Pre-Meeting Q & A from the Board - December 4, 2018

The following questions have been posed by Commissioners prior to the scheduled Board Meeting on December 4, 2018.  Staff responses are included below, and are sorted by Agenda topic.  

2019 Proposed Budgets and Prices (FAHEY/HART)

2019 Key Budget Assumptions: Does 90% generation assumption cover us if FERC continues to restrict flows at Carmen-Smith due to sink hole concerns? The 2019 budget included a risk tolerance of approximately $3 million. That is sufficient to cover a 10% reduction in generation, a 2.4% reduction in load, or a 47% reduction in wholesale prices. The budget does include a Carmen-Smith outage from April through November. A full outage in the first quarter would have a roughly $1.2 million financial impact, although we are having productive discussions with FERC.

2019 Key Budget Assumptions: Why is the shift in Shared Services allocation needed? Is this because Water was typically not covering its full cost of service? The shared services allocation is based on share of total plant in service, revenues, and direct labor. Since 2012, the Water Utility's proportionate share of the total in each category has steadily increased.

Electric Utility Capital and Debt Service Budget: I see a significant jump in grant funding in the budget for 2019, what grants are we anticipating and what projects do they support? Funding of $681,000 is a FEMA grant for specifically identified projects that enhance our reliability. These projects were approved by FEMA for reimbursement and were highlighted as necessary after the ice storm. We began publishing the "roster" of these projects at the EWEB Open House in October, and a descriptive brochure is available with more detail. The remainder of the grant funding is from the ODOE for microgrid final deployment and analysis.

Water Utility Operations Transmission and Distribution Costs budgeted increased from $6.2 million to $8.7 million in the proposed 2019 budget, what is the cause behind this jump? In 2018, to better align with the nature of the work, certain FERC accounting codes (to capture and assign costs) were grouped with Transmission and Distribution. Prior to 2018 those FERC codes were grouped within Production. This represents about $2 million in classification differences.

Why has the budget for Customer Accounting increased from $1.2 million to $1.9 million? Why do we expect Water Retail Revenue to be $2 million higher (an increase from $7.1M to $9.2M)? Roughly $300,000 of the increase is due to adding the Advanced Meter Services. The rest of the increase is largely attributed to the change in the shared services allocation, as described above.

Finance Budget: Why are 5 more FTE needed? Customer Service staff from the atrium now report to the Cash Accounting Supervisor and roll up into the Finance FTE total. We have been proactively adjusting customer service staffing levels to best support our customers.

Why was Printing and Postage for customer billing transferred from Customer Service's budget to Information Services' budget? EWEB uses a Software as a Service (SaS) Vendor, Kubra, for bill printing and payment processing. The contract with the United States Postal Services is closely tied to this contract and is best managed in parallel to the Kubra contract. Over the last few years EWEB has been consolidating software contracts into Information Services for consistency in contract management.

Why do we have an upper limit for debt service coverage ratio if a higher number is a stronger position? Does the upper limit indicate some level of customer burden level? Correct, a high debt service coverage would indicate that current customers are paying now for future benefits.

Consent Calendar

MINUTES

November 6, 2018 Regular Session Minutes (LAWSON)

Have the minutes always not shown who seconds motions? ORS 192.650 requires recording or written minutes and provides direction around the content which must be included. The statute does not specify naming the maker or the seconder of a motion as a necessity. Roberts Rules of Order recommends recording the name of the person who introduces a main motion, but says that the name of the seconder should not be entered unless ordered by the assembly. In 2016, we transitioned to an abbreviated minutes format, supplemented by audio recording. As part of that simplification, the practice of including who seconds the motion was discontinued.

