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cost to customers could have been as much as ten times the increase they have seen to this <br />point. <br /> <br />Mr. Berggren reported that FERC held hearings in August and September 2001 regarding whether <br />unjust and unreasonable prices were charged for wholesale power in northwest markets and <br />whether refunds were due some utilities; FERC had yet to rule on the issue. If FERC were to rule <br />in favor of the utilities, EWEB would save nearly $40 million, but that would require EWEB to seek <br />refunds from numerous parties, which would be a challenge. <br /> <br />Mr. Barrel arrived at the meeting. <br /> <br />Continuing, Mr. Berggren said that the recession, in combination with the events of September 11, <br />resulted in a collapse of loads on the entire west coast and lowered its load requirement by ten <br />percent. That collapse of loads, in combination with the collapse of market prices, left many <br />northwest utilities, including EWEB, with stranded commitments to high-price contracts and no <br />market in which to sell them. That resulted in substantial increases in rates. In addition, <br />Bonneville Power Administration raised wholesale power rates by an average of 46 percent in <br />October 2001; that, in combination with increases in other costs, meant that EWEB saw a 63 <br />percent wholesale increase in BPA rates. EWEB raised its electric rates by 32.8 percent to pass <br />those costs to customers. <br /> <br />Mr. Berggren stated that EWEB had borrowed money to pay for the higher priced contracts and <br />had spent down its reserves prior to borrowing that money. EWEB needed to repay $30 million <br />and generate an additional $10 million to build its reserves to normal levels. <br /> <br />Mr. Berggren said that the board was now considering a rate increase in April 2002 to address the <br />ramifications of the energy crisis, the drought, and the recession. To reduce the needed increase, <br />EWEB had initiated several actions, outlined in the staff memorandum accompanying the agenda <br />item summary, to lower costs over the next three years while minimizing customer rate increases. <br />He anticipated the increase would be about 2.6 percent for residential customers and up to 5.5 <br />percent for some commercial customers. A surcharge would be levied equally across all kilowatt <br />hours for 36 months; at the end of that time, the surcharge would be reduced. He said that the <br />utility continued to seek further savings opportunities. <br /> <br />Responding to a question from Ms. Bettman, Mr. Berggren clarified that the rate increase affected <br />both commercial and residential customers, noting again the approximate 5.5 percent increase for <br />certain industrial contracts and commercial customers. <br /> <br />Ms. Bettman asked if the additional megawatts purchased by EWEB were in excess of what was <br />needed to serve the projected local need. Mr. Berggren responded that the amount was slightly in <br />excess. EWEB executed those contracts in March and April 2001; at that time EWEB had a <br />forecast of load and went slightly above it, although within power management guidelines, <br />because EWEB was unsure of the future impact of the drought, which was anticipated to drop the <br />McKenzie River flow below 1,000 CFS, the minimum flows on the Leaburg and Walterville <br />projects. He noted that at that time EWEB had decided that if minimum flows occurred, the <br />projects would be shut down. <br /> <br />Responding to a question from Mr. PapS, Mr. Berggren confirmed that once EWEB had contracted <br />for power, it had to purchase it. EWEB could sell the power, and EWEB had done so as it could. <br /> <br /> MINUTES--Eugene City Council February 25, 2002 Page 3 <br /> Work Session <br /> <br /> <br />