thought that could be a “deal breaker” for the whole project. Mr. Banry said this was why the entrainment studies were being looked at. He stated that much work had been done on fish mortality and EWEB was looking at other aspects as well.

Commissioner Simpson moved approval of Budget Amendment No. 2 for Project Number 22639 in the amount of $3,045,560. Commissioner Lanning provided the second. The motion passed unanimously, 5:0.

FINANCIAL POLICIES

This item was rescheduled due to time constraints.

ITEMS REMOVED FROM CONSENT CALENDAR

Vice President Bishop provided the following corrections to the minutes from the Work Session of April 19:

· Page 2, paragraph 1: “…He projected this additional work would cost $250,000….”

· Page 5, paragraph 2: “President Farmer remarked that when the subcommittee, consisting of himself and Vice President Bishop met with Mr. Douglass, Mr. Robertson, …”