EWEB Board of Commissioners — October 15, 2024

0:07 all right I'm going to call to order the October 15th work session of the Eugene Water and Electric Board um I'm going to go through the safety and awareness briefing briefly I'm going to leave some things out um that aren't relevant since we don't have a big group here um I just want to note that public test is not taking place this evening because it's a work session this format is not set up for public test testimony uh visitor access is limited to the board meeting room and restrooms restrooms are located on the first floor um and people can go through the interior or the backer room and security officer will direct you to the location for all of us

0:52 in the event of emergency such as a fire or security incident please follow instructions given by staff um something else I was oh I just want to note that uh commissioner Brown is not joining us this down one individual um with that I think I'll turn it over to the general manager uh president McCrae and thank you Commissioners uh good evening um we uh rearranged the schedule slightly from um the last board meeting um considering that the two topics this evening that are really open for for discussion um around the BPA product Choice then leads itself into a little bit of a broader discussion so we rather than start with

1:39 the business model we switch that up and we're going to start a little bit with bonab and then we'll extrapolate from that into some larger discussions but with that I will turn it over to to Brian Booth who you all know is our chief energy resources officer and his team and I'm just going to duck up for second so another one oh yeah never mind all right uh Mike should be on hi everyone Frank already gave me the introduction uh from my left on over I have Aaron Bush senior in analist and our energy division next to him Ben ol lead analyst and in the far Corner Aon Orlowski Communications Guru sure

2:27 expert I thank you for joining us this is going to be a fun conversation I there we go um we're here to talk about qualitative considerations that are going to the energy resource St this is going to be uh a little different than some of the discussions we've had in the past I love numbers this team loves numbers there's not a lot of numbers in this one it's fuzzy because qualitative factors aren't fuzzy um agenda so our agenda for tonight uh we're going to take a look at the REM and the timeline of this process where we're at where we're going eron's going to have that eron arino is going to have an update the community table we had it

3:13 Friday before last um yeah give you some reactions on that or I should say get you an update of that so you can have reactions uh then we'll be talking about our values key factors and our relationship with the product choice so the line uh here's where we're at it is October we are here for the qualitative consideration work session we're going to be back in December with initial results initial qual quantitative results I should say so numbers which are much more satisfying and uh we hope to have board board endorsement of a decision next Pro that way we could sign a new contract at the end of this year so with

4:00 that I'm going to go ahead and hand it over to Arin o who can talk about the community table all right thank you Brian and good evening Commissioners as Brian mentioned we had the first session of the community table on October 4 um but just as a reminder of what the community table is this is a group of representatives from different Community organizations that we invited to join us to examine some of these energy Supply decisions together and the point was to invite people who you know are from organizations that represent certain segments of the community who do this as part of their day jobs uh and that way we can uncover the broad crosssection or the broad spectrum of views that might be inherent in the in the this set of choices we're not necessarily looking for consensus that we probably won't get

4:45 it um but that's fine we're looking for what the ends of this the Spectrum are so who did we invite and who showed up um for this particular in iteration we got local institutions the city the county uh Environmental groups industrial and large customers and then folks from different housing organizations uh and what did we do we presented some information to them and then the bulk of it was really small group discussion led by different members of the energy team here um to really sus out what some of the insights were we collected lots of feedback that is the stack of paperwork on my desk so this chart did have numbers on it at one point but per what Brian said we're trying to eliminate all qu

5:31 quantitative elements from this presentation um so what we did is we asked participants to fill out this chart um and to say whether we should in decrease maintain or increase focus on these five different values that pertain to energy Supply de decisions and the key lesson here is that our community wants us to do more of pretty much everything uh and having a a person say that we should do less of a particular thing was was quite rare um so that just means that the trade-offs and the difficult discussions are are left to you all uh and then we moved on to a you know the the small group discussion and we asked five different questions these are the paraphrase questions that we asked them and kind of a key takeaway from each um I'm not going to read through it necessarily but basically um

6:17 we learned all values matter all the five different values that we asked them about but some Val matter more to certain people than to others so for instance reliable and affordable power was very important to some of our business and large customers industrial users some of our Environmental Group friends were okay with sacrificing some of that reliability so that's just an instance of where there's different views on this topic um and there's sometimes there's tension we did stay away from talking about the BPA decision in detail this was a discussion about values we kept it very high level but when we did touch on the BPA decision there actually was a fair bit of consensus in this group to keep that local based on the information they have at at this time um so that was a really

7:03 interesting finding of course that could change as we share more information with them uh and then unsurprisingly this group also wanted to be active in the decision-making process which makes sense they came to a meeting they showed up um and that was kind of to be expected and it's part of also part of our identity as a public utility so uh the next session is planned for early December uh and we're hoping to get some you know initial commentary from you all just some kind of feedback high level you'll get a more detailed rundown of the feedback from the session uh in a memo later um but at this point you know what are some of your initial reactions to this community feedback president now just up

7:48 Mindy yeah um my initial reactions are the feedback you got is not surprising because you asked why group of individuals what they wanted and everybody wants what they want so um not surprising at all I think the thing that maybe gives me the most pause is um how much what what happens with this feedback I guess sometimes I worry a little bit about when we open up public process and we invite the public to participate that it's not not really asking them to

8:33 participate um because there's a lot of tradeoffs and decisions that we have to make and we're the ones that are making the decisions and so um it sometimes it feels a little bit ctive and that we kind of Le people to believe that they have more input than they really will I think that public participation needs to be really meaningful and oftentimes it's not I'm not saying that this isn't but that's just my hesitation um especially given that the feedback that we got is that everybody wants everything so like that that just can't can't happen so some people are going to feel like hey e web didn't listen to me it only listen to these people or maybe many people will think

9:19 youb didn't listen to me because we're going to have to make tradeoffs everywhere I I I think that it's admirable that we reach out and we want to hear what people will have to say but I just worry a little bit about first okay well I'm also not super surprised by the reactions I think it it it would be helpful to have um know something to the effect of uh the exercise that we once did around okay

10:06 you have nine chips where do you put those chips instead of just saying you know so they have limited resources that they then have to do out because that is the question that we're facing we have limited resources if you care about affordability not expanding those resources we're keeping that pot the same so where are the things that are going to give um I also share some of the same concerns that that may had around how we get the feedback and what we do with it and the message that we convey to them and what is next so I would like to hear more about kind of what the messaging was about how they're involved moving forward we do want their feedback it is valuable if we ask the

10:52 right questions but we also want to make sure that we're not leading them down something that is what we're going to do very and it doesn't feel like there's too much to give a lot of feedback on so iess that's also we EV yeah more to come in a future memo the to answer your question the the messaging was specifically that we would deliver the feedback to to you all and that was the extent of the promise um yeah I should I think Mindy really hit it on the head as as far as her comments go um and I too am Leary of the open-ended what he

11:41 want um because nobody says I I don't I want more expensive power nobody's going to say that nobody's going to say I don't care if the power goes off in January they all want everybody wants everything and we can't give everybody everything um and then again you're asking for feedback from us but the amount of of in input that we got was not even not a bubblegum rapper as far as the information to give feedback on I don't know who you say community people I don't know who they were I don't know how many of them there were I

12:28 don't know you know you say our bigger customers okay percentage of you know getting to your numbers percentage of our income you know is it you know if if two of those people have a Hu are huge drivers in our economic plate and and other ones are representing smaller interest groups that weighs into my decision as well so um I think what Mindy said categorizes what I have and then the second part is I would have liked to have seen the memo before this meeting rather than post

13:17 meeting I'll just take one quick moment and say um I shared the thoughts I'm interested in who the representation was like by organization or industry that they were representing I don't know if they participated um on the condition of anonymity I don't need to know names necessarily but affiliation would be helpful to form my thinking I'm crushed without numbers I don't know what to do with done loss um and my last question did we pay any attendees to participate I'm just wondering okay I do think you know to the extent that we're trying to capture as many as possible I think paying some folks who might otherwise not be able to afford to attend could be valuable for that I one I'm also interested in who didn't attend so you said that you

14:02 invited 25 people and only 14 attended so I'm curious when when we get that information who did yeah that will be in the memo um generally speaking the folks who were representing their organizations in a professional uh Banner were more likely to attend than those who act on a volunteer basis for you know business folks who were there on the clock I would I

15:00 to this but we were like let's at least rush and try and tell them what we can right away and fall up with a memo so I want to get that Cadence better next time uh because I think it will help the conversation be more fruitful and we are going to do more uh Community table uh so after you get those memos uh maybe some feedback I think would be helpful for us after you digest um that'll help Inspire us for future Community tables how do we make it more useful how do we start the education process about the trade-offs and we've asked the community table MERS to tune in to our meeting tonight because we're all learning about the context of this PPA product decision together and so it's kind of an invitation to tune in and letting them know that this this higher level conversation is taking place so that was kind of our anxiety to just get this conversation started so that we could keep having it over the course of you

