Pre-Meeting Q & A from the Board - November 6, 2018

The following questions have been posed by Commissioners prior to the scheduled Board Meeting on November 6, 2018.  Staff responses are included below, and are sorted by Agenda topic.

2019 Proposed Budgets and Prices (FAHEY)

Residential Water Service Inside the City Limits of Eugene: Why is the 3/4 pipe tier being proposed to be eliminated? Is that size being phased out?  We are actually phasing out the 5/8 inch meter size and standardizing to 3/4 inch meters as EWEB's standard residential meter. This was a decision made as EWEB shifted to "ipearl" water meters made by Sensus, in which there was no cost differential between 5/8 inch and 3/4 inch meters. Also, EWEB is one of the last utilities on the west coast to be utilizing 5/8 inch meters as a standard and the availability/support of 5/8 inch meters is dwindling. So, as part of the change out from our existing meters to the ipearl (which are AMI compatible) the change to 3/4 inch was an opportunity for standardization. Since there was no cost differential, we decided to standardize to the existing 5/8 meter base rates, labeling it as a "< 1" (inch meter)", and having no impact on our customers from a financial standpoint. We will be addressing the SDC charges for this change in standard meter size at a future Board meeting.

Fixed Pumping and Delivery Above the Base: Do these proposed charges fully cover the cost of delivery to the elevated properties? Not entirely. EWEB water recovers the energy portion of pumping to the upper pumping levels, and a portion of labor and equipment (O&M costs). Currently we do not charge for the infrastructure that supports the higher elevations.

Finance Operations & Maintenance Budget: Why are materials and supplies expected to almost double in cost? The $23,000 increase is for additional shelving in the warehouse to accommodate meter inventory. Why are Insurance costs expected to go up 14% between 2017 Actuals and 2019 Proposed Budget? Insurance rates in general are going up in the wake of recent disasters. The threat of increased wildfires has particularly hit the utility industry hard and property/liability insurance has increased substantially. In 2016, EWEB agreed to reduced property/liability insurance rates for a two-year contract. While a significant increase was avoided last year, EWEB is now subject to insurance market conditions.

Did credit card transaction fees go up across all credit card types?  The transaction fees are the fees that the bank charges to process credit card transactions. In 2018 EWEB has been averaging approximately 36,000 credit card transactions each month compared to 34,000 last year.

Do we accept all credit card types (i.e. MasterCard, Visa, American Express, etc.)?  EWEB accepts MasterCard and Visa.

Human Resources Budget: Why did Professional and Technical Services line item decrease ~$200K?  The 2018 Human Resources Professional and Technical Services budget line included one-time implementation costs for the Human Resources Information System.

Is that change related to the increase in Training and Travel budget? The $54,000 increase in Training and Travel is primarily due to reinstating a tuition assistance program.

Information Services Budget: What is the equipment being replaced that is increasing the budget $260K?  The following purchases are driving the increase in the Technology / Office Equipment budget which were funded through a reduction in purchased services:

• PC and related peripheral replacements
• Equipment (cables, mounts, optical networking devices, etc.) to support capital projects
• Increased deployment of the Verizon Network to support mobile and field work

Water Operations and Maintenance budget: What is the difference between "EWEB Equipment" and "Equipment"? "EWEB Equipment" is for Fleet Services needed to support the Water Utility and "Equipment" is associated equipment needed to operate and maintain our plant facilities (such as water quality testing equipment, flagging and signage equipment, controls equipment, etc.)

Customer Service Policy, Cost-Based Fees (FAHEY)

Why is our cost to disconnect service at source so much higher than a fee than shutting off service that requires a truck roll? Disconnecting at the source requires both a trouble-shooter and a meter tech, takes much longer than disconnecting at the meter, and requires additional equipment to reach the source which is on top of a pole in overhead infrastructure situations.

