Agenda - 07/10/12 Eugene City Council and EWEB Joint Meeting

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Attachment 3 Even with this significant mid-course correction, EWEB anticipates a 10 percent electric rate increase will be needed in 2013 to balance the budget, as well as a water rate increase. EWEB will be seeking other on-going cost reductions to continue to effectively manage its resources without impacting the reliability or quality of our core services. To do this, we must adopt a nimble, flexible mindset and approach to staffing and operating the utility if we are to survive and thrive for another century of service. EWEB is still refining its strategies and many decisions are still in flux as we re-adjust our management structure and staffing levels. In the meantime, here is some more detail on some of the higher profile program impacts. Conservation For the past several years, EWEB has invested in conservation at a level much higher than our actual growth in energy use. This is partly due to our popular conservation programs, but also reflects the downturn in the economy (e.g. Hynix closure, International Paper, general economy/recession). The 2011 energy resource plan showed that pursuing conservation in excess of load growth (demand) isnot a cost-effective strategy. In addition, beginning in 2012, BPA reimbursements that help support our conservation programs were cut significantly. EWEB is currently surplus power, so recalibrating our spending on energy conservation programs to more closely match current and estimated near-term future demand makes business sense. However, conservation is not just about offsetting future resource needs; it encourages customers to use energy more efficiently and helpspeople save money on their bills. EWEB will retain incentives, low-interest loans and rebates for high impact programs, as well as continue to offer programs targeted towards renters and low income customers. The utility will also be re-directing resources to “demand response” programs, which focus on shifting customerusage to times when existing energy resources, particularly renewables, are available. With a more adaptive conservation acquisition strategy and emphasis on exploring demand response programs, EWEB will be able to stay on target to meet the progressive goals of the 2011 energy resource plan. Limited-incomeand education programs These programs are specifically approved by the Board each year, and were not cut for 2012. Funding discussions for 2013will occurin the July-to-September timeframe, with final decisions coming in November or December. While no specific decisions have been made, I expect that the context of decision making by the Board will be different this year. Also, EWEB has been using reserves for enhanced support for limited income customers (about $1 million of the $2.7 million budget)during the economic recession.Limited income funding may potentially be returned to pre-recession levels (about 1% of rates). We will also look at focusing more conservation dollars towards limited income housing and households. The concept here is to create long-term solutions by making homes more energy efficient rather than providing direct dollars to help pay bills. Customer service EWEB will be reducing the number of customer service employees, which will likely impact the public’s ability to access services or information. Lobby services will be reduced, for example. However, the way customers interface with service providers is changing, with growing expectations for 24/7 remote access. To address changing customer needs, EWEB recently contracted with a vendor to provide amuch more customer-friendly online bill payment service, as well as improved paperless billing options. Other reductions EWEB will significantly reduce the marketing and advertising of its services and products in 2013, in terms of traditional paid advertising, brochures and other media. However, the utility continues to engage the 2