ML21118A044

Portland General Electric Co., Annual Financial Report for Year 2020

ML21118A044
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Issue date:	12/31/2019
From:	Portland General Electric Co
To:	Office of Nuclear Material Safety and Safeguards
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Table of Contents PAGE Board of Commissioners and Officers 1 Report of Independent Auditors 2-3 Management's Discussion and Analysis 4-23 Flnanclal Statements Statements of net position 24-25 Statements of revenues, expenses, and changes m net position 26-27 Statements of cash flows 28-30 Statements of fiduciary net position - OPES trust 31 Statements of 'changes in fiduciary net position - OPES trust 32 Notes to financial statements 33--85 Required supplementary lnfonnation Schedule of proportionate share of the net pension liability - pension 86 Schedule of contributions - pension 87 Schedule of employer contributions - OPES 88 Schedule of changes in total OPES liability and related ratios - OPES 89 Schedule of investment returns - OPES trust 90 Supplementary Information Electric system long-tenn bonded debt and interest payment requirements, including current portion (unaudited) 91-92 Water system long-tenn bonded debt and in,terest payment requirements, including current portion (unaudited) 93 Electric system analysis of certain restricted cash and investments for debt service (unaudited) 94 Water system analysis of certain restricted cash and investments for debt service (unaudited) 95 Sustainability accounting standards disclosures (unaudited) 96-97 Audit Comments Report of Independent Auditors on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Perfonned in Accordance with Oregon Minimum Audit Standards 98-99

Board of Commissioners Mr. Steve Mital Wards 1 & 8 President Ms Mindy Schlossberg. "At Large* Vice-President Mr.. John Brown Wards4&5 Member.

Ms. Sonya Carlson Wards 6 & 7 Member Mr. Dick Helgeson Wards 2 & 3 Member Officers Mr. Frank Lawson General Manager, Secretary Ms. Anne Kah Assistant Secretary Ms. Deborah Hart Treasurer Mr. Aaron Balmer Assistant Treasurer Commissi'oners' contact information may be found at www.eweb.org. Written communication may be se~t to the. attention of commissioners or officers at this address: *

• EWES 4200 Roosevelt Boulevard Eugene, OR 97402 1

@MOSS~DAMS Report of Independent Auditors The Board of Comm1SSioners Eugene Water & Electric Board Report on the Financial Statements We have audited the accompanying statements of net posrbon of the Electnc System, Water System and Combined Total Systems, and the statements of fidue1ary net position of the Retirement Benefits Trust (the Trust) of Eugene Water & Electnc Board (the "Board"), as of December 31, 2020 and 2019, and the related statements of revenues, expenses and changes in net position and cash flows of the Electnc System, Water System and Combined Total Systems for the years then ended, and the statements of changes In fiduaary net position of the Trust for the years then ended, and the related notes to the finane1al statements, which collectively comprise the Board's basic finane1al statements as listed in the table of contents Management's Responsibility for the Financial Statements Management Is responsible for the preparation and fair presentation of these financial statements in accordance wrth accounting principles generally accepted in the United States of America, this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsilnlity Our responsibility IS to express opinions on these financial statements based on our audrts We conducted our audits In accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contain~ In Government Auditing Standards, issued by the Comptroller General of the United States Those standards require that we plan and perform the audit to obtain reasonable assurance about whether, the financial statements *are free from rriaterial misstatement*

An audit Involves performing procedures to obtain audit eVJdence about the amounts and disclosures In the finanaal statements. The procedures selected depend on the auditor's judgment, including the assessment of the nsks of material misstatement of the finane1al statements, whether due to fraud or error. In making those risk assessments, the audrtor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audrt procedures that are appropnate iri the e1rcumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion An audit also includes evaluating the appropnateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the finanaal statements.

We behave that the audit evidence we have obtained is sufficient and appropriate to proVJde a basis for our audrt opinion.

Optnion In our opinion, the finanaal statements referred to above present fairly, in all material respects, the respective finanaai position of the Electric System, the Water System, Combined Total Systems and the Retirement Benefits-Trust of the Board as of December 31, 2020 and 2019, and the respective changes in financial position and cash flows for the Electnc System, the Water System, and Combined Total Systems, and changes in finanaal position for the Retirement Benefits Trust of the Board for the years then ended In accordance wrth accounting principles generally accepted In the United _States of Amenca.