15:46 know by June 2025 when we make this decision great thanks I personally appreciate bringing stuff even if it's not fully banked I think it's helpful just to help us think you Frank yeah I really appreciate the comments I think one of the things that we're really we do recognize that um the board this board is where we get our guidance um I think also in our approach to outreach and just understanding and studying things we want to test the boundaries with certain groups and certain people to make sure that there's something that we're not missing but we're not leaning into that group to make make any kind of decision for this board uh we want to be as informed as we

16:33 can um not just where we find consensus which is you we want more of everything but also at some point what might those trade-offs and the sort of the range of outcomes be um the timing aside which which Ben touched on um we do really consider this board as our as our governing body and where we're going to get our guidance from so that's um in that though one of the things that we have to be careful of is whenever you ask for somebody's opinion they're going to go well why do you want it um what are you going to use it for and um we need to make sure that we're very clear with people that uh this is um to test some of our assumptions this is for

17:18 things that we're looking to to check out it's not necessarily designed to influence a specific decision I think we have to be clear with that I know we were on a on a bit of a Time brunch I I do want to uh point out that an interesting yeah an interesting thing that came be came to be from the community table wasn't so much everybody wanted everything it was some of the things they didn't necessarily ask for we go back to our scores though they're all pretty similar they're not exactly the same um we did not hear a lot of folks say you know what do less and just focus on affordability you look at the scores there affordability is the least high of

18:04 them nobody was willing to you know Mark that a one or a two uh but we definitely heard a lot of folks say hey we want you to do this stuff and there was some acceptance that it cost money well and that could also be reflective of the 14 people who were there absolutely afford it not living yes even though they weren't in that room they're definitely part of who I watch out for and getting to Matt's point of about under representative underrepresented people being their voices being heard I was a part of a planning process when I

18:49 was on the Planning Commission was River Road or one of the areas and we used the firm I think it was called democracy now or whatever where they they picked people out of a hat basically that random and then they offered them financing so that they could do child care and a and a nominal a nominal sniping so it was enough so that somebody could take the day off of work if they were working or if they were at home and had kids they could afford to get their child care so maybe that's something we could look into pulling from our rate payers you know one one person reach War you know pull them out make some offers I don't know if that's something but that was something that

19:35 was it gave us some good Insight because a lot of times what I've seen in public processes you get the same people showing up at the table and and you hear the same thing over and over again and this brought fresh eyes and people that weren't didn't have a specific agenda other than the fact that they're getting an even film all right any other discussion so I think we going for a second no I was get in uh into some more weeds now um so the goal tonight is to have uh AOW of the Commissioners to have a discussion about some of the trade-offs and some of the qualitative differences between the BPA products and so I'm

20:20 going to try and do a little bit of table setting here to get the conversation started before I have Aon walk it through in more detail but I I want to give you the spoiler alert here is that we are choosing from among good options so all of the BPA product options eweb can meet our goals and our values and really this is about how eweb goes about meeting our goals and our values is where this product choice is going to make an influence so we did some brainstorming with the executive steering committee and we tried to brainstorm where are the qualitative differences among products so we can highlight those differences and give you a sense of real world trade-offs in these products and we we came up with with five key factors that we identified in our brainstorming we're going to walk you through them tonight it's flexibility portfolio cost risk local

21:06 control local resource development and eweb programs and incentives and the key here is that the BPA product Choice impacts how we get to our goals so saying the same thing but in a slightly different way the BPA product Choice creates a future decision-making environment because it's the it's the foundation of our portfolio BPA rates and BPA uh policies are going to influence our future decision- making and our and our future strategy so at a high level planed product utilities so EOB is a planned product customer today we have more of a do-it-yourself approach to our portfolio Management in exchange for Less BPA influence so the idea there is you've

21:51 got some different bubbles that feed into our portfolio like our uh programs like Energy Efficiency and demand response uh how we manage our owned assets like Carmen Smith the amount of contracted resources that we buy to supplement our Bondville product uh the amount of Market interaction we have in energy markets our risk management those are all aspects that feed into our portfolio and Bonville has very little influence over that today we're more of a do-it-yourself approach load following utilities have a different strategy they tolerate a few more requirements and constraints on how they manage their own assets for example um and they tolerate those ex those constraints in exchange for allowing BPA to manage more aspects

22:37 of their portfolio on their behalf as part of a larger pool so it's kind of just a different strategy and if you allow BPA to manage more on your behalf that could reduce your need to do it yourself and so as we start to have this conversation today about what kind of eweb what kind of utility eweb might want to be in the future and Aaron's going to give some real world tradeoff examples here I just want to prompt the Commissioners to start thinking do uh do I think eweb should be more of a do-it-yourself utility or do I see benefits in doing a pooling approach uh and allowing BPA to do more on our behalf and I'm and we're doing that without the context of numbers so this is just conceptual we're not making a decision today it's just more to just

23:22 facilitate a conversation without numbers do I have some leanings or trade-offs that I want to think about or do i r react to some of these trade-offs differently so I'm going to pass it to Aaron and he's going to walk through some of these key factors and trade-offs between the BPA product choices all right so yeah thanks that summary was really helpful just the overall context I'm going to try and walk through those kind of five key factors um there's also a few kind of informational slides in here uh and the goal is to kind of set up this for discussion with you so I'm going to try and Broad ly say like what it is so Define it how it might be different across the products and then maybe why it's important why it might care about it um so in general just starting off

24:09 you heard with the community table local control something they might care about in general we find that plan products so we've said that word a few times it's basically encompasses everything except for load following uh right now we're kind of simplifying um and so that's like slice block block by itself and block with shaping all of these products kind of lumping into plan products and so defining local control is the ability for eweb to affect change to our portfolio ourselves right and so planed products as we go through this discussion you'll see in general with those we'll have more needs for resource procurement more needs to do portfolio management uh and also more needs to kind of manage our own reserves ourselves so it's just EB just does more

24:54 with those products for load following Bonville takes on a lot more of those resp responsibilities and there's less need for EB to do it ourselves um and so at the end of the day they bondable rates and policy you're going to have more of an influence over EB at the end of the day if we went that direction and so at a high level here you know we're assuming uh broadly that all of these options are going to get us to our goals does it matter to the board that would say hey we're in a boat and that boat is going in this direction we don't need to be steering the rudder or it's like no it matters to us and our community to have our hand on the R and say how we're getting there um so that's the kind of broadest category local control to begin with one of the other key factors that we identified was

25:39 flexibility um so broadly defining that as our ability to change direction in the future given new information right so we know we're heading towards more uncertain times might we want to be able to Pivot and what does that look like um I want do want to call out this yellow box uh your flexibility there's some pieces tied to the product itself that kind of put constraints on certain products that have attributes to them but also our future flexibility is a result of decisions that we make subsequent to the product right Ben talked about creating this environment so decisions that we make about the resources that we have or the Staffing the capabilities that we have are going to impact our ability to change course in the future so there's flexibility directly from the product but also

26:24 subsequent decisions um in general again we're finding that plan products because we tend to own more of the portfolio management and we have more resource flexibility they tend to allow for more flexibility load following with bondal managing the portfolio there's less incentive for EB to do it ourselves because we don't need to uh and that might right kind of disincentivizes kind of the the capabilities uh and knowledge eweb because we no longer need to do it we might lose that and it might change our flexibility in the future uh so moving to to cost risk so this is just looking at within-year Cost risk for a portfolio right so if you assume that each year you're serving load and

27:11 the load varies and the costs uh for market prices or to serve that load is varying or you have a different Hydro year um how much cost variation is there and in general um slice block has the most and that's because eweb sees both the variability on our load side and cost of serving that load and on the hydro side but if you look at the top line here while that specific product we directly see it the hydr variability across the the products is actually similar and that's because it's the underlying federal system is serving U is that resource and so it's really about whether eweb or bonab is managing that um so if you look at the plan products that's you we have reserves policies we have a risk management

27:56 committee we have a lot of uh portfolio hedging and balancing activities that we take on WE manage it ourselves load following customers Bonville does it for them they've got a big pool of reserves all the the funding flows into there bonable does the balancing um and so there's not as much need for EB to do it um and then that pulled risk and benefit at the bottom I'll discuss this a little bit more on the next slide U but basically right now we have all of the risk and benefit of operating or res resources in our load right so we can serve economically when it works but we're also Exposed on the other end when things are a little bit more expensive so we directly see uh the revenues from our resources and our bondable product

28:41 as well as the cost to serve our load with load following U bonbl kind of pooling those together and it flows through bonbl reserves um so if we think about that in the context with the market and here we're just broadly talking about kind of the the energy Market um so up on the upper left we're talking about plan products first um so there's Bonville upper left and EB in the middle so in this this is like slice Block it's like what we have now we're buying energy from bonaval and we're using that energy to serve our load and we're transacting with the market to balance and so the revenues uh are flowing directly to EB as is the cost and so we see directly the market signals to move things to optimize to manage efficiently

