Item A: Joint Meeting with EWEB Board

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EWEB criteria for participating in such projects are found in its Integrated Electric Resource Plan (Plan). The Plan establishes goals for the acquisition of the community’s energy requirements over a 20-year time frame and was adopted by the EWEB Board in 2004 after extensive community and citizen participation. The Plan’s top three resource development priorities in order of preference are: 1.Conservation 2.Local and renewable distributed co-generation/combined heat and power systems 3.Renewable Resources including Wind, Geothermal, Biomass and Solar EWEB continually evaluates resource development opportunities for their environmental, social, and economic impacts. During the 2007 legislative session, a renewable energy bill was passed creating a renewable portfolio standard under which utilities like EWEB would be required to derive 25 percent of their annual retail electricity sales from renewable energy resources by 2025. The impact of this and similar standards in California and Washington has been to drive up the monetary value of renewable energy projects such as Harvest Wind. However, the project will help EWEB comply with this standard and, given current energy market conditions, is expected to provide high economic value as well. The Harvest Wind partners plan to use a financing structure which allows the utilities to monetize the federal tax benefits, get power at "cost" for up to 20 years, and have the option to take full ownership of the project in the long term. EWEB’s portion of the project is about $46 million. The Board will be considering project funding options, including seeking bonding authority from City Council, on November 18. Utility Rates EWEB customers have traditionally enjoyed some of the most cost-competitive utility rates in the country. A recent comparative analysis of rates ranked EWEB residential electric bills as comparable with the ten other Northwest cities studied, while water rates were significantly lower than most other cities. This analysis accompanied EWEB’s long-term financial plan. The plan indicates that rate increases are necessary in order for the utility to meet its future service and financial obligations over the next ten years. Utility rates are built upon a series of known data, projections and assumptions that consider factors such as costs to acquire power, debt service, capital expenditures, operating expenses, and demand projections for electricity and water. Using these and other variables, projections over the next ten years indicate an average annual increase of 5 – 7 percent for electric rates and 4 – 9 percent for water. Like many businesses, EWEB is facing higher than normal inflation for materials and supplies (i.e., the chemicals needed to treat 60 million gallons of water to drinkable standards on a peak demand day). Future budgets for the water utility also include sizeable capital investments needed to repair and upgrade an aging infrastructure system that contains almost 800 miles of water mains. The closure of Hynix, EWEB’s largest water customer, had a significant impact on the financial health of the water utility. As a largely fixed cost-based utility, this loss in revenue will be offset 3