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Other Matters :r Required Supplementr;rrY Information Accounting pnnclples generally accepted in the United_ States of Amenca require that the management's discussion and analysis, schedule of proportionate share of the net pension liab11ity, schedule of contnbl.11:Jons -

pension, schedule of employer contnb1,1tlons - post-employment health care benefits, schedule of changes in total OPEB liablllty and related rabos - post-employment healtti'care benefits, and the sch'edule of investment returns - post-employment health care benefits be presented to supplement the basic finanaal statements Such lnformabon, although not a part of the basic finanaaJ statements; 1s required by the Governmental Accounting

'Standards Board who considers rt to be an essential part of finanaaJ reporbng for placing the basic financtal statements In an appropriate operational, economic, or h1stoncal context. We h'ave applied certain limited procedures to the required supplementary information In accordance wrth auditing* standards generally accepted In the United States of Amenca, which c,ons1sted of inquines of mi=lnagement about the n:,ethods of prepanng the, Information and comparing the information for c6ns1Stency wrth management's responses to our Inquiries, the basic flnahaal statements, and other knowledge we obtained during our audrt of the basic flnanclal statements We do n9"1 express an'.op1nion or proVJde any assurance,'on the infprmabon because the limited procedures do not proVJde us wrth sufficient evidence to expr;ess an opinion or proyide any assurance.

Other Information Our au~rt was conducted for ttie purpose of forming opinions on the financial statements tha{collectiveiy*.

cqmpnse the Board's finanaal statements. The Electnc Syst81']1 and Water System, long-term bonded debt and, interest payment requirements (including current portion) schajules and the Electnc System and Water System analysls*of certain restricted cash and Investments for bo,nd se1V1ce schedules an_d sustainabllrty accounting standards disclosures ("supplementary informabon") are presented for purposes of additional analysis and are not.a required part of the finanaal state~ents. Such informabon has not been subjected to the auditing procedures applied in the audit of the financial statements, and accordingly, we do not express an opinion or Provide any ass~rance on rt ... 1 Other Reporting Required by Government Audi.ting Stwulards In accordance with Government Audmng Standards, we have also issued our report dated March 19, 2021 on our consideration of_ the District's internal control over fin an a al reporbng and on our tests of Its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters The purpose of that report 1s solely to descnbe the scope of our tesbng_ of internal control over financial reporting and compliance and the results of that tesbng, and not to proV1de an opinion on the effectrveriess of the District's internal control over financtal reporbng or on compliance That report IS an integral part of an audit performed in accordance with Government Audmng Standards in considenng the Dlstnct's internal control over finanaal reporbng and compliance . /

Report on Other Legal and Regulatory Requirements In accordance wrth the Minimum standards for Audits of Oregon Municipal CorporatJons, we have, issued our .

report dated March 19, 2021, on our cons1derabon of the Board's compliance wrth certain provisions of laWs arid regulabons, including the provisions of Oregon ReVJsed Statues as speafied in Oregon Administratrve Rules The purpose of that report 1s to describe the scope of our'tesbng of compliance and the results of that tesbng and not to proVJde an opinion.on compliance. * *

, For Moss Adams LLP Portland, Oregon March 19, 2021 r

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Eugene Water -& Electric Board Management's Discussion and Analysis The following discussion provides an overview of the financial results of the Eugene Water & Electnc Board (EWEB) for the years ended 2020, 2619, and 2018. This unaudited discussion is intended to be used in con1unct1on wrth the financial statements and note disclosures following this section.

EWEB is the largest publicly-owned el~c and water utility in Oregon. The City of Eugene (the City) commenced utility operations in 1908 with the purchase of a privately-owned water system. In 1911, upon completion of the City's first municipal hydroelectric power plant, the Crty organized the Eugene Water Board to operate the City's electric and wat~r utilities. The name of the Eugene Water Board was

• changed to the Eugene Water & Electric Board in 1949,*

EWEB is chartered by the City and supplies electnc and water service within the city limits of Eugene and to certain areas outside the city limi~ EWEB operat~ as a primary government, and is not coilside~ a component unit of the Crty. EWEB is governed by a fiv~ member Board of Commissioners who are ,

elected by voters residing in the City. The Board of Commissioners has authority to set pnces for water and electric services. Pnces are set based on the cost of service delivery, including operating, capital, and debt service expenses.

