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HomeMy WebLinkAbout08/11/1986 Meeting M I NUT E S e Eugene City Council Bon-Sai Restaurant 44 West Seventh Avenue, Eugene August 11, 1986 5:30 p.m. COUNCILORS PRESENT: Ruth Bascom, Debra Ehrman, Richard Hansen, Freeman Holmer, Jeff Miller, Roger Rutan, Emily Schue, Cynthia Wooten The dinner/work session of the City Council of Eugene, Oregon, was called to order by Council President Richard Hansen, in the absence of His Honor Mayor Brian B. Obie. Bill Sloat, of the Business Assistance Team, updated the group on the question of electrical service to the Willow Creek area. He highlighted a letter submitted from Larry Campbell, Vice President of Pitchford's Inc., on behalf of the owners and developers of Willow Creek Park which had been sent to the councilors. He said that the developers wanted Willow Creek to have reliable power sources and thought that the cost of power in Willow Creek should be competitive with other light industrial sites in Eugene. Sloat also said that the letter referenced the Tampa exercise, and discussed the need for low electrical rates at Willow Creek in order to attract new businesses. He cited e the recent Eugene/Springfield Metropolitan Partnership Quarterly Report about two businesses that were lost to the state of Washington because of lower ut il i ty rates. Mr~ Sloat said that he did not know if Willow Creek was the only local site that the firms considered. Ms. Wooten asked what the rate difference was and how Lane Electric Cooperative's rates compare to other parts of the state, or other places where the companies may have relocated. Mr. Sloat acknowledged that even the Eugene Water and Electric Board's rates were not as low as Washington1s utility rates. He said that there is at least a 30 percent rate difference between EWEB and LEC for industrial uses. He said that staff compared EWEB and LEC rates for a 20,000 square-foot electronics type of development and the study indicated that LEC would cost $1,000 more per month than EWEB. Mr. Sloat stated that the Metro Plan looks at efficient and orderly extension of urban services. A recent amendment to the Metro Plan states that EWES and the Springfield Utility Board will be the eventual service providers inside the urban growth boundary. He said that there are technical and duplication of service issues whi ch need to be addressed. Bill Sloat described the map which detailed the Willow Creek area, showed the urban growth boundary, and pointed out the area served be Lane Electric Co-Op inside the city limits and the urban growth boundary. He read a letter from Ed Aster, president of Aster Publishing Corporation, who agreed that electrical service should be transferred to EWES. e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 1 Mr. Sloat said that south Eugene residents are concerned about inconsistent power and the number of power outages in that area. He said that quality power e and the need for back-up power are critical to Willow Creek and staff believes that EWES is in a better position to provide the type of industrial power needed to that area. Mel Damewood, of EWES, said that EWEB could provide a higher quality and more reliable power supply than LEC. He said that EWES's Willow Creek Substation runs along the east boundary of the Willow Creek basin. He sa i d that all the areas within the urban growth boundary were reviewed in EWEB's long-range planning. A future substation is planned near the railroad tracks on Greenhill Road. To serve the adjacent areas between the Willow Creek and Greenhill substations, he said that EWES will ha ve to either go around or through LEC areas. He described EWES's "loop reliability system" and said there was a transmission loop that is fed from either direction in case of a power outage. He said there are two such loops within the city and another one is planned as development takes place. He said that the transmission lines are in place in the Southeast part of Eugene and substations can be added later. Ms. Wooten asked EWES and LEC what the advantages were to serve this area in terms of revenue to the utilities and how much money the firms could make at Willow Creek's ultimate growth. Mr. Damewood said EWES does not necessarily compare revenues when considering investment on a long-range plan. He said that EWES looks to the metropolitan plan in terms of land use densities to project load growth over a 5-10-20 year period and at ultimate growth development. He said that revenue is analyzed only when capital improvements will be put in an area that EWES will serve. In December 1985, EWES said it performed an ana lys is, whi ch was based on the January 1985 CH2M Hi 11 study that projected load growth in the Willow Creek basin over a 20-year period. e EWES estimated that about $3.5 million in total annual revenue is associated with the anticipated growth in that area. He said that this figure did not take into account what the net "profit" would be on those revenues--this was only the gross revenue that EWEB expects to realize at current rates for that load level. Norm Oakley, of LEC, said he thought that LEC should continue to serve Willow Creek, and that LEC is capable of supplying power to that area. He said that LEC has existed for 48 years, its service territory encompasses two-thirds of Lane County and it has 10,000 residential, commercial, and industrial accounts. He said that LEC is consumer-owned and that any profits are returned to the members in the form of capital credits (a delayed refund) which ultimately reduces the price that the consumer has to pay for electricity. He said LEC has the same federal benefits and a Bonneville Power Administration contract for full requirements which expires in 2001. He said that there is no supplemental resource obligations or commitments. He said that the service boundaries were developed so that utility companies could do long-range planning and to eliminate any potential legal conflicts. He said that the LEC service area had been