INTERGOVERNMENTAL AGREEMENT

United States Geological Survey (USGS) (ACKERMAN)

If I average the latest 5 year contract and add up all other costs, EWEB is paying over $260,000 per year to monitor the river streamflow, and this includes maintaining the systems, etc. Is this something we would do internally? Also it looks as though we pay over $90,000 per year for temperature monitoring atmosphere all generation gauging sites so why couldn't we have used that data for some of our temperature studies? Yes, we have a plethora of water quality monitoring requirements and contracts for a variety of reasons. In the long term, some consolidation of contracts and roles is possible with the willingness of USGS and others. However, the many contracts, each with unique objectives, is a good example of our broad stewardship role and responsibility for the protection of the McKenzie River.
As indicated in the IGA information for the Consent Calendar, we have a number of different agreements with the USGS. The one currently before the Board is required to maintain an independent compliance point for our Leaburg, Walterville and Carmen-Smith licenses. The FERC licenses require EWEB to contract with the USGS for streamflow compliance monitoring. We cannot legally do this ourselves and the USGS is the entity that builds and maintains the network across the country.

EWEB also contracts with the USGS for maintenance and reporting of the Vida gage. Data from this gage is shared by generation and drinking water source protection (DWSP). While we could technically do this one ourselves, there has been an established USGS gage at Vida above Leaburg Lake for many years and we have historically used this for projecting streamflows through the Leaburg and Walterville project. We recommend continuing this relationship.

The drinking water source protection program contracts with the USGS separately for water quality monitoring and streamflow gaging stations in the lower watershed at Hayden Bridge, Camp Creek, and Cedar Creek. The water quality monitoring work includes a cyanotoxin study and continuous water quality monitoring at Vida. EWEB receives 40% cost-share from the USGS and is reimbursed for the Cedar Creek gaging station from SUB. The DWSP program does maintain its own continuous water quality and water level gage at 52nd Street stormwater site.

The contract for temperature monitoring at the gaging sites is relatively new. We contracted with USGS to add temperature monitoring probes to all of our McKenzie River gaging sites (Generation and Source Protection) about two years ago. The Settlement Agreement and new license will require at least five years of water temperature study at Carmen-Smith. Because of our general stewardship responsibility on the McKenzie, and with the interest of the Board, we added temperature monitoring to the gaging sites at Leaburg and Walterville. In order to create a complete picture of water temperature on the river, we added the source protection gaging sites as well. We will fund this work for five years and then evaluate the need and benefits of further funding based on what we've learned. We will ultimately tie this together with our recent two-year temperature study within the hydro projects on the lower river, but our study included many additional monitoring sites so we could get a clearer picture of the impacts of the hydro projects. The gaging sites paint the big picture and our hydro study provides finer detail related to the hydro projects.

RESOLUTIONS

Resolution No. 1828, Customer Service Policy, Appendix A (FAHEY)

There is no current charge listed for Restoration During Business Hours, is that because we have not charged a different fee from Restoration After Business Hours? EWEB historically has not charged for restoration during business hours. There will continue to be no charge for customers with a communicating smart meter and those who have a communicating smart meter installed at reconnection time.

What does EWEB count as "After Business Hours"? I ask because the Customer Service now has extended business hours to answer calls, but that may not align with when EWEB technical crews are available to do truck rolls, that difference may be confusing to the customers if the hours are different.  After business hours has been procedurally defined as 5 p.m. This has not caused confusion with customers who contact us during extended phone support times.

Resolution No. 1829, Regulatory Deferral of Other Postemployment Benefits (OPEB) (HART)

When would the OPEB expense be booked/recognized? As EWEB makes payments to the OPEB trust, EWEB would record the expense on the books.

Resolution No. 1835, EWEB Avoided Costs Filing (ACKERMAN)

Avoided cost estimates steadily increase until 2034 then decrease for a few years before increasing again, what assumptions are causing the initial upward trend and later downward trend? There are several driving factors affecting avoided costs over time, but the strongest influences are: (1) Steadily rising prices - this model assumes that WA and OR follow CA's carbon market at the California Air Resources Board's (CARB) floor price starting in 2021 which escalates over time, and (2) Decreasing prices - the resource mix changes over time with coal declining (high dispatch cost) and is replaced with gas fired generation (lower dispatch cost). This puts downward pressure on prices (the marginal unit). Additionally, more of the resource mix is renewable ($0 dispatch cost) over time. In summary, there are 2 major trends working at odds to each other (carbon cost vs. relatively low gas cost displacing coal).