The Statements of Net Position report assets, deferred outflows, liabilities, d~ferred inflows and net position as of the end of the financial year, December 31. Tlie Statements of Revenues, Expenses and

• Changes in Net Position report revenues and expenses occurring durin*g the financial year. The Statements of Cash Flows report cash from operating act1vrt1es, mvesimg activities, non-capital fmancmg activities as well as.capital and related financing ~ctivitles.

El,ectric System .

The El~c System supplies service to 95,000 residential, commercial, and industrial customers within

- the City of Eugene and areas along the McKenzie River between the cities of Walterv1lle and Vida where two of,EWEB's hydro-power plants are.located 1he total service area covers 236 square miles Th~

Electric System owns and operates approximately 1,100 circuit miles:of overhead and underground I .

distribution Imes, 129 circuit mil~ of transrry1ss1on lines, and 38 distnbution substations: Power delivered to ~ustomers is supplied by aonneville Power Administration' (BPA} contracts, EWES-owned generation resources, other contracted resources, and purchases from the wholesale energy markets. EWEB's power supply sources are primarily hydro-power, but also includes wind, biomass, steam, and solar.

2020 MWh Hydrerpower 2,583,553 62%.

Wind 186,900 4%

St0;c1m 231,,357 6%

Biomass _121,193 3%

qther 111arket purchases 1,047,442 25%

4,170,445 100%

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)

Eugene Water & Electric Board Management's Discussion and Analysis

\ )

2020 MWh EWE~:B-owned generation 530,943 13%

Contracted generation ' ~.592,060 62%

Market purchases ' . 1,047,442 25%

\

4,170,445 ~100%

Net Operating Revenue Electric System net operating revenue for 2020 increased compared to 2019. This is d9e in part to increased generation from EWES owned resources and BPA Slice product. In 2019, higher power market prices 'in the first '

quarter influenced .the rise in both revenues and expenses -

compared to prior years. Also in 2019, a change in accounting for *certain wholesale market transactions presented figures at gross amounts whereas 2018 netted s1m1lar transaction a!11ounts during the year. The change did not influence net operating revenue.

2020 was marked I by COVID-19 and wildfires. Financial impacts from COVID-19 were most apparent

• in the revenue collection cycle an.d in reducec;I sales among retail customer classes. Less noticeable meas_ures taken.on the expense side, include curtailed business travel !!nd training following social distancing guidelin~. .

• Of"E:gon wildfires in th~. fafl of 2020 severely damaged areas of the service terntory along the McKenzie River and a separate fire damaged transmission lines critical to the Stone Creek ProJect. Restoratipn.

efforts totaled nearly $5 *million in' 2020 with work continuing into 2021. FEMA public assistance is . ;

expectec;I to reimburse 75% of eligible restoration costs. A snowstorm in February 2019 caused severe outages in the region. Restoration efforts totaled over $4 million. FEMA reimbursemeht of 75% of eligible restoration costs were received in 2020. 2018 did not have sev,ere events requiring extel"]sive restoration.

Electnc System - Net Operating Revenue Increase Increase (Decrease) (Decrease)

(In thousands) 2020 2019 2018 , 2020/2019 2020/2018 Operating revenue $ 243,900 $ 263,339 $ .248,973 $ (19,439) $ (5,073)

Operating expense (241,732) (262,654) (232,694) .

• 20,922 ~9,038)

,_,~

Net operating revenue $ 2,168 $ 685 $ 16,279 $ 1,483 $ (14,111)

Operating* Revenue Operating revenue varies from year to_year based on custom.er load, generation 1:!Vailable for sale, and corresponding power market prices. Residential customers make up approximately 90% of EWEB's customer base and approximately 50% of customer revenue: H1s.torically, sales to residential-customers are variable based on weather trends. Loads peak in the winter especially with extreme cold events as opposed to summer heat Weather for 2020 was slightly milder than average 2019 had colderiwinter temperatures especially early in the year. .