29:27 right we're seeing all those directly and we're making those decisions um for load following now e is on the lower left um and so bonnaville is kind of in the middle here and so you pay bonaval rates um and you get energy from bonaval but bonable for the majority of the portfolio especially that Federal side they're the ones interacting with the market so they're balancing the portfolio and our behalf they're pooling the loads and resources the cost to serve the load the revenues are flowing to Bond's Reserve reserves and then they flow to customers after that so it changes our relationship um with the market and how we do things every product's a little different but this is a kind of a general way they work that's different uh and I just wanted to

30:13 highlight kind of an example I've got a little asteris at the top here these are all example numbers are not specific bable rates we could put real things but not just trying to give a a sense of the direction here um so on the left hand side with kind of this quote unquote average Market condition U bonaval price versus the market um and you see bonaval is the more orange line um you know bonal might change their rate designs fut sure they've tried to leave room for that but in general bonal rates are very simple they set it and this heavy and light load very flat they don't move um and so you know if you're thinking about serving load you could say hey that's great I like the stability I want the comfort of that or you could say hey I

30:58 you know I think that we do a really good job optimizing our loads and resources I want to invest in time ofuse rates and incentivize customers to help us snip the peak there and avoid those higher price times um similar on the right hand side here those High market prices this is showing another example you know when you have a a more scarcity event uh maybe prices are a bit higher you have a weather event um here right now EB manages our resources to hit that we can send the signal to load customers if we want bab build if you're on the the load following side you're going to get the consistent energy rate there there's demand rates that make things more complicated but this is the the base idea being our current situation um with the way that we manage block and

31:43 slice provides for more Dynamic responsiveness right this balancing loads and resources load falling is a different construct that's more stable um and maybe you don't need to invest in those things if you're just looking for that stability um so when we think about this in the con uh the context of uh programs and incentives find the planed products tend to give us more options to implement those right so for load falling you're basically looking at Bono rates as your economic incentive to invest in things um right now we have those market prices that move we can respond to those as well as looking at when we need new resources peaking resources or energy that's what we're looking at as the kind of longer term avoided cost um so

32:30 depending on our you know need and interest for developing programs um there's just different incentives the way that they they work here um and I know we've talked through this slide before this is showing those five different products and kind of how much capacity so basically how much peaking capability we would need across the products um and the goal for all of these is to get up to the orange doted line um so all of the plan products are kind of the darker colors on the left load falling is the lighter blue on the right uh and the main message here is that for all of the plan products there is a bigger need for resources than with load falling there are typically we're talking about more flexible peaking resources could be you know physical resources batteries demand response um

33:17 there's a variety of things that could fill this but the main message here is that plan products while they vary they have more needs so when you think about you know what is eweb ready to invest what kinds of resources are we looking at if we are thinking about local resource development as being something that we care about you know plan products provide more of an incentive and opportunity um because there are these gaps that we need to fill and again that market signal those more Dynamic signals from the market are U kind of what you're going to see as the economic driver load following um your real incentive there is the bonal rate design it's like can you beat bonil rates great otherwise um you might have some decisions around local resiliency

34:02 or something like that that feed in but again that becomes more qualitative than an economic acceptive um so just a brief summary here um so hopefully I've said PL products tend to have more flexibility um greater opportunities for local control have higher resource needs but also that greater within your cost variability because we see you know we take the benefits we're optimizing our loads and resources but there's also a risk to that sometimes load following Bonville is managing more of the portfolio they kind of provide this buffer to the market so we would get indirect signals um so we're really relying on Bon's rates and Bonville holds reserves you basically pay Bond bill in your rates to hold these

34:47 reserves to kind of flatten things out a bit for you um so as Bennett mentioned earlier kind of this bondable product Choice while there's features of each product um it also creates this environment for future decision- making right if you look at what youb needs to do to manage our portfolio and you start thinking down the lines of like well do we want to develop resources do we want to manage portfolio and balance that ourselves or let someone else do it and how does that impact our flexibility in the future um so we can go back and answer questions uh I'm sure there was a lot of material here that would be fun to talk about also we're trying to just set up the discussion with a couple of um props so

35:32 I would throw it to Brian or Frank about whether we want to start here or the board but um yeah with this just you know do you have a gut reaction to you know that local control do does eweb do we tend to want to do it ourselves are we okay hey want to like take the raids we're okay with giving up some local control so Aon could I add a 30 second color commentary on this before we Le hand it over for discussion I want to give a example not the one guys work about on this uh on this slide uh last summer we had a high heat event at the same time Karma was out as you might recall we put

36:18 out an ask to the customers to place to produce usage if you can whale market prices were extrem and it appears that they did reduce us in a meaningful way it provided not only a monetary benefit to EB but also a benefit to the region now our neighbors did not send out that message because they don't have that market exposure BPA was out BPA was exposed to the market but certainly the the subs and Lane electrics of the world they weren't worried about the market being a thousand bucks because that was sheltered from them right so just wanted to give a real EX example of yeah this is what that marketing closure

37:11 Son okayy Well I have plenty of questions and thoughts on this one um so it seems like Risk uh is higher in planned um we have more flexibility but when we get flexibility that it's not just flexibility for flexibility sake you want that flexibility to change your risk or deal with a shock or something like that so when I look at the portfolio I want to know what you know kind of shocks to the system that flexibility really deals with and and why we would see that as a benefit and because you know when I look at this it's like okay well it's more

37:56 stable the pricing is more stable it's less risky to do a model we're not doing now um and so it it's interesting to see just what does flexibility buy us let me let me talk for just a second on on the risk part I don't know that we would say that Lo of following is less risky I I think we would say that instead of us managing the risk ourselves or our own management committee and our own reserves we would instead be abdicating that to be so they would be holding more reserves on our behalf when they have positive or negative interactions with the market

38:42 they' essentially do cash calls on us or refunds if things go the right way uh so there'd be this buffer of cash between us the market operations are still market operations um the flexibility side Aon I may ask you to chime in on this one but there are certain handcuffs that come with load following if we wanted to bring a resource online it has to play Within EPA somewhat prescriptive rules I would describe it as a set of handcuffs it is simply unpleasant from a regulatory standpoint to bring resources online within a loadall contract a mayy add a bit of color on that I don't want to get too far in Weeds on that but yes

39:28 in general load fing has more restrictions on your owned assets and other contracts they have just stricter requirements on bringing something specific to load um I think the other piece of flexibility so you know we talk about risk there's one piece which is like within your hydro risk and I think the other piece that we're trying to like puzzle out and we're still working through is like there's long-term risk right so when you rely on bonil and like we look at the amount of load growth that there is it's like well bonal says they're going to meet all of our Peak demands like are they actually going to do that um how much is it going to cost and so to the extent that youb relies on bonable and bonable can't execute are we

40:13 able to go a different direction there are a lot of very small customers who are wedded to bond ailment they cannot do something else um so I think that when we think about flexibility it's it's in that realm of you know one kind of the local control but also like is Bond like load following these other products you are tied to 100 other customers who are also advocating for the same product right so it's a lot harder to get something unique to what you want um also you know if there something happens like B's acquiring a whole bunch of resources that can't do it or it costs more than you want do we have the capability ourselves to go develop something or Implement a local program that can help us avoid those costs but I mean it's

40:59 it's it's a diversification of sorts you talk about flexibility when I think of portfolios I think about Investments I think about okay how do you manage the risk of a an Investment Portfolio it's similar concept you have diversity in your portfolio if you're putting all of your eggs in the BPA basket y then you know that's one concept you know kind of a we said it and forget it not that we would do that but it's it's very different than having us have to make manage the hourly raids and the contracts for each of those others which does take a lot of time and expertise and skill which is great that we have that but well we always have that um I know we've had you know labor shortages and such too so I'll let others ask questions and they I

41:44 have other things um to ask but leave it at that hand it over to Frank real quick you had something to add just a quick thing to add I think that um sometimes when we talk about flexibility we're not just talking about resource flexibility but decision flexibility um when you think about the unknowns of the future making decisions that allow you to make future decisions more flexibly is part of how we consider flexibility um but relative to risk I think one of the things that we're trying to understand is there are a lot of different forms of risk and we'll talk about this a little bit in the second half there's price risk there there's Hydro risk there's regulatory

42:29 risk there's um load risk you know there's pricing risk whether we're talking about being subject to the pool of baville or our own management of resources and there's there's really trade-offs between those and um I think we'll have to understand the value of flexibility in that in that context um and so I think ultimately you know when you think about this pooling if we think we're positioning ourselves better than the pool then we'll sort of lean toward this I'm gonna do it on my own I'm going to be a DI diyer if I think I'm better than the contractor if we think there's advantages to the pool then we may look at this and say I want to lean into that