certified since 1968. Mr. Oakley discusssed the 16th, 17th and 18th amendments to the Metropolitan Area General Plan, which Lane Council of Governments ratified June 26, 1986, and he questioned if the amendments occurred to support Willow Creek. He said that LEC believes that this is not a land use issue, but if it is, LEC has a e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 2 pre-existing use for this land. He said that if the councilors assume that it is, it is not a basis for condemnation authority. Instead, he said that LECls e present service area would be grandfathered into the plan. Under 1 and use laws, a pre-existing use is permitted to continue and the City could lay itself open to claims of antitrust activities, by using its power to take customers from one business to give them to another. Mr. Oakley discussed the January 17, 1986, Business Assistance Team memorandum that the councilors received. In February 1985 he said that the councilors asked EWEB to enter into a cooperative study with LEC regarding electrical service to the Willow Creek basin. He said that he believed that the information that the councilors have--to the best of his knowledge--is "not in any way a result of the joint discussions between lEC and EWEB." Instead, he said, "City staff and the Mayor have used the council's directive as a basis for compil i ng thei r own study. II He said that the Willow Creek developers and LEC initiated the January 1985 CH2M Hill study to determi ne the future requi rements of Wi 11 ow Creek, and that the study stated that LEC could continue to serve the area effi ci ent ly and economi ca lly, even wi th the significant growth projections provided by the developers. There was no suggestion that LEC should relinquish this territory. He said that City staff was gi ven a copy of thi s study, but none of the information tha t the councilors have refers to the CH2M Hill study. He asked that the City Council be furnished with that information before it decides which utility should serve Willow Creek. He asked where the money would come from if the City chose to condemn the property at the request of the developers. He cited Article 44 of the City Charter, Subsection 6, which stated that EWEB controls the income of the utilities and the operation, maintenance and improvement of them. He said that Section 44 also grants only to EWEB the power of the City to generate e light and distribute the electricity. He said that the only professional study completed on that area supports that LEC should continue to serve Willow Creek. He said that LEC provided information to City staff and the rough draft--which was distributed by the Business Assistance Team--came to LEC. He said that LEC noted, in writing, errors and omissions to the draft, but the current document does not contain LEC's comments that were noted on that draft. Mr. Oakley said that EWEB serves the area north of Willow Creek and does not now and may not need to cross the certified territory to perform services in its area. He said that LEC has the capacity to serve Willow Creek and the South Hills areas and new lines will be installed as growth occurs. He questioned why EWES built the Willow Creek substation if it does not serve the Willow Creek area. He said that the criteria for choosing a utility to serve Willow Creek should be based on LEC's past performance and its future service capabi 1 it i es. Mr. Oakley discussed the Tampa exercise, which gave each of the utilities an opportunity to provide cost estimates to provide service to a 10 megawatt load. He said that construction costs to build to that system were $1.4 million, and of that $1.4 million, he said that $300,000 could be attributed to the potential consumer. He said that LEC's current construction allowance policy gives consumers credit for the load that will be put on LECls system, based on load factors. He said that the construction allowance for the very e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 3 lowest load factor in this case would be $700,000, which is well above the $300,000 that might have been needed for the construction. He said that the e construction allowance is LEC's way of recognizing the benefit of that load on the cooperative. He said that the industry may be charged for a portion of the construction costs, if it had a very low load factor (10 percent), but with a 50 percent load factor, there would be no charge since there is a construction allowance. Mr. Oakley was asked to clarify the costs shown to the group. He said that $300,000 is part of the construction costs that might be attributed to the consumer. He said the consumer will be charged that amount of money if there is no power usage. Mr. Crinklaw, of LEC, said the $1.4 million would be the total construction needs for meeting that additional load of 10 megawatts in that area. He said that would mean a new substation and transmission lines would be needed. Of that $1.4 million, he said that a large portion of that would be used for the system to meet other customers. needs. A portion of that transformer in that substation would only be going to a portion of the new 10 megawatt load. He said that is where the $300,000 comes from--the portion of that $1.4 million initial investment by LEC. He said that has no bearing or relationship to the construction allowance. Further, up to $700,000 may be given to the consumers, depending on their load factor. He said that the initial $1.4 million would be acquired either through build out and the General Fund, or the money would be borrowed. Ms. Wooten asked how this would affect the rates for the rest of the LEC consumers. He said that in this particular case, with the density in this area, it would have very little, if any, effect. He said the $300,000 that would be needed for construction would be taken out of the users rates over a period of time. Mr. Fadeley, attorney for LEC, said that in the examples cited, no money would have to be paid by the e locating company. Mr. Oakley discussed the Fantus