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Eugene Water & Electric Board Management's Discussion and Analysis Recent residential price adJustments have been as follows:

2020 No change 2019 No change 2018 No.change Commercial and industnal accounts make up approximately 10% of.the EWEB customer base, and approximately 50% of customer revenue Commercial and industrial sales are more reactive to economic

,conditions rather than weather Measures taken to stop the spread of COVID-19 restricted businesses ability to operate to varying degrees throughout much of 2020. Reduced commercial and industrial sales in 2020 compared to_2019 were also impacted by the closure of a large industrial customer in May 2020 The closure was announced prior to COVID-19 impacts. 2019 commercial and industrial sales were in line with expectations and levEll compared to prior years.

Bectnc System - Sales to Customers Increase Increase (Decrease) (Decrease)

(m thousands) 2020 2019 2018 2020/2019 2020/2018 ",

Resldentlal , $ 99,374 $ 100;560 $ 97,673 $ (1,186) $ 1,701 Commercial and 1ndustnal 92,941 100,605 102,214 Q.664) (9,273)

$ 192,315 $ 201,165 $ 199,887 $ (8,850) $. (7,572)

Bectnc System - Sales to Customers mWh Increase Increase (Decrease) (Decrease) 2020 2019 2018 2020/201_9

• 2020/2018 Residential 929,317 938,625 914,754 (9,308) 14,563 Commercial and 1ndustnal 1,331,978 1,429,042 1,427,882 (97,064) (95,904)

,2,261,295 2,367,667 2,342,636 (106,372) - (81,341)

EWEB sold power supply in excess of load into the wholesale markets The Electric System has an active hedging. program to manage price risk associated with wholesale power sales. 2020prices were lower due to increased hydro-electric generation in the region. Several factors contnbuted to higher wholesale pri~s in 2019, including reduced supply due to unfavorable hydro conditions ir:i the region, low renewable resources availability, a'nd limited natural gas supply.

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• Eugene Water & Electric Board

.Management's Discussion and Analysis 2020 2019 2018 Retail sales $ 192,315,036 $ 201,165,722 $ . 199,887,212 Retall volume , 2,261,295. 2,367,667 2,342,636 Average pnce per m'Ml $ ,85.05 $ 84.96 $ 85.33

==

1/v'holesale sales $ 43,909,185 $ 5{885,415 $ 41,201,400 Wlolesale volume 1,854,372' 1,588,379 * .1,477,941 Average pnce per m\/oJh $ 23.68 -$ 32 67 $ 27 88

==

Operating Expenses Electric System operating expenses include purchased power and wheeling. Prices are set for SPA and contracted resources by their respective contracts, which may esC?late over time. Market purchases are made at times when resources aren't adequate for customer load or to support the EWES hedging 1

, program* and are subj~ct to price variabilfy to the extent those sales are not fully hedged. Purchased power costs decreased in 2020 *compared to 2019 due to lower market prices. Purchased power volume was comparable from 2019 to 2020. An accounting change for contracted power_ trades occurred in 2019.

Relative to 2018, gross amounts are recorded for. offsetting purchase and sale transactions for the same delivery period and the same location, rather than net amounts presented in. 2018. The Foote Creek wir:id generation project in Wyoming was sold in July 2019, and as a result wheeling costs decreased m 2019 and 2020.

Transmission and disfribution expenses were higher in 2020 and 2019 due to restoration efforts following September 2020 wildfires and a severe snowstorm in February 2019.

The Electric System's allocation of shared costs with the Water System was updated in 2019 tp 80% from 82%. The 2% decrease contributed to declines in customer accounting and administrative and general in 2019. In 2020,'the COVID-19 pandemic caused*many businesses to reduce operations or close and led to increased costs for collections and.customer assistance. rncreases in conservation expense we~ froni rebate programs in energy conservation as well as load growth incentives to support business development. '

In 2019; depreciation costs increased. EVVES received a forty-year operating license for the Carmen-

~smith Hydroelectric Project. Preliminary costs for implementing the liC:Emse were placed into service and are being amortized over the term of the license. Depreciation expense decreased m 2020 as

.depreciation associated to the Leaburg hydroelectric project was not recognized In 2020, the L~urg

_hydroelectric project was moved to property held for future use. FERG ordered the project.to dewater the canal which forced the generation plant offlme.

