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Summary of Finance Issues for EWEB Advisory Group from Becky Koble as of ~Ipr~l 2~, _.~:~~Z Issue Summary ¦ Potential Threats to City CII.T Revenue s The City receives over $7 million annually from EWEB in "contributions in lieu of taxes," or CILT, mostly associated with retail electricity sales. EWEB pays the City 6% on gross revenue from retail electricity salesl, 17% of net revenue from wholesale electricity salesZ, and 4% on gross revenue from Steam sales.3 Potential threats to this general fund revenue include: • EWEB Initiatives to Change/Reduce CILT Formulas Since 1997, Council has approved changing the formula used to calculate CILT on wholesale electric sales to enable EWEB to remain competitive in the restructured wholesale power market and has also reduced the steam CILT rate from 6% to 4% in 1999 to help maintain the long-term viability of the steam operation. As recently as late 1998, EWEB requested that the City exempt from CILT payments the Wind Power premium.. The concern with recently-granted changes in CILT formula is that the City NOT set a precedence for continually lowering the CILT rate agreements with EWEB, which result in a deterioration of the City's second-largest General Fund revenue source. ~:.AS art.aftl~eir:.:2i142biz~ et-x d~ 'ot..and:crate-~ettin %s .tt it~~>~1~eBoard ~rtie~: otential reductton~ €r;~I~~irne CELT`: a: ent~to::;thy::it.::as~~e::~~t~:::~~€~ls:::;Chat.xh~.. mi 1 ~~z>eva txate vrre `"c~~ :c~stsazi `tzaa~ti at~i~ `~tire:r~~eizac~r~ases:: ~ ~s g__ , . ,_..::.:::::g.::.:::::::::.:.::::::.::::::.:g..:::.: g.::::::::.:.:.::,::.:: ~~scu;ss~gn xs:~~~edu~ed ta.:canttz~~~~~~:~~y 7 w~rk.s~~s~v~t±~1ur q~~~x~tan~ltpg 1~.t~~.... the Boards iria° :cot~s~dera:c~~ :leaf tl~~erent to ct~~s .t~nebetn tmtfatt~ :~re:.:~t~~.t~Qits;with y .::.:..:....:...~.:.:::g..:....:......... the fit fox a lar~r+~T`ra~~,:anather route b~~n :~~~n :clar~fica~ti~~':~ri'~~u~' ..............X.................................... ~ ~eees~a < as.tfltbe.:basxs f~r::CT a ii;~z~s>ai~fih~rir~~t~Qx~hi a>~:';Chart~x..ti~'±a<S X25.27 • Competition and Deregulation ~ Retail wheeling -The general threat under SB 1149 is that outside electric suppliers will sell electricity inside Eugene, potentially resulting in the loss of CILT related to commodity sales. The challenge will be to work with EWEB to implement a mechanism whereby the City continues to collect an equivalent CILT/franchise fee from any marketer who is using the EWEB distribution system to deliver their commodity. ~ Specifically. Loss of Weyerhauser and Sierra Pines Contracts and CILT -Another potential CILT revenue threat is related to EWEB's potential loss of the service contract for Sierra Pine/Weyco. This is a contingent issue we've know about for years; but that contract comes up for renewal in 2004, and SUB/Springfield are likely to battle it out with 1 One exception is that, unti12009, the City receives only 3% on gross revenue inside the former LEC territory, per an agreement between the City, LEC, and EWEB. z Note that, prior to the 1997 wholesale MOU, the formula was 6% of gross revenue. The 6% of gross still applies to wholesale deals entered into prio to June 24, 1996. s Note that all CILT rates apply to sales inside and outside City limits. Page -5-