43:15 pool a little bit more even though there's pros and cons to to both approaches whether we do it or whether we we push some of that off um some of those are Financial will get into the economics because we're going to have oh this is going to lead to these Futures but part of this discussion is what's more important is it more important to be flexible is it more important to have local control um you know there's pros and cons to doing it on your own versus leaning into somebody else Bonville raises a rate and we're tied to Bonville there's not a whole lot we can do about it um as opposed to actively manage sources which has some of the opposite risks that I

44:00 mentioned thanks Indy um sorry if this sounds like a ridiculous question but um imagine there's a different federal government that makes a lot of um decisions that don't necessarily make a lot of sense to many people how much can can something like BPA be changed question uh do you mean this actual Federal agency that exists now yeah or yeah uh I mean it it's a process to change anything that I mean people have talked about privatizing Bon's transmission various things at times uh

44:46 the the bonaval has been created by federal statute it's existed for a long time it's hard to get things through um and they're independent uh financially from a lot of other right so they they're yeah I was a um I think in many ways you know Bonville can be subject to some of the same pressures that we we feel whether it's inside or outside the government and some of the things that we're seeing for example is is uh let's breach the lower Snake River dams and of and let's modify Hydro operations which which

45:31 further restrict the economic value in in response to fish and wildlife needs so there's you know Bonville is subject to some of those same pressures even though they in in many cases they aren't um their regulator is not FK like in in some of our Hydro projects um that they are also um that what complicates Bonville in the relationship that they have with utilities in the Northwest is that they have really three very distinct functions that are that are combined into one organization they are the marketer for the federal power system so uh in primarily the dams and then um some some nuclear in there as well so

46:17 they Market this this power they are also are balancing Authority and so they have a particular area of which they're responsible for ensuring that there's resource adequacy uh the load is being met so it's kind of a reliability function and then third they are a significant owner and operator of transmission and so depending on which part of that you're talking about uh they can be subject to uh to pressures um like a lot of other agencies are now or even independent people are um I think the really the thing that is common no matter what is we rely on the grid and

47:02 they're a significant part of the grid um and I think that's a reality independent of whether we lean into them for certain things or we do those on our own there is a a certain um subjectivity you know that that that we have for for them and I don't know if I answer that question but they they are under a lot of pressures you know just just like we are well and I just think if there hopefully this is just dystopian but another Administration came in that was a disruptive Administration I know you say that there's been talks years about these things happening but like somebody could come in and pretty quickly change things so to answer this question

47:47 specifically I am very much like all the participants at your I would like I would like it both because it seems like it's a lot cheaper and easier for BPA to do it for us right it takes a lot of work off our plate it's much simpler we don't have to worry all about all that but I do really value the do it ourselves um approach like you said Brian like we ask customers to um reduce their energy usage during uh a high heat event and I think that that is really key in just looking at addressing the climate like we we have to address behavior and um that's one of the ways

48:33 to do it and so I re I do really value that I also value our um climate goals and I think if we're just completely tied to PPA they might change their portfolio or where the resources come from and and we're kind of stuck with that we kind of we can have these values but we can't necessarily do much um to to live those values so I would say that I'm I'm maybe leaning a little bit more towards do it ourselves um we forgot one other thing that BPA does you forgot one other thing about BPA they do irrigation as well so and

49:19 part of their B they have a environmental Foundation part part of their battery goes to the a valley learned that on our little trip to R um you know for me I think that there's we've kind of been setting up this utility to move towards local control we have a highly dispatchable resource at Carmen that we can we can use when and where and and to the best of our ability to realize the prices on it um we've spent a bunch of money on this new computer system so that we will be able

50:05 to use demand response in the future um and and as you alluded to our community seems to be willing to buy into that type of uh that type of uh interaction I think so those three things make me lean towards that I also feel that moving forward with the advancements in AI it's going to be a game Cher for for trading for trading power because rather than having you know you said part of it is you lose maybe some of the institutional knowledge of people that are upstairs trading power but as AI moves into it and you can put a lot more

50:51 things in there like okay there's a storm over Hawaii and it's going to be here and plug even more data into a into a picture and know when we want to turn carbon up when we want to turn carbon down I think it's going to be very advantageous to us going forward um you know I I look at as you know Sonia mentioned it's an investment right and to me you can go can go in the bond market and have it be 3% straight or we can go into equities and it could be 9% this year it could be you know we could go down and have it have a a bad year and and but I think

51:38 what we've seen is that the that's just one part of it that's just the financial part of it but like Frank said once you get locked in there they're going to tell us when when to turn carbon on and they're gonna say we need this power at this price of carbon and we could say well no we've got slice it we've got slice that you're selling to me for $10 and I can turn Caron on and sell it for $25 and and I think we have that ability now and also if we want to bring out other resources that we may not even know know in eight years the resources that are going to be out there may be wholly different than what we have available now and the price so for me I'm leaning

52:23 towards block slice to get Us close close to what the regional requirements are going to be and then and then move on from there because we we've had block slice for so long we know that but we have all these new tools that are coming on board that will help us enhance block sles thanks um I have a couple questions just clarifying the the bar chart that you show us earlier with the different products and the gap what we would get what we need to need our load so we're not just talking about the type of product that we're buying we're talking about that the amount at the same time right they're they're

53:09 inherently linked um I think it makes the conversation trickier um and without without teasing that apart um I think you used the words Erin um whether we can beat BPA prices not right that's kind of the the bottom line is are we able to keep our prices you know at with our ability with our trading floor we able to keep prices as good or better than EPA if so there's my question how are we doing now how are we done over the last five years are we at least not losing ground I mean my my understanding is that our trading floor in many cases saves us as utility

53:58 money yeah I so we did promise to not share numbers at this meeting I didn't ask for numers same question just competition trade floor does a nice job um particularly with Karma we've got a lot of flexibility to go out and buy low and sell high and they do a nice job of nice job of doing that and really working tools that are at their disposal right now that would not be at the disposal Lo following customer right um so I I have kind of an open-ended question I'd like to leave youall with uh we got five more minutes and not exactly leaving but to let you sit on it until December um we're going to be coming back with the quantitive analysis

54:44 which will show what we think you know opening costs would be under any of these contracts um certainly if like a planned product comes back and it says yeah we you can go out and do this cheaper a BPA okay let's do this cheaper if load Following comes back and it's cheaper then we've got a value allain right like if it's make up a number 100,000 bucks a year is the the cost to going to a a planned product okay my freedom is probably worth the 100 Grand but if it's 10 million bucks a year oh that's a different that's a difference then some somewhere between those numbers there is a point of indifference and we need to to decide if like they turn out to be golden

55:30 handcuffs how much are we willing to put out our hands Frank I think commissioner we do a really good job of what we do today I I think our structure and our history um has built to a certain point where we have our own resources and we'll talk a little bit about some of the constraints going forward of of the business model discussion we do a good job of what we're managing today I think we we feel like like that's the case I don't think that's the question I think the question is for the next 17 to 20 years depending on the life of the contract what's going to give us the most opportunity the most

56:15 flexibility um the most resiliency um from some of the issues that we see going forward and I think that's um um this isn't the case here but you can be really good at doing the wrong thing um and that's not where we are now but going forward we need to be intentionally aligned around um what's our strategy where we think the opportunities are how we're mitigating for some of the risks that we see coming how we're mitigating or planning to mitigate some of the risks we don't see coming and so that's where the qualitative piece comes in um because eventually we're going to have this model and that's going to tell us well this one's going to cost us this and this is going to cost us that we're going to look at it go that's not a whole lot of difference under the ideal scenario um but what about sensitivities what about the what

57:01 if the US government all of a sudden changes according to Mindy um to something that we can't foresee right now what does that mean for us um and so and it's the first time I didn't expect to hear AI tonight but um you know how we approach this is going to matter but we we do feel like we do a good job now but really we need to be looking at it this in a different time frame right good uh I did I wanted Channel my inner John Hart Who I wave at I assume he's watching me um just something just about the portfolio management so you ask can we do it better than Bonville you know referring specifically to demand rates right if Bonville is your your demand rate is your price signal like can you beep that with it like what

57:46 is your cost to build a resource or do something there's another piece which is you know it looks cheaper if bonaval manages the portfolio and part of that is just hidden costs right at the end of the day someone is managing the portfolio you're paying for that we've interviewed a number of utilities they have different structures for how they manage the portfolio at the end of the day you're paying somebody to do it um and so this is part of the local control piece is like youb staff they do a good job it gives us certain benefits um but you can pay someone else to do it and just choosing a different product doesn't mean that you're not paying for it it just changes the path the money goes so I have one comment and then a

58:31 question and I'm going to leave on the table and then I'm might hand it over to son because something else to say um I work for local government and I work with state and federal agencies and I think overall that we are better at knowing what our local needs are and adapting to those locally than the larger agencies they're good at some things but um I think we do it better locally so from my perspective the more the the I would push us more towards local control to the extent that we can um and then the other question and maybe this is for later or a discussion in December but I'm curious what are the most consequential BPA policies so we're