) '

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Eugene Water & Electric Board Management's Discussion and Analysis Electnc System - O~ratl~ Expenses Increase Increase (Decrease) (Decrease)

Qn thousands) 2020 2019 2018 2020/2019 2020/2018 Purchased power $ 134,594 $ 153,922 $ 125,272 _ $ (19,328) $ 9,322 System control 4,637 4,269 4,383 368 254 Wieellng 11,248 13.)07 13,312 (1,859) (2,064)

Steam and hydraulic generation , 12,142 12,277 12,824 (135) (682)

Transmission and d1stnbutJon 24,510 24,526 22,585 (16) 1,925 Customer accounting 8,242 7,668 7,990 574 252 Conservation expenses 4,014 3,633 3,299 ~- 381 715 Admmlstrative and general 20,751 20,467 21,892 284 (1,141)

Depreaation on utilrty plaht 21,594 22,785 21,137 {1,191} 457 Operating expenses .$ 241,732 $' 262,654 $ 232,694 $ ' {20,922) .$ 9,038 Other Non-operating Revenue, Expense, and Capltal Contributions For the Electric System, non-operating revenue VJas primarily miscellaneous revenue from sources unrelated to core business functions, including investment earnings, rental revenue and claims revenue.

In 2020, non-operating revenue included re_cognrtion of a $3.1 million public assistance grant from FEMA tied to the 2019 snowstorm. Additionally, earnings from equity investments, WGA and Harvest Wind, were especially strong, $3.2 million in 2020. as compared to $2.2 million in 2019. In 2019, non-operating ,

revenue increased compared to 2018 primarily due to settlement of a claim for damages incurred on a hydro-generating project. Non-operating .expense is pnmarily interest expense for long-term debt and other revenue deductions including taxes and losses on the disposition of property. A bond issuance in 2020 refunded prior debt and reduced associated interest expense compared to 2019 2019 non-operating expenses were lower than- in 2018. Non-operating expenses included a $4.1 million accounting loss on the disposition of surplus riverfront property iri 2018. -

Caprtal contnbutions represent amounts customers contribute to construct assets that become par:t of plant in service for the Electric-Utility. Capital contributions can-fluctuate due to the timing of customer-

-driven work.

{m thousands) Electric System - Non-oeeratlng Revenue and Expense '

Increase Increase (Decrease) (Decrease) 2020 2019 2018 2020/2019 2020/2018 Non-operating revenue $ 11,960 $ 10,273 $ 8,292 $ 1,687 $ - 3,668 Non-operating expense (7,637) . (8,723) (12,056) 1,086 4,419 Caprtal contnbutlons 2,806 2,606 4,274 200 {1,468}

Total $ 7,129 $ 4,156 $ 510 $ 2,973 - $ 6,619

-speclal Item In 2019, the Electric System made a $16.7 million deposit to an Oregon Public Employee Retirement System (OPERS) side-account. It r~duced EWEB's employer contribution rate as of November 1, 2019, and will' provide ongoing savings. In addition, this deposit received a $4._2 million match from the state's Employer Incentive Fund. There were no special items in 2020.

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Eugene Water & Electric Board Management's Discussion and Analysis Total Assets and Deferred Outflows of Resources . . ( I*

Total assets for the Electric System include utility plant net of deprec1at1on, current assets representing cash and investments, accounts receivable, matenals inventory, pre-paid expenses, long term investments, and non-current assets such as Jointly-owned cqmpanies a~unted for under the equity method for investments.

Current assets are influenced by cash balances, investments having maturities one year or less, and changes in balances of customer and other receivables at year end. Investment activity in 2020 in-creased the amount of securities with maturities beyond one year and shifted investment balances to_ the non-current classification. Receivable balances w~re steady from 2018 to 2019 and declined ,in 2020, despite challenges in the revenue collection cycle due fo COVl[?-19. EWEB voluntarily suspended disconnects for 5 months during the spring and summer in response to increases in unemployment and local economic difficulty. Customers were provided with various forms of assistance, including zero or,fow interest loans. Overall, the receivabl.e balance declined year over year as a result of warmer temperatures in November and December 2020 as compared to 2019. In 2019, current assets decreased compared to 2018 due to a payment of $16. 7 million to OPE RS.