Report which showed that all of the utilities in the Eugene area are assets as far as industrial development is concerned. According to those graphs, he said that LEC was shown to be the second lowest utility and EWEB was shown to be the lowest. He sa i d that all other utilities--from the Mexican border to British Columbia--had higher electric rates. He said that should indicate that if a company relocates to another area, it would not be the electric rates that would cause a firm to settle in another location. Mr. Oakley showed the difference in LEe and EWEB electric rates. He said that for a one megawatt load, 200 megawatts usage a month, is $61.26, 400 megawatt hours is $8,478; versus LEC's $78.89 and $10,949, respectively. Ms. Bascom asked to see detailed start-up costs. Mr. Oakley said that under the Tampa exercise, the start-up costs for consumers would be zero. Mr. Oakley said that LEe long-range plans include construction of the Four Oaks substation in the area, with two underground double feed circuits to the area, with switching on the transmission line which will provide the capabi 1 i ty to serve duri ng an outage situation. He said that any rate reduction to the consumer would occur after 20 years, if the projected area growth takes place. He advised that the cost to build the substation is e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 4 $750,000 and construction would take place between 1990 and 1995. He said that the LEC total megawatt capacity is currently one and one-half megawatt e excess until a new substation is built. In response to a question from Ms. Schue, Mr. Oakley said that CH2M Hill was asked to study LEC service to the Willow Creek basin--he said it was strictly concerned wi th LEC 's capabil ity to serve the a rea --to the best of hi s knowledge, he said the study had nothing to do with EWEB. Mr. Holmer asked if there were interconnections between LEC and EWES to provide for emergency services. EWEB and LEC representatives said they knew of no such interconnections. Ms. Wooten asked why LEC was interested in maintaining its service to the Willow Creek basin. Mr. Oakley said that without Willow Creek, LEC has no potential for rate reduction and stabilization and LEC woul d lose its potential for increased revenue. He said that LEC has been interested in the Willow Creek area since the 1960's. Mr. Oakley said he thought that the history of the negotiations between EWES on customer exchanges which was provided to the councilors by staff was incomplete and/or selective and could easily be misunderstood. He said that LEC has negotiated customer exchanges in the past and has usually ended up with fewer customers than EWES. He said that these exchanges were always outside of LEC allocated service territory. He said that when LEC applied for exclusive service certification, it did not include any areas that EWES would service. Instead, he said the application covered only areas where LEC's exclusive service already existed, and adjacent areas that were not served by e any utility. He said that if there was service by two utilities in the same general area, LEC did not include it in its application or the PUC order in 1968. He said that Willow Creek has been LEC service territory since 1968. He alleged that Ci ty sta ff were participating in the solicitation of LEC customers to support the change of the electric supplier to Willow Creek. He said that LEC has a contract with each of its members which calls for its members to purchase all their electriCity from LEC. He emphasized this point to ensure the councilors were aware of the contract, as well as of the PUC service territory order. He said that any transfer of LEC consumers would likely increase LEC costs. Mr. Oakley requested that the City Council vote against condemnation of the property. He said that LEC has a legal right to serve the Willow Creek basin and it will fight to support and protect that right. He said that if LEC did not receive assurance tonight that "those efforts by the City staff to interfere with our contractural rights to serve our customers will stop, we will have to ask our attorney to file appropriate legal action to obtain the court order terminating this uncalled for and 1 ega 11y inappropriate activity." He said LEC does not want to litigate, but it does have an obligation to protect its service area. Based on Mr. Oakley's comments, City Attorney Tim Sercombe adv i sed the councilors to conduct their policy discussion openly. e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 5 Mr. Sloat said southeast Eugene area neighbors are gathering their petitions to be presented to City Council for the change of electrical service to the e Willow Creek area and that City staff is not involved in this process. Ms. Ehrman asked Mr. Sercombe for background on the pue, the boundary issue, and why the City has to interfere with this boundary discussion. Mr. Sercombe said there are ways to change the boundaries--the boundaries can be set by the PUC. He said that when there are two competing utilities for the same area, the easiest way is for the utilities to agree to a contractual boundary change, and the change can then be approved by the pue. He said that the easiest way--in terms of a direct action--to change the boundary, is for the municipality to condemn the assets of a utility within an allocated territory. He said there is no formal way to change the boundary, short of negotiated agreements and condemnation is an informal way to change these boundaries. Mr. Holmer asked EWES when the Willow Creek substation was erected and how much it cost to build it. Mr. Damewood said that he did not have the information available, but would provide it to Mr. Holmer. Mr. Damewood said that the substation was built to serve the area that EWES already serves to the east and west and that EWES's board of commissioners have not taken any formal action on this issue. Mr. Damewood said that EWES's August 7, 1986, memorandum is a position statement on this subject--it