59:17 talking about the price right the rates and that's a fairly obvious one but if we do the sensitivity analysis what are the other BPA policies that really change things for us um because and then are those likely to happen right I mean to the extent that we can forecast the policy risk coming from BPA that' be valuable so Aaron is the right person to answer this while he thinks of the uh correct answer can I ask if we have another hour Frank I am not gonna try and answer that right now no yeah yeah coming back to that later would be great if you have thoughts about it and son okay so just a a couple last quick things um you know Frank when you were talking about you know the different risks that I mentioned before and you

1:00:04 listed off price Hydro regulatory mention talent risk I mean all of those things I think we see is potentially going up over time it's not like any of those are down so when you have more risk you want more flexibility to handle that um which is what I was getting at although when you look at the price curves and stability and some of those things it looks like load feels very appealing but given that we have other risk um but but I I am also curious have you all looked at shocks to the systems from other or from other organizations that have load following or you know some of these more restrictive and

1:00:50 seeing how BPA serves them we know this like we know BL s so it feels very safe but I still have to go kind of outside of the box push and ask for due diligence on what what did they get or what didn't they get out of one of these other portfolios um and may you don't have the information now but I think when we have these discussions future like I mean there's a whole bunch of different ways we could go U I think it's another one is better to follow up on rather than me try and a whole bunch of things um and and you know when we say okay well if BPA can't produce that's one of the biggest risks I when we think about this all eggs in one basket if BPA can't

1:01:35 produce then the other question is well can we do we have the ability to to buy those and set it up and make sure that we have that that flexibility and if if we do I mean for me I lean more towards diversification because we don't know what's coming there's a lot of different Pathways that we could go the this end of the spectrum to this end of the spectrum um so for me I you know I I think about those risks more and then my last little piece that I wanted to um actually two so all of the portfolios you said they all have the same environmental benefit correct yeah I should say that the BPA fuel mix the percentage of their system that is carbon free stays the

1:02:20 same no matter which product you take we don't think that's particularly fair but that is reality of the situation so oh so we can't we couldn't buy a more clean or or something it's it's just it is what it is yes the BPA product is the BPA or the BPA system mix is the BPA system mix no matter what but what resources we go out to serve our needs we control those in a in a planed product well we would not following contract just to put I I promise no numbers but let me put some numbers out there um in the BPA white book BPA is looking to be short capacity in the next several years we course talked about the regional load forecast of the trajectory

1:03:05 it's on BPA is looking to be short this peaking capacity uh 370 megawatts beginning in 2027 up to a deficit of 2700 megat by 2034 we have no idea where they're going get that from and so if they if they go to some other they could buy a natural gas peaking plant or nuclear or something else they could go and buy that and then we would just be Stu that so the environmental risk is actually there it's high because we we don't have control over the resources that we came with I just fill that c uh depends on yes so I this is a complicated discussion too um so I would say at the starting point

1:03:51 we're talking about tier one energy all of the we get the same amount of energy from bonable and that is this tier one like 95% clean mix um you know if we think about capacity is purely meeting Peaks there's not a lot of energy necessarily to it the energy decision we' kind of talked about this before so our above high water mark like load growth decision is going to be a separate decision on like where we get additional energy um so there's there's Nuance to this as well bonable is going to have different buckets of how they assign this um so I'm I'm complicating it because it is it's at the at the starting point all products kind of meet our broad goals of right right it's bonable low cost it's low carbon and the

1:04:38 question is where we move from there and are we are we on a kind of bonable path and certain parts of it or not and how much does ewb own of that it it gets a little bit worse quickly when okay so if we buy in bu bu load following what is Buy in load following all in on BPA I'm trying to get the Nuance of the various sides um it's tier one so it's 95% clean and they would guarantee that the the energy that they're purchasing for us is 95% clean but then they would do peaking with other things or the um I the 95 yeah the 95% is today's system so today's existing federal system is 95%

1:05:25 Cur okay but they're not guaranteeing anything out in the future no okay so there is environmental risk there as well for us that's what I wanted to get at okay thank you let me also just say qualitatively 2700 megawatts is a lot I have no idea where they're going to get 2700 megawatts and Frank you get the last word and then dinner I appreciate the conversation the there are a number of different different ways and and actually this tees up really well into the second half of of the the meeting um we talked about the unknown future and the fact that that we have to be able to look at different scenarios and understand the

1:06:10 impact of those scenarios and when there's a lot of unknowns flexibility is one of the ways that you can mitigate for that the other way which is the whole dilemma here is that you can pull your risk as well and so there are some advantages to to you know you see a certain stability for example with a with a more of a full requirements leaning into bonab because they are pooling their risks which has certain advantages the flip side of that is that it may expose other risks and so it really isn't a matter that risk goes away it's how and where we manage that and how we sort of balance that with the potential upside of things that we think we could do better versus is what we

1:06:56 think bonnaville could do and that's that's really um the basis for why we want to look at this qualitatively and it's been helpful to hear Commissioners Express a certain um sort of leaning toward the fact that we we think we have a certain local response a local obligation we'll talk a little bit about commissioner barovsky you you talked about how we've set ourselves up to be a certain way it's absolutely correct in fact if you look at our strategy it is all around the presid present business model um and so we will we'll talk about that um and some of the constraints relative to these what do we do versus what Bonville might do and how we manage that um you know after whatever is next um I guess eating

1:07:43 um but the qualitative piece is is important to to just start getting these tradeoffs out there because um a lot like the discuss we can't have everything we're going to have to lean in and say under certain scenarios we see certain benefits and others we don't how are we going to manage that so a lot of ways to manage this risk right thanks and with that we'll uh take a recess to grab dinner are we back in 15

1:22:54 back the October 15th work session of Water and Electric Board and we're going into the next agenda item the electric business model perspectives re president McCrae thank you good evening again Commissioners uh for the the record Frank Lawson CEO and general manager the uh second half uh of the work session this evening is to really broaden the conversation um from BPA expanding outward to EB's larger electric business model model um this evening we'll look at understanding uh the present model some of the constraints and how that model was originally developed and and why um look at some future options eventually drilling down to what we

1:23:40 think some of those uh decisions would ultimately become and the trade-offs between those and then we'd like to finish with um kind of continuing the discussion we had around Bonville but uh again again trying to understand commissioner perspectives on how you would see managing risks and tradeoffs when it comes to a broader business model so what we mean by a business model uh and and when we talk about vertical integration we're really referring to the links between sort of the commodity which in this case is electricity um how that gets produced uh generated uh how it gets ultimately

1:24:25 marketed balanced uh and delivered to our retail customers and um and so you know you can see and these are relatively scaled to size although some of them um were made a little bit larger so you could actually see them um but you can see presently uh our portfolio as an organization includes uh Bonville of course which is a a large chunk um and it's Federal resources that resource that we have access to and right now it's it's as you know split between a block of energy and then a slice of the federal system which is variable by water we have some of our own owned resources uh these have been developed

1:25:11 and procured over the last century um we also um there's one of the wind of farms by the way with a 50% owner um and so not all that would sort of be split between contract and then we we have some direct contracts um and then we lean into the Commodities market and so um we have relationships uh and resources spread uh throughout those different um types of of generation and then uh as you can see kind of when you move toward the middle of the model uh we have a wholesale um function a wholesale part of our business which interacts with our

1:25:56 retail demand and also with uh other trading partners uh that we either buy and sell um electricity to or from and uh based on the particular need at the time sure a little little color on this one uh first of all Aron Bush put this together we have yet to find anything he's bad at I assume he has some Horrible Secret we know about um we we agonize quite a bit over the detail on this one every little line has a story behind it it just to give you an example yellow line from the wholesale Market to International Paper is reflective of the way their contract Works get a chunk of

1:26:42 power and get they maintain a load exposure to the market so they can shap their load around the market um Surplus for example that goes to the wholesale Market because der plus every they have so every little bit of this has a lot of thought that went into it if you want to dive into the details I know some nerds that love the Talk Shop nerdy details aside um thanks thanks Brian um every line does matter on here um also wanted to give you a little bit of an indication um why and how this got to where it is um and what some of the restrictions are um first of all there's a lot of things that uh

1:27:27 we're considering uh and have considered through time as as this particular portfolio was put together obviously the regulatory environment the Northwest power act the federal power act there's a there again this developed over uh basically A Century of of the evolution of those um there is also this notion of of federal access and I wanted to use an example um that um kind of comes in we we you know you look at Bonville and that's one of the question well why can't we just rely on Bonville for everything and part of that is we can't um when we have our own resources bonab Bill's obligation is a net requirement and so one of the the items on here you'll see under contract is what's