A bond issuance in 2020 increased restricted reserves for future construction projects by $46 million.

Investment activity in 2020 increased the amount of securities with a maturity beyond one year In 2019, the investments classrfled as non-current decreased compared to 2018 due in part to overall portfolio red~ctions. Reduced purchase activity for investment securities increased amounts classified as current, and current funds were used for payments to OPERS. Within preliminary investigations, $23.5 million of preliminary costs associated with the Carmen-Smith operating license moved to plant in service during 2019, and an additional $7.8 million was moved to construction work in progress in 2020. The regulatory asset for pension debits declined by $17.1 million in 2019 as costs- were recognized in the current year through payroll and special one-time cohtribut1ons. In 2020, regulatory assets for pension debits.

increased-as recognized costs were less than the actuarily determined expense amount. EWEB has elected to use regulatory accounting for pension and OPEB reporting and recognizes expenses as contributions are paid.

Deferred outflows of resources represent transactions occurring in Mure penods and are not classified as assets. 2020 deferred outflows of resources decreased di.JI;) to. a reduction of pension contributions after the measurement date for actuarial reporting. n,ey had increased in 2019 with $20.9 million paid _under the PERS Employer Incentive Fund program where PERS offered a 25% match to employer contributions.

• f' Electric System - Assets and Deferred Outflows -

Increase Increase (Decrease) (Decrease)

(in thousandsJ 2020 2019 2018 ,, 20201201g.. 2020/2018 Net utility plant $ 429,157 $ 407,800 $ 367,758 $ 21,357 $ 61,399 ,

Current assets 147,456 153,657 170,448 (6,201) (22,992)

No~rrent assets 125,995 87,369 150,381 38,626 (24,386)

Deferred outflows of resources 43,938 52,351 45,530 (8,413) ~1,592)

Total assets and deferred outflows of resources $ 746,546 $ 701,177 $ 734,117 $ 45,369 _ $ 12,429 9

Eugene Water & _Electric Board Management's Discussion and Analysis Capital Asset Activity Capital projects for the Electric System are categorized as Compulsory, Strategic, or Risk Based Elective lmproveme.nts.

)

. Compulsory war!< 1s mandatory to ensure EWEB rrieets minimum service, regulatory, and safety __

requirements. Compulsory work develops from both !nter:nal and.external drivers. There is minimal opportunity to change the compulsory portion of capital plans due to legal and policy requirements.

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Strategic'projects and programs are derived from strategic direction and are typically multiyear and multimillion-dollar efforts. Strategic improvements are moderately flexible in nature and can be balanced with efforts to prioritize compulsory work or other drivers, such as afforclabil_ity or operational' improvements Risk Based Improvements are elective in th'at staff can plan and schedule them to balance within the boundaries of the capital plans and the long-term financial plans as well as staffing and resources available. This work 1s driven* by the goal to maintain system condition and Age of Asset metrics in order to maintain reliability. Reducing the level of work in this area will ultimately result in the increase of compulsory work and reduction in reliability.

Ongoing caprtal improvements included:

Electric System - Caprtal Projects 2020 2019 2018 Transmission & Distribution Transmission & Distnbution Transmission & Distribution Generation Generation Generation Information Technology Information Technology Information Technology Substations & Telecom Substations & Telecom Substations & Telecom

• Buildings & Lan'd Transportation Equipment AMI AMI AMI Downtown Network Downtown Network Downtown Network Consolidation of Operations Holden Creek Substation Holden Creek Substation Customer Experience Consolidation of Operations Leaburg Roll Gate Rebuild Improvement Project Distribution Resiliency Distribution Resiliency Upgrades Upgrades Carmen Smith License Camien Smith License Carmen Smrth License Implementation fmplementatfon - - Implementation

• In 2P20, the Leaburg hydroelectric project was moved from plant m service to property held for M'ure use.

FERG ordered the project to dewater the canal which forced the generation plant offline. The FERG ruling

• was due to increased seepage along the canal indicative of unstable soils and was deemed a public safety risk. lniti~I canal soil studies conc_tuaed in 2020 and the Board is discussing possible remediation of the canal for storm water conveyance or restoration to power generation. * -

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Eugene Water & Electric Bo~rd Management's Discussion and Analysis In 2019, FERC approved the license for the Carmen-Smith hydroelectric project and associated preliminary investigation costs of $23.5 million were moved to plant in service.