Quarterly Strategic & Operational Report for Q3 2018

Electric Financial Strength Measurements: We are getting close to exceeding the Age of System Requirement. Can you please put this figure into context? The age of system metric is a system-wide measurement and contains both long-lived assets (e.g., Carmen-Smith) and assets with shorter useful lives (e.g., computers, software). This metric improves when assets are placed in service, not when the capital spending occurs. This metric measures how investment in plant assets compares to the pace of depreciation over many years. Depreciation starts after an asset is placed into service. (FAHEY)

How much time would need to pass to put us over that target? If the Electric Utility places no new assets in service, it would take approximately 1.5 years before the age of the whole system would reach 60%. (FAHEY)

Since some infrastructure costs more is it weighted by value of the investment? The metric is calculated based on total assets and total depreciation. Assets in service have estimated lives varying between 3 and 50 years so the metric is weighted by cost and estimated useful life. (FAHEY)

How much will the Carmen-Smith upgrade reduce this figure? Placing long-lived assets like Carmen-Smith into service does have more of an impact on the age of system (compared to computer equipment, for example) due to the large up-front investment and extended useful life of the project. (FAHEY)

September 2018 Generation YTD Report: I recommend putting the acronyms in the text accompanying the chart (AF, FOF, etc) instead of a glossary at the end. Thank you for your recommendation, we have noted it for the next iteration of the report. (LAWSON)

Chlorine Goal Chart: I would guess that the chlorine dips in April to June coinciding with run-off season, is that correct? Otherwise, more description of this metric would be useful.  This is our water quality goal for Chlorine residual in the distribution system. (> 0.2 parts per million of chlorine) EWEB staff conduct hundreds of chlorine tests each month to measure the chlorine residual in the pipelines to ensure there is a measurable disinfectant to protect our drinking water. When the chlorine residual drops below 0.2 parts per million (ppm or mg/l), it may initiate a series of actions by EWEB staff, such as water main flushing, to ensure that we have enough chlorine residual in our system. You noticed the dip in the spring which is typical (as well as fall) when there tends to be more chlorine demand (the term used when residuals are being used) due to more naturally occurring organic material in the water during those seasons. The 97% goal of maintaining between 0.2 and 0.8 ppm (We do have a not to exceed level of 0.8 ppm) in our distribution system has been achieved consistently over the last year, due to both Hayden Bridge and Distribution System Operators working closely together in keeping water quality a top priority. (DAMEWOOD)

Water Capital Projects Quarterly Status Report: Hayden Bridge costs are 20% higher, please elaborate on why the construction costs were significantly higher.  This is associated with our Hayden Bridge On-Site Disinfection Building Project. As noted in the contract approvals by the Board in May 2018, (RFP 015-2018) for the equipment purchases and in July 2018, (Contract 031-2018) for construction of the building and equipment installation, the bids came in much higher than originally anticipated in both the budget and updated project estimates. This is a symptom of the strong economy that shifted from the time of budgeting. Several large local contractors and suppliers did not bid the project due to excessive workload. EWEB plans to offset these costs via deferrals and reductions in other projects, but those efforts have not yet been identified. Staff will likely be recommending a budget amendment for this project in December. (DAMEWOOD)

Consent Calendar

RESOLUTIONS

Resolution No. 1825, 2018 Revised and 2019 Trojan Budgets (FAHEY)

Excluding the payment that covers multiple years, what are the cost drivers impacting the storage costs? The majority of the costs for the site are labor and related expenses. There are also materials and equipment, contracted services, and PGE overhead applied to costs incurred.

Do we anticipate that BPA will continue to have to pay EWEB's portion of the storage costs or is that set to expire after 2019 and relies on approval of extensions? BPA is obligated to pay the site expenses, regardless of whether the settlement is extended. BPA pays the expenses as incurred. Several years later, BPA receives a share of reimbursement from the settlement.

Why is the "Trojan Final Budget: EWEB Direct Costs" spilt up the way it is? The presentation of EWEB expenses traditionally has been split between labor and non-labor. The internal labor is for monthly and annual monitoring and reporting.

What case are the budgeted $10 million in legal fees for? The 2018 Final Budget - EWEB direct costs has $10,000 for legal fees. EWEB legal expense is generally for review of, and response to, settlement issues and review of licensing and other legal documents by outside counsel. PGE legal counsel takes the lead role, and EWEB legal counsel reviews to ensure EWEB's best interest is represented.