1:28:12 called Smith replacement um that is not Carmen Smith that is actually Smith Creek which is a resource that we used to own we sold that resource but we still are on the we are still obligated to procure the energy that we even though we sold off our ownership of that particular Hydro operation and in northern Idaho and so uh the federal system and access to that is on a net basis and so um a little bit of difference in the leeberg example um there are requirements so all of these in green are ones that are basically resources that are dedicated to load um

1:28:58 and so Bonville net requirement is based on those in the case of leeberg it was it met certain requirements that bonab was able to um reduce that and replace it had to do with un economics end of life some of these other uh criteria but if we were to just sell off an asset to somebody it would not mean one of the green ones I'll be specific if we were to sell off one of the green assets we would be obligated to replace that energy through contract that would not go to Bonville as a as a tier one uh requirement to replace um we could lean in on a tier 2 basis tier two is basically they're going to market for it so um it's an indirect way of

1:29:43 establishing a contract so there's there's limits to sort of how we got here and why BPA is the percentage that they are um and why some of the the history of our own development of assets um is is why there is a mix here um and so why you see the combination of owned BPA contract and then and then market so there's there's some ground rules associated with that including how we manage the risk here through the the risk management committee Financial reserves and a number of other board policies as well so there's kind of three ways to look at the business model we can we can change the business model in potentially sort of three primary ways one of them

1:30:28 is we could look at the generating mix and I talked about it um they're obvious and we'll get into this a little bit more there's trade-offs between owning a resource procuring a resource through contract we'll talk a little bit about that so I categorize these as sort of the gener the resource mix we can also look at another business model change which might be um the resource management this would be where we look at you see sort of the number two there which is how we manage manage or balance our system um presently through a trading floor we have a number of Partners it's a bilateral Market I think as you know we call up people and we trade energy back and forth on uh various periods whether month ahead sometimes we hedge years

1:31:15 ahead uh we have day ahead markets um or or customers in this case uh realtime markets so this we're we are managing the imbalances in our system um to try to optimize that so that we don't actually get charged by our balancing Authority or being out of balance which is which is Bonville um the third and I kind of put limited here I didn't even put a number by it I don't know that that we're actually in a position to change our service territory dramatically I mean you could say that's a potential business model change we are chartered by the City of Eugene I don't think that's going to be something that we change dramatically potentially with the exception of how far outside of the City of Eugene and outside of that Charter do we we really

1:32:01 want to make changes to relative to our retail customers so the the retail piece is probably relatively fixed but we can look at the generating uh the generating mix and also the management of that they kind of uh again in these number one and number two resource mix and Resource Management um the resource mix decision really comes down to ownership versus contract is is there U there are trade-offs between those we'll talk a little bit about it um we are um mostly contract but we are diverse we do have our own resources and so thus the X there uh between the own and contract is sort of leaning toward the contract side if you consider kind of BPA also as a

1:32:47 contract which is contractually um um an obligation and an o oblation to fulfill on their part you can also look at how you operate those there is a difference between owning a resource and operating it um I don't know that we'll get into that distinction uh this evening um the other the other part of that is um really the resource management that's going to be really a choice between how active we want to be in the resource management side of it versus how responsive which would be are you going to lean into somebody else uh and then adjust your resource management to respond to the needs of the market or the market signals that you you may be getting and so there's kind of an in an active

1:33:33 versus inactive I say active versus passing direct versus versus indirect won't go in into all of these details but I think that you've gotten a flavor um over the last number of years all of you've been on the board for a number of years um there are risks and reward towards to owning um a generating facility there's um you're dealing with operational flexibility which is a very positive thing uh there is local control we've talked about some of those things even we're very hydr Centric and so our impact on the Watershed for example in the McKenzie river is something that we we value and we cherish there's also a

1:34:18 very uh difficult to navigate regulatory construct and so um there's environmental there's water availability U for example is a is a vulnerability that you have when you own a resource um and so um um there's there's tradeoffs with with owned versus contract you know contract you're you're dealing in some ways with lower lower entry costs um you may also be dealing with higher marginal costs or higher variable costs there are are contract obligations whether that's by period or by Price we've seen through history we've had some some contracts that we thought were were in the money to begin with became out of the money as the contract went along so there's there

1:35:04 are pros and cons to Contracting resources as well there's also you're now party dependent and so you're dealing not just with something that you can control and you can optimize but now you're dealing with something that someone else is responsible for the maintenance and the operation and then you have to deal with that variability so there's kind of pros and cons to that um resource mix you know own versus contract construct um going forward U kind of the you know we've already talked about this a little bit relative to Resource Management um talked on you know in the first conversation you know if if we are managing our own um balancing then you know we have this

1:35:51 ability to to tailor that to our own resource mix I think it was mentioned you know we can can actually sell on the market when the market is at a premium we can hold back and adjust resources Kon Smith I think was mentioned in the first conversation in the sense that it can Peak During certain times and then sort of EB and flow and you can align that to to try to um leverage the fact that you can have sort of pricing Arbitrage and you know it's it's like stocks you want to sell when they're high and you want to buy when they're low think that's it's the same thing on a much more Dynamic I shouldn't say much more the stock market has been pretty Dynamic lately but uh some of the similar Concepts and you can do that when you're in the active management um role um if you're in a in

1:36:38 a role where someone else's is actively managing that then you're really responding to their price signals some of that dilutes for example some of the value that we could potentially get out of the loads side management um I thought it was really uh appropriate that it was mentioned in the first conversation the alignment um between our resources and the fact that our strategy really talks about this synchronizing between supply and demand and the fact that there is value on the resource side if we can adjust the demand side to be able to optimize that um if you're leaning into someone else into a pool you are now diluting you are now having to change the value that you had with your direct control into

1:37:24 something that's now under someone else's control there still may be value in moving things around but it's it's not as directly controllable the so the utility of the future I mean there's there's a number of different ways to look at that um and again you could draw circles around this and and you could kind of say well we've set ourselves up to really be and continue to be this vertically aligned utility which means we want to still play a very active role in the ownership and the management and the Contracting of the resources as well as the the management of those resources through the the balance of wholesale and Retail and then all of that with really the

1:38:10 benefit of trying to add as much value to our customers our retail customers um you could also say let's really focus on resources and sort of delivery um we'll let the management of some of that we'll we contract through that we'll lean into somebody else that would be another business model and again there's kind of pros and cons to that as we've talked about uh you could also say let's devest of resources let's just treat resources as this this commodity and our job will be the management and delivery of that commodity in the most optimal way and so there are um what you do when you in are in that situation you are divesting some of the uh risk and variability that

1:38:55 comes with owning uh and managing your own stock portfolio for example you know I'm going to decide which stocks I'm going to buy versus um I might buy a mutual fund instead which is um you know you may have less upside um but you also may have um leveraged the diversity of of that portfolio differently and so there are different ways to go here I will point out the transition or migration to of these is years um this isn't necessarily something that we would say let's let's transition to this immediately some of the key time frames around that and we're talking about the bonab bille contract being 17 years it is likely that there will be some sort

1:39:41 of midterm check-in on that contract that might might provide the ability to flex in a different direction we also in the early 2030s roughly will will um have decisions around some relicensing um decisions associated with that time so um much of this is is not I mean you can you can set up decisions to create the flexibility to look at business model that's one of the aspects of flexibility but we also know this isn't something that uh we would necessarily turn on a dime it took us 100 years to get to this point and um if we want to go another direction we will will need to do that intentionally and

1:40:31 carefully I already did that one um so a couple quick key questions for Commissioners to to consider um and really uh hopefully Inspire some conversation here you know one of them is we do you know this is a question that we're asking ourselves this very first one you know how does a BPA product Choice impact the future business model options I think that's something that we we are really trying to consider when we bring back u a recommendation uh to the board it's going to be yes there's going to be economics there's going to be social environmental impacts local control flexibility um risk with different scenarios you what happens if load grows at a greater rate or not a greater rate for those are all things that we consider but also very directly what gives this flexibility relative to

1:41:16 business models um beyond that decision what are the qualitative aspects that Commission would tend to prioritize relative to Future um and we know that there's the values we're not going to let you off the hook uh like the community table you know what are the things that you see as most important if that's local control The Good the Bad and the Ugly of that okay we'll own that um is it something related to the fact that we can over time have the ability to choose these and to your point president pres McCrae we probably have a better feel for our local community than say if we were to Outsource or diversify

1:42:01 that um why might you see more or less risk with local local control versus regional control um there are pros and cons to that um you know the mutual fund is a is a good example there there are ways to mitigate it by pooling um your risks um there are also ways that which you can maybe manage those directly and so like to get your your take on that um we also kind of want to we we want to understand your bias here in the sense that um how important is it for example that we happen to be the ones who own the generating resource on our water supply um we could if we sold those we didn't own those someone else would

1:42:46 still be subject to many of the same Burk water management requirements um that we have how important is that um to that we have a dual stacking of interests um on the McKenzie river specifically um you know what what criteria might be important in deciding who and where the business model functions reside again that's kind of goes back to to where we see the pros and cons of that um and then one of the things that we really want to try to understand is that um what are the of the key pieces that you think we should be investigating going forward that could help this board potentially future

