In December 2009, EID sent Proposition 218 notices to customers. The notices explained proposed rate increases over five years, from 2010 through 2014. At public workshops and in meetings with community groups, we heard loud and clear that the proposed increases were too high. We listened and went back to the drawing board to see what could be done to lessen the impact on customers. “Plan B” was the result, and its commitments will help to avoid rate shock in the future.

Here’s how we’re doing with the commitments in Plan B. The following bulleted items have been completed.

• Reduce the impact of the rate increases on customers: Plan B decreased the amount of the 2010 rate increase from 35% to 18%.
• Negotiations with employees: On March 29, the board approved a new contract with the employees’ union that will save between $2.2 million and $2.8 million in personnel costs over the next 4 years. Savings are achieved through wage freezes, changes in the retiree pension and health benefits for new employees, and other actions.
• More dollars for hydropower: In April, we completed negotiations with buyers to improve the price we are paid for the hydropower we generate. Under a new contract, we project $6 million to $10 million in power revenue per year, much more than the $3.5 million estimated in the 2010 budget.
• Savings from debt restructure: In late February, we completed the process of restructuring some of our debt payments, leveling them off over the life of the debt. This conserves cash and reduces our payments an average of $4 million in each of the next 3 years.
• Defer capital improvement projects: The board adopted a new capital improvement schedule in late February that cuts the costs of the 5-year program by almost one half. This reduces the need for future borrowings and conserves cash.

On February 4, the board adopted a resolution that incorporated Plan B and contained other commitments to keep the district on sound financial footing into the future. Here’s how we’re doing with the commitments in the resolution. The final two bullets in bold green are currently underway.

• New rates: The resolution authorized the Plan B 18% rate increase for 2010, 15% in 2011, and 5% in 2012, 2013, and 2014. Only the first three years of rate increases were implemented. Separate board action—including a public hearing—is required before implementing increases for 2013 and 2014.
• At least $1 million more in cost cuts: The general manager completed a reorganization in late March for savings of $1.3 million. This action included laying off 14 employees and outsourcing the district’s laboratory testing functions to a private firm that will rent EID’s lab facility.
• Hold public hearings before borrowing in the future: This gives customers an opportunity to discuss the need for the borrowing, and it gives the district a chance to ask customers to support the borrowing—with any changes in rates fully explained and approved in advance.
• Internal financial control test: We have established a new internal financial control test. It requires that our projected annual revenues will cover annual operating expenses and debt payments, even if the district receives no new hook-up revenues. This will prevent the district from becoming overly reliant on new hook-up fees in the future.
• Special report on capital expenditures: This new staff report is intended to reconcile capital expenditures against bond proceeds, new hook-up revenues, rates, and other funding. Staff completed the report and presented it to the EID board of directors in August 2010.
• Cost-of-service study: This work has begun. In conjunction with a community-based ratepayer advisory committee, we are conducting a cost-of-service study, using an independent expert well versed in accepted standards. The results will be presented to the board by year’s end. [UNDERWAY]

These commitments will guide EID’s financial management well into the future. They are aimed at ensuring the district continues to deliver safe, reliable services in a financially responsible way.