Correspondence

Lower McKenzie River Water Temperature Study - 2018 Results (ACKERMAN)

Regarding the temperature study, as I read it, our diversion of the water results in the water in the river getting warmer where we divert water. So our actions warm the water, is there a threshold that we cannot go above? I thought there was a temperature threshold but it was not placed on the new Leaburg/Walterville license because it was missed and an oversight. If that oversight had not happened would this temperature deviation cause any operational issues? It is likely that our diversion of water into the power canals results in an increase in the warming of the remaining water in the river. This is consistent with information identified as early as the 1990s during relicensing studies for Leaburg and Walterville. What is less clear, and more difficult to determine, is if the projects have a positive or negative impact on river temperature following the return of the canal water to the river below the power plants. Studies completed in the early 2000s seemed to indicate that the Leaburg project has an overall cooling impact below the project while Walterville has an overall warming impact.

There is no threshold for water temperature at either hydro project, either within the diversion or below the power plants. There is also no water temperature standard referenced in the FERC license, and, while the Leaburg/Walterville hydro license does not have a CWA 401 Water Quality Certification from the Oregon DEQ, even if it did, the 401 would have pre-dated the establishment of the total maximum daily load (TMDL) evaluation for temperature on the McKenzie River. In response to ODEQ establishing a TMDL for the McKenzie River, EWEB and ODEQ signed a settlement agreement (circa 2006) that established that EWEB is meeting its temperature requirements on the McKenzie through our conservation and source protection actions on the river. In summary, EWEB is meeting our water temperature impact obligations through other means and no additional action would be required by ODEQ even if we had a CWA 401 Cert for the projects.

2017 Operational Greenhouse Gas Inventory (ACKERMAN)

Why is it no longer possible to estimate supply chain emissions? Prior to implementation of a new work management system several years ago, the accounting system had specific resource codes that identified the type of materials and services that were purchased (ex. concrete, steel poles, consulting). These resource codes were used to assign emissions values to the dollars spent using the Economic Input-Output Lifecycle Assessment protocol. Each material type has a different carbon intensity, some many times more than others. For example, iron and steel have an average emissions factor of 3,110 MT CO2e per $1million dollars spent, concrete is 2,150 MT CO2e/$1M, m otor vehicle parts are 750 MT CO2e/$1M, and legal services are only 99 MT CO2e/$1M.

Even with the use of these aggregate codes, the estimate was crude and time consuming to track. Our present systems no longer include those detailed resource codes and, therefore, it isn't possible to estimate supply chain emissions within our accounting system to any degree that would be truly meaningful. We understand that supply chain emissions are a large part of EWEB's carbon footprint and have investigated other ways to estimate. Unfortunately, we have not found a solution that is both efficient and cost effective. For example, without the aggregate codes, each invoice would need to be sorted through and assigned a carbon intensity. This would be an incredibly onerous process and would still provide only a crude estimate of supply chain emissions.

What do we use Natural Gas for at the ROC? EWEB uses natural gas at ROC (and at HQ) to boil water for space heating and restroom hot water.

Status Update on Past Board Action (ACKERMAN) 

A year ago we declared several parcels of property surplus, what is the status of those parcels? The Board declared four properties as surplus at the January, 2018 meeting. Due to workload issues in the property department, we have yet to dispose of these properties. However, all four will be listed soon. Three of the properties (Hillaire Substation Site, Shasta 1150 Pump Station Site, and Potter Lane Rock Pit) are residential in nature and, therefore, will be listed with our residential broker, Windermere Real Estate. The fourth property, known as River Loop Substation Site, will be listed as a commercial property with Jeff Elder as broker. A Comparative Market Analysis will be completed by the end of this week. The City of Eugene did not respond to the surplus notifications within the 30 days specified in city code. They subsequently expressed interest in the River Loop parcel, but have not recently approached us. We will notify them directly when it is listed, but have no obligation as we know others will be interested also.