1:43:31 boards evaluate these business models um maybe more specifically we have we have a few things that we're we already know that that we need to take a look at relative to Performance statements of certain functions and certain the way that we operate um and I really what I mean by that is what's how do you characterize the value of a of specific resource versus the portfolio um but if if there's other things relative to that um it'd be important to know we have if you think about our strategy and I'll just kind of end it this way um we've talked about the strategy being really the fact that the Dynamics on the resource side and the consumption side are both becoming um

1:44:19 more Dynamic they're you're seeing it in price curves you're seeing it and the way consumptions consumption Works um our approach our strategy has been and we talked about this even with rate design is to influence behavior that creates value for our customers long to some of that value comes in the optimization of these resources if we then decide not to manage those resources our strategy will need to reflect that um and so the fact that we're going to be talking a lot about strategy over the next year to kind of refresh that is is also related related to this so with that uh president McCrae I'll pass it back to you and sort of um look

1:45:05 forward to understanding the trade-offs as the commissioner see it where you prioritize what questions you have and what you might want to know further and more about we got 15 minutes left on our agenda tonight you all want to spend that time talk about get S o'clock okay we'll start with John Brown oh John didn't have anything to say so uh Browski I'm gonna first pose a question to you if you had to start this utility today which direction would you

1:45:52 go that that it's an interesting question I part of which I I think where we are today matters so I don't know that I would I would be able to answer that today um part part of the answer there too is that it did take us a long time to get here and as much as um I'd like to be able to wipe the Slate clean I don't know that that's that's actually a a fair thing to do based on where we are right and and the reason I I asked that was because you know when we started 100 years ago it was like we needed to build a dam so that we could have power for the city of MH and that was the option we didn't have an option of calling baville and saying can you turn our lights on for us um

1:46:39 so for me the risk and reward kind of I break it down to almost entrepreneurship as opposed to working for something right if I if I'm an entrepreneur I have the opportunity to have larger gains larger successes but I have a bigger chance of fa I have a bigger chance of failure rather than if I go to work for somebody and punch time clock and know that I'm going to get paid for my 40 hours of work and so that's kind of what I see the an equation to here and and instead of instead of an entrepreneur going

1:47:26 bankrupt if I if I make the wrong choices the impacts are I'm going to have to raise I'm gonna have to raise prices on my customers that we have to survive so but the rewards can be much greater in the entrepreneurial system and and what that means is that we have a greater opportunity to keep those prices low lower if we do our job correctly we don't have to pass it on I feel that this organization done a really good job of that in the past and I think we can continue doing that going forward the risks that really scare me

1:48:12 are the regulatory ones that's what we hear about four four or five times a year we hear about the regulatory in environment and how those are going to impact the entrepreneu thing our profit profitability and so being able to detach ourselves from regulatory burdens of owning a dam intriguing to me but then you also lose the entrepreneur aial instead of of owning that thing so I still lean

1:48:57 towards the B business model we have going forward um and utilizing that and then we start proc procuring more resources lean into the ones that have the less regulatory requirements with them so rather than buying into more Hydro dams if somebody says I'm going to build a dam stay away from the that but if they're saying hey I've got a new technology whether that's batteries hydrogen even I'm gonna say it you could probably put this in your book too small nuclear those types of things that would have a little bit more regulatory but

1:49:43 that's where I believe thank you commissioner Min I feel like if we went the direction where um the opposite direction of where we are today then really we're just pass through kind of right and so our values don't really matter anymore because we're like a middle so I think if if values are important to us at all then uh that would kind of negate the decision to go that direction I feel like kind of what what John definitely what John said um one of you have

1:50:30 strengths is that um we've been able to Pivot in times when we've needed to Pivot we've been creative in the way we've thought about things and part of that has to do probably with our size and part of it has to do with what Matt touched upon before is that we really know what our local needs are and I think that that is a huge strength that needs to be taken into consideration I think that if we go straight with BPA or we lock ourselves into um being stuck with a decision it just gets really clunky like you can't really change things very quickly or you can't be responsive and when I think about the future there's so many unknown variables on multiple levels and it seems like

1:51:17 being able to be quick on your feet and Nimble and responsive is a really important attribute to have so I know that also there is risk there because if something happens to one of our assets and we need power and we don't have a way to get it that's also risk but I just think given our size like of being fast on our feet is a um is a value and so I also like the direction that we need going one one of the things that um probably didn't mention is that if we're not vertically integrated within in this case a single commodity what kind of other business

1:52:03 model does that create and another way to look at that would be um kind of this trade-off between focus and scale and if we if we weren't vertically inated if we weren't putting not just the money but sort of the the opportunity cost the brain cells into managing this this entire string of electricity there is the potential that we could we could leverage and expand the relationships with our customers and some of the things that come to mind are the fact that we have connectivity into every single premise in the City of Eugene what else could we leverage that for whether that's Communications whether that's maybe owning appliances and selling them you know instead of selling electricity you're selling heat

1:52:49 or air conditioning I mean there's you can integrate the other direction the way we are are now is we're you know focused on being good at that and the more we you know we could we could focus on being good at something else but we would we would give give that up so there are there are pros and cons to I think the the primary the primary business premise of this is whatever you do you want to be really good at it and the more you sort of expand and dilute yourself the less chances you are being really good at that and so that's that's where because someone's going to ask well why can't you do that anyway why because well at some point you become fragmented and right now we are focused

1:53:34 on this vertical integration and that's where we are and um that's that's where I see I see the focus um two risks that I see commissioner um barowski one is probably two of the two or three of the biggest ones regulatory risk is one when you when you own it the other one is a scarcity risk the fact that if you look across the Northwest where are we going to get Market liquidity as this area grows and you know can you just go out and contract things maybe maybe not markets are going to change there's going to be a different Supply demand curve um there might be some value to leaning into something that would spread that risk more I mean these are these are things we're going to have to test so

1:54:32 um uh one clarifying question so looking at the two charts there's the pie chart of our our supply that had like 70% BPA and 30% of other things but then on the there was own and and Contracting yeah I'm to go backwards there cool yeah so 72% that far off um and then right a whole bunch of things that we own and contract is that the average over the course of the year what does that represent there this particular one was U megawatt average average megawatts produced it wasn't it wasn't name plate it was what's produced on average okay and then if we go back to the kind of spaghetti diagram that made

1:55:19 um it looks like the BPA contribution looks smaller than that right the block and slice of BPA there how those different or is it just different charts and different charts some of some of these we had to scale them so you could read them yeah yeah yeah and that was that was mentioned earlier so I was just making sure that I okay yeah and and there's also you know there's so many ways to slice and dice this commissioner you if you go by name plate you're going to get a different mix if you go by capacity contribution you're going to get a different mix sure um the pie chart was average but one of the see you look at all these and summer capacity is different than winter capacity I mean you you really the

1:56:04 characteristics of the resource start to to be important yeah yeah understood and I was just trying to make sure I was understanding that right um and and this doesn't include that sort of Commodities part which is sort of the buying and selling of the market chunk that we use this this is more of the the plan resources on a planning basis so it's bit different yeah so I guess what I want to point out here with this Charter 75 or 72% is kind of the same like we are relying heavily on BPA already and if and a couple of the uh I think it's clear we talk a lot about U resilience here about curveballs in our future many of them and um when we think about resilience principles diversity and

1:56:49 redundancy are right at the top right maintaining diversity and maintaining redundancy and so I think um to the extent that we're not relying more on BPA than we already are it enables us to have a more diverse portfolio than we would if we're just leaning BPA recognizing um BPA is going to have its own mix but we're going to be buying a piece of that either way right so all things being equal my sense is that we have a few more um options available to us when we're we don't invest more in BPA than we already are and then on the redundancy side we were talking about the trading flow right bpa's got their trading floor and then we have our trading floor but that might be really helpful as we look at

1:57:35 curveball so I just um just to put those two principles there I think maintaining not increasing further our dependency on BPA from my perspective will help us manage curveballs recognizing that there is risk of local ownership and operation were eating it with leeberg right I mean and some of that is the um regulatory risk that has smacked us upside the head but that's a part of local ownership right so there's plenty of risk there and also it feels like we're managing that and that felt like that feels really big and so one of the things to investigate is are there bigger local ownership risks that we're not thinking about so some of the ones that have bitten Us in the past the senica

1:58:21 contract right leeberg and and Walterville are and and even Carmen Smith right we're running into things where we have costs there that we're trying to figure out how we manage are there other bigger local ownership risks that aren't yet in our conversation because to me that would be helpful for us to think about and I'm quite confident that if we're looking at purchase of future resources we're not going to duplicate what happened with Sena right there's enough memory in the institution right and and when we think about local ownership of new resources you know barowski is like don't buy small Hydra I mean we'll be thinking really hard long and hard before we do that again so I just think we've learned a lot we've got a really really well

