EWEB wrestles with rate hike.

Byline: SCOTT MABEN The Register-Guard

A proposed 6 percent power rate increase this spring for Eugene Water & Electric Board customers has been scaled back to less than 3 percent thanks to last week's announcement of a wholesale rate reduction by the Bonneville Power Administration.

But most EWEB commissioners are uncomfortable with a rate increase of any size so soon after they raised residential rates an average of 36 percent last fall.

Board members discussed the utility's financial dilemma for nearly two hours Tuesday night and were asked to instruct the budget staff how to proceed. When it came time for an answer, the board was practically paralyzed over what to do.

"I don't know what to suggest," Board President Dorothy Anderson told the staff at one point after hearing no agreement on whether to schedule a public hearing on an April rate increase.

Anderson said that she believes utility managers have reduced EWEB's budget as much as they can at this time and that another rate increase is the only other tool left to replenish reserves and pay off debt resulting from last year's drought and energy crisis.

"This is why I'm finding this ridiculous, because I think some of you aren't facing reality," she told her colleagues on the board. "And I don't know what to do about it."

In an effort to break the impasse, Commissioner Peter Bartel - a staunch opponent of raising rates again - said it looked to him like a majority of the five commissioners probably would grudgingly agree to an April rate increase and that the staff should proceed accordingly.

But Bartel said he still wants to squeeze more out of the budget. To start, he suggested a pay freeze for all EWEB employees, a cap on what the utility covers for employee health insurance premiums, and a $500,000 reduction in the annual set-aside for low-income energy assistance programs.

"I'm willing to roll up my sleeves and hack away at whatever's out there," he said, even if it's only enough to postpone a rate increase until next fall.

Calling low-income assistance "a real safety cushion for people in the community," Commissioner Sandra Bishop said she isn't inclined to cut there.

Commissioner Susie Smith said employee benefits have emerged as a key area to contain costs in her discussions with residents over the past few weeks. She asked for a comparison of EWEB's benefits packages compared to other local public agencies.

Commissioner Patrick Lanning was the first to suggest during Tuesday's meeting that EWEB try to hold off on raising rates again until October, and then only if absolutely necessary. Lanning said he can't see how utility officials will be able to explain to customers why their rates are going up at the same time the BPA, which supplies 70 percent of EWEB's power, is lowering its rates.

"I don't see how we can get that message across," he said. "I just don't feel that April is the time to do that."

The proposed overall rate increase of 2.93 percent - 2.64 percent for residential customers and between 3 percent and 4 percent for most businesses - as well as budget cuts and other measures would generate an estimated $40 million over the next three years.

That would allow EWEB to pay off $30 million in loans and raise another $10 million to bring reserves back to what managers consider sound levels.

Without the rate increase, EWEB would fall about $15 million short of its goal for recovering from lost hydropower generation and high-priced wholesale power contracts last year.

The BPA's announcement Thursday that it will cut its rates slightly from April through September means EWEB will save about $2.5 million this year. That allowed the utility to scale back its proposed April rate increase, which most recently had been 5.64 percent overall and 4.73 percent for residential customers.

In addition, EWEB now proposes the rate increase as a surcharge - a temporary rather than permanent change - at Lanning's suggestion.

It would show up as a separate charge on customer's bill and would raise about $20 million if left in place through 2004.

The staff is expected to return to the board March 5 with a proposed list of budget reductions and to hold a public hearing on the proposed rate increase. The board would vote on the rate change March 19.