Electnc System - Capltal Assets Increase Increase (Decrease) (Decrease)

~ thousands) 2020 2019 2018 2020/2019 2020/2018 Plant 1n service $ 803,732 ,$ 816,318 $ 786,987 $ (12,586) $ 16,745 Accumulated depreaatlon (451,027) (446,919) (436,984) (4,108) (14,043)

Property for future use 37,050 1,345 783 35,705 36,267 Construction work in progress 39,402 37,056 1'6,972 2,346 22,430 Net utility plant $ 429,157 $ 407,800 $ .367,758 $ 21,357 $ 61,399 More detailed information about plant activity can be found in the note disclosures to the financial -*

statements, Note 3 - Utility Plant. .

Debt Activity The Electric System issues revenue bonds or notes payable to fund certain capital projects. During 2020, the Electric System made scheduled debt service payments and issued $39.2 million in revenue bonds for capital improvements. In addition, $16.8 million in revenue refunding bonds were issued with proceeds used to pay issuance costs and refund bonds previously issued in 2012. Dunng 2019, the Electric System made scheduled debt service payments which decreased outstanding dybt compared-to 2018. For more detailed information, see Note 12 - Long-Term Debt Electric System bonds are rated Aa2. by Moody's lnvestorS Service, AA- by $tandard and Poor's Rating Services, and AA- by Fitch Ratings Electnc System - Debt Activity

' I Increase Increase *

(Decrea~e) (Decrease)

(in thousands) 2020 2019 2018 . 2020/2019 2020/2018 Total outstanding debt $ 235,116 $ 198,672 $ 209,279 $ 36,444 . $ 25,837

=

Liabilities and Deferred Inflows of Resources Current liabilities are primanly accounts payable, accrued payroll, and the current portion of long-term debt'. Current liabilities' decreased slightly in 2020, as a result of. decreases in the current portion of long-term debt due within one year. Accounts payable also declined as a result of normal fluctuations. Total liabilities increased in 2020 as a result of the bond issuance Current liabilities decreased in 2019 due to fluctuation~ in accounts payable and accrued payroll. Total liabilities were influenced by decreases in the net pension liability*and net OPEB liability, as well as regular debt service payments mentioned above.

Increases in deferred inflows of resources for both 2020 and 2019 were primarily due to changes in the employer proportion related to EWEB's PERS net pension liability.

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Eugene Water & J=lectric Board N!anagement's Discussion and Analysis Electnc System - Llab1lrtles and Deferred Inflows Increase Increase (Decrease) (Decrease)

(m thousands) 2020 2019 2018 2020/2019 2020/2018 Current l1abllrtles $ 36,491 $ 38,378 $ 41,051 $ (1,887) $ (4,560)

Non-current liab1lrtJes 298,498 263,083 295,130 35,415 3,368 Deferred inflows of resources 24,018 21,277 11,811 2,741 12,207 Total liabdrtles and deferred lnflOYJS of resources $ 359,007 $ 322,738 $ 347,992 $ 36,269 $ 11,015 Net Position Th,e net investment in capital assets component of net position, which reflects the value of capital assets net of the debt incurred to acquire those assets, has increased each year since 2018. Capital assets have been added each year, while corresponding debt levels associated to capital improvements have declined.

Restricted net position 1s subject to external legal restriction*s on its use and is primarily representative of

.reserves for payments of debt service, customer donations, and amounts deposited.in escrow accounts relating to the Harvest Wind Project. Restricted net position decreased in 2020 as a result of lower debt service reserve requirements as part of the refunding of a portion of the 2012 bond series. The 2020 bond series d1d*not have a debt service reserve requirement. Restricted net position increased in 2019 due to investment income on the debt service reserve and donations to the custo,mer care program.

Unrestricted net position represents the accumulation of net assets that are not capital assets, or ~ubject to external restrictions on their use. In 2020, unrestricted net position remained flat from the prior year with increases from operations and decreases with amounts held as preliminary investigations moving to net investment in capital assets. In 2019 unrestricted net position decreased due to payments made from existing cash reserves for unfunded liabilities related to retirement benefits.