1:59:07 experienced and bright team and I think um yeah so I'm I just want to reiterate my my inclination that we don't rely more on vpa than we already are we um the other thing I wanted to ask about is the conservation um opportunity my observation and I'm looking for you to correct me if I'm wrong is that we eweb are more able to leverage conservation uh in our territory than our peers are neighboring locally owned utilities that are primarily just Distributing EPA power is that is that a fact is that a function of the way we operate in our in our ownership or is it just a function of the interest of those Sports Jim you

1:59:54 wanted to respond but I'll I'll add on there's some Nuance on the BPA contract side that I do think influences it that said I I'm of the opinion that the bigger driver is a local values decision on that yeah e web has committed to serve our load growth with Energy Efficiency we were able to do so for 15 years yeah um we've got the size to hit the economies of scale to have Energy Efficiency staff that can go out and execute that you know I again there's some Nuance on the BP contract side that does influence that but I think the Big Driver is we've got the size and and willpower to go out and do it well from my perspective the the demand response and the conservation

2:00:39 potential are really significant pieces of slices of the pie that we aren't really talking about but they're there right that we have potential to execute on that we might have less potential to execute on if we just turn it all over to BPA to drive the perit bus um so those are a couple things that I think we should research I know we're already doing it conservation potential and then I'll give it to you um conservation and Dr potential and and price sensitivity right we've talked some about that like how much can we really expect to get in terms of responds potential you touched on one thing commissioner that I I I know that we we have to keep in the Forefront of our of are thinking when we think about

2:01:24 contracts we think we almost always go to the economic value of contracts um the contracts also have a stacking of benefits as well you know do do they facilitate for example conservation or even the alignment with our strategic work around demand response and um Peak mitigation and some of these things not only does that have an economic value under a contract it can also have environmental value it can have customer value from a relationship perspective there's there's all kinds of sort of a stacking of benefits that we can get I would say that just on the conservation question that you had there's a little bit of construct there as far as the

2:02:11 value of it but e made a conscious choice to invest in it is is really the driver we had we developed the capabilities the engineering capability to support it um and therefore and and we pay for it through Bonville but we typically do more than what we get reimbursed for so that was a conscious choice that that goes back actually several decades um that then got sort of codified in the fact that we were going to use that as a as a growth mitigation tool as well well and to add to that right that every time we do invest in conservation especially when it comes to homes you know the get weatherized we reduce the um the exposure of those

2:02:57 families to extreme temperatures right if we have a power outage they can last longer comfortably in their home if it's weatherized like there's a whole bunch of resilience benefit too to that conservation um that may or may not have been our driver but it seems to me as we're thinking about where we're going over the next 10 years is a huge piece of it right to the extent that we were having higher temperatures and we can buffer that by increasing the number of homes that are really well insulated um to the extent that we have that tool and we can lean in with it it feels like that's a huge opportunity that we could give up if we to BPA I'm gonna stop because um one of these times for S we're actually already

2:03:42 over time so can um can we just set uh sorry s take a thermometer no no no take a thermometer for how much appetite have for it's a 5 after we want go to quarter after 10 minutes left to your to your point to your point about um kind of the ability to do more conservation I mean that gets back to what you all were talking about earlier about you know we had the the big Heatwave and we asked our customers to mitigate their usage I mean we have an incentive to because we have some skin in the game they don't much if they are a part of that pulled situation so they don't have the

2:04:27 it seems to me they don't have that same kind of connect which is part of our values we do care about reducing our impact and and you know if we go out on the market then that's a purchase that's probably from a natural gas peaking so justed L on that so I agree thank you um when I think about the other uh like our our values and how we weigh those um you know when I think about safe that has to be the top of the line and I think a lot of our safe uh work comes from a regulatory perspective the the drivers of that are constantly the rules and the regulations driving that forward now we I'm sure go above and beyond but the you know

2:05:15 litigious nature of our culture is such that the regulations and you know that risk kind of drive that and that's that's that's a here situation and that's in a future situation but that one just is always going to be there um and be the the top of the list for me then when we start thinking about kind of affordability reliability and environment we start thinking about kind of that timeline for how those risks hit so affordability is here and now our people are feeling it we have the risk because we have to vote to um raise prices or not and how we handle that that's here and now at all times it impacts our customers immediately when I think about

2:06:01 reliability um and becau partly because we've done such a great job and also because there are rules and regulations that help make us a very stable organization um we only have the reliability concerns I think when there's a shock to the system instead of constant Rel liability challenges right so I think of that as as there's a potential risk out there and there's a cost associated with that potential risk and so when I think about the mitigation of that risk and balancing it I would say okay well if that risk costs a hundred $100 well or $100,000 then we also have to think of the chance

2:06:47 of hitting that risk and whatever that chance times the risk is the amount that we should pay to mitigate that risk but that that's a harder figure to to pull at and it's in the future um and then you know when we think about kind of the environmental and the community side of it again that when I think about the environmental side of it in the portfolio it's really about what's the greenhouse gas emissions um you know we'll set that the other other some of the other values aside there because I think you know we have environmental risk of uh you know Carmen and the the sink holes that we have but that's not the kind of environmental risk that I think of when I think of what we're trying to mitigate our portfolio I think more that's more of a

2:07:33 a safety risk a reliability risk um when I think of environment in terms of this I think of how is our portfolio making sure that we're doing our part to keep the community you know solid in the future in the face of climate change and so that one is and I think just naturally because we always push that down the road it's not here and now it's easier to push off and and everybody's doing that and that's why we're not dealing with it collectively as much as we should be so it's just interesting to look at those kind of different time Horizons and the kind of the chance of the risk versus the cost of the chance of that particular risk to think about how we

2:08:20 set up a portfolio that is as affordable as we can be but then you know not not overdo it on on these other sides and so it's that's how I think about it when you're asking about the values and how we weigh them that's what comes to mind for me yep thank you I mean there there certainly you touched on a lot of the things commissioner Carlson that um I think in some ways uh creat some even tensions because you're talking about the magnitude the likelihood the timing of which those risks can occur um and we have to balance that with with the fact that um you know going back to the

2:09:05 entrepreneurial analogy and if I were to start the utility today um I wouldn't be starting with a a base load of 300 megawatts um of which we're obligated to serve um but you would take into account the fact that Investments today have a longer um impact and so how would you start to weigh the immediacy of your decisions versus positioning the utility for the best thing long term and I think that that's um sort of the difference between the marginal cost and the invested cost or the amortised cost right there's there's a lot of trade-offs what I'm hearing is how you sort of weigh those values which is which is helpful I'm als Al hearing from

2:09:52 this group kind of The Importance of Being Nimble flexible looking at the fact that when we control it ourselves there's maybe larger upside to that as long as we can find ways to mitigate and handle the risks associated with that upside right and those risks do manifest themselves in pricing affordability uh sometimes even reliability we want to make sure that that we're doing this so that we can we can actually make changes to our distribution system system as well we have an aging distribution system if you're if you're going to go unlimited load everywhere you're you're going to create those reliability problems that that that you've been talking about and so um it seems like the board is

2:10:37 comfortable with kind of the alignment around these decisions and business models that align with the present strategy that we have which is create this flexibility look at mitigating and balancing the load and the supply side in a way that optimizes it it doesn't mean it's perfect it's trying to optimize those decisions um and it sounds like that's kind of been reinforced um obviously knowing that there's tradeoffs and when Brian shows you a bunch of numbers you're going to pick your favorite and we're gonna have to sort of recalculate this whole thing um but um that's that's what I'm hearing the value of diversity redundancy to your point nimbleness flexibility upside you know

2:11:26 those lend themselves toward more of a DIY utility as opposed to a we're gonna we're gonna in some ways be subject we already are somewhat subject to the to the grid certainly but to be more subject to the grid is probably not in our long-term best interest it it my summarization is accurate from I think you got it right John Brown might have it totally different but he's not in the room so we never know I'm sure I will hear from John Brown shortly after he listens to

2:12:12 this but um this this this was helpful um I hope it was informative to commissioners and some of these things we will continue and and hopefully you'll you'll see and you'll look for and some of the things that we we bring back for consideration that we're trying to navigate the the the values and all the values and the sort of the pros and cons from a business perspective and um you know appreciate Brian and his team for trying to keep us out of the numbers even though it's complex um but appreciate your thoughts I just want to comment on the effectiveness of this type of a

2:12:57 meeting and without a timer going and and a 30 second clock in front of us more back and forth it's something that I I think works well at least for me so I just want to thank you for allowing us to do this and if there's other complex issues of the Future Would these types of this is the last one we'll never have another complex issue ever that your well definitely um president McRae if you don't mind just thank Commissioners for taking some extra time to meet and discuss this complex issue the one of well will'll be many uh commissioner um so we're not done with

2:13:42 this and any kind of feedback during our one-on ones on the format appreciate it thank