was prepared by EWES staff and was reviewed by the EWES board of commissioners without comment. He said that EWES would like electric service boundaries that are consistent with the Eugene city limits and the urban growth boundary. He said that EWEB and LEC already maintain duplicated electric facilities in the Eugene area, in addition to the existing LEe service boundary in the Willow Creek area, which forms a peninsula within the EWEB area, which would only contribute to the duplication of service for that basin, but would create a system planning and e construction problem for EWES since EWES serves customers on three sides of this peninsula, and EWEB lines would need to be constructed either through or a round the LEC area. He said that either alternative would result in additional cost for EWES for duplication of facilities for both utilities. He said EWES wants to maintain a good working relationship with LEC and hopes that both utili ties can negotiate a working agreement to allow for the elimination of duplicated electric facilities in the southern and western areas of Eugene. Mr. Damewood said no analysis was made on the cost of the condemnation process or what effect condemnation would have on the rate payers and EWEB. Mr. Miller said it appeared that the EWEB territory extended far beyond the urban growth boundary and the city limits and he asked if EWES and LEC have discussed the possibility of trading properties. He was advised that no recent discussions on this subject had taken place. Mr. Sercombe explained the condemnation process. He said that the City would condemn assets of the utility that are located in the property that EWES and the City would serve. He said that the basis for valuation on such a case would be the difference in the value of the utilities' fixed assets, not in terms of future life. He said that there are poles and wires on the property and an appraiser would give the value amount to the City prior to instituting condemnation. e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 6 Gary Long, the City I s Director of Administrative Services, said that condemnation costs appear to be less than $1 million, and given EWES's past e position and rate structure, and depending if EWEB acquires the property, it appears that there would be no rate adjustment or any serious cash problem. He said that in terms of the assets to be condemned, the value of the poles and wi re s on the property would be less than $50,000. He said that this is separate from the cost to EWES to serve the area. Mr. Rutan said that he wanted the council to be direct with this conversation and to determine what information is needed. He asked EWES to state its intent and whether this issue could be resolved by negotiations between the two utili ties. He said if EWES and LEC cannot agree on this subject, then the council can then decide if it wants to get involved. Mr. Sercombe said that if the condemnation process was initiated, LEC would not be entitled to an award of future profits and he would check to see if LEC might be entitled to severance damages. He said that the condemnation would not be subject to review or action by the pue. EWES was asked to provide start-up costs based on a scenario of assumed growth in the Willow Creek basin that was contained in the exercises by LEC. Ms. Wooten wanted to know from EWES .what the impact of a 20-year build-out would be on the rate structure--either increase or decrease. She requested detailed information on the condemnation costs of LEC assets for that area. Mr. Hansen requested information on other types of condemnation proceedings, of similar successes or failures within the state. Ms. Wooten requested a comparison of residential electricity outages in southeast and southwest Eugene from both utility companies. She asked for LECls and EWEB's track record to the areas e surrounding the Willow Creek basin. She also requested an analysis of LEels industrial service, the number of outages in the area, and what LEC's back-up, uninterrupted service capability is. EWEB was asked to initiate a conversation or arbitration session with LEC to try and resolve the issue without legal or City action. A report was also requested stating any negotiating problems. Mr. Fadeley said that if LEC was going to negotiate, it needed to know that City staff will not he 1 p to solicit--or help others to solicit--LEC customers with letters that have been distributed. Ms. Schue requested background information on LEC, with a map showing what two-thi rds of Lane County is served by LEC. She also asked for an annual report and general background on LEC. The councilors requested that EWEBls board state its position on the proposed negotiations and on the possible condemnation process. A summary of the CH2M Hill Report, including comments on the Tampa exercise, was also requested by the councilors. The City Council also asked for the status of LECls financial condition, how LEC projected its future, and how the Willow Creek basin issue will affect LEe I s growth. Staff was asked to prepare a synopsis of the CH2M Hill Report, and give LEC sufficient time to respond to that synopsis, or for a report from LEC on this study. e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 7 Ms. Wooten asked EWES, LECt and staff what was really at stake in this issue-- how many companies were affected and how many companies may relocate into e Willow Creek over the next 20 years. Mr. Hansen said that LEC would like assurances that the City will stop pursuing this issue. He said that he is not willing to stop the review process of this subject and he urged LEC to protect itself in any way it wishes. He said that the City will proceed in a timely manner to reach a decision it can be comfortable with. The meeting adjourned at 7:15 p.m. and will be continued at 7:30 p.m., August 11, 1986. Respectfully submittedt ~~ - - Micheal Gleasont City Manager (Recorded by Sue Lewandowski) MNCC0811 e e MINUTES--Eugene City Council Dinner Session August 11, 1986 Page 8