Overall net position h~s increased by 0.4% since the start of 2019. The financial position of the Electric System has remained steady. Operating actMty remained positive despite a severe snow event in 2019 and unprecedented wildfires and a pand~mic in 2020. In addrt1on, re5lrve use was focused on strategic issues, such as lowering future employer contributions for pensions.

Bectnc System - Net Position Increase Increase (Decrease) (Decrease)

(m thousands) 2020 2019 2018 2020/2019 2020/2018 Net investment m capital assets $ 251,254 $ 241,620 $ 206,740 $ 9,634 $ 44,514 Restricted 6,~ 6,552 6,122 (118) 312 Unrestncted 129,851 130,267 173,264 (416) (43,413)

Total net posll:Jon $ 387,539 $ 378,439 $ 386,126 $ 9,100 $ . 1,413 12

.Eugene Water & Electric Board

.Management's Discussion and Analysis Reserves and lnvesbnent Activity The Board of Commissioners has established Electric System d~ignated reserve accounts for specific -

purposes including funding routine capital activjty, significant one-tim~ expenses, and to protect customers from the effects of large fluctuations in power prices, generation volume and counterparty risk.

The Board has authority to re-evaluate and redirect designated and unrestricted reserves based on current priorities.

In 2020, the Board maintained reserves above target and increased reserves held in working cash. In 2019, the Board used $16.7-million of reserves to participate in an Employer lncei:itive Fund program with PERS. State, contributed flinds matched 25%. of EWES contributio17s and reduced EWEB's employer contribution rate starting on November 1, 2019. E.ach year the ~oard reviews reserves in excess of target for the highest and best use of cash.

(m thousands) Electnc System - Reserve Balances Target 2020 Working cash $ 36,000 $ 41,535 I

Des19nated funds Operating reserve 4,000 4,083 Self-Insurance reserve 1,720 1,774 ,

Power reserve 17,000 17'.,000 Capital improvement reserve 22,000 23,900 Rate stabilization fund 5,000 24,489 Pension and post rebrement rrye<11cal fund 974 Desigl)ated funds total $ 49,n0 $ 72,200 The Electric System also maintained restricted reserves for purposes mcludmg the payment of pnnc1pal .

and interest on debt, and proceeds from bond issuance restricted for use on capital projects.

Working cash and short-tenn investments are not held in reserve and were available for the day-to-day operations of the utility. They were classified as unrestricted.

All Electric System working cash and reserves were_ held in depository accounts, the Local Government Investment Pool, or in high quality securities. Investment strategy focused on the following in prionty order: preserving princ1paJ, liquidity of funds, and investment retur_ns.

Water System The source of supply for the Water System is the McKenzie River, with headwaters in the Cascade Range east of Eugene. Intake and PL!rification of water occurs at the Hayden Bridge Water. Filtration Plant In addition to the filtration plant, the Water System owns and operates 22 reservoirs, 27 pymp stations,-and approximately 800 miles of transmission and distribution mains. The Water System provides water service to 55,000 residential, _commercial, and industrial customers within the EWEB service territory, and also supplies wholesale water to the River Road and Santa Clara water districts outside

. Eugene. In addition, EWEB. has surplus water contracts with the City of Veneta and the Willamette Water Company.

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Eugene Water & Electric Board Management's Discussion and* Analysis Net Operating Revenue 2020 water net operating revenue decreased compared to 2019 and 2018, primarily due to increased operating expenses.

Water System - Net OperabnliJ Revenue Increase Increase (Decrease) (Decrease)

~in thousands} 2020 2019 2018 2020/2019 2020/2018 Operating revenue $ 38,881 $ 38,092 $ 39,393 $ 789 $ (51~)

Operabng expense ~29,351} (26,044) ~24,792} ~3,30~ ~4,559}

Net operabng revenue $ 9,530 $ 12,048 $ 14,601 $ ~2,518) $ ~5,071)

Operating Revenue Consumption of water varies depending on the season and the ~eather patterns of a particular year with peak consumption in the summer months. During 2020, COVID-19 social distancing measures required many commercial facilities to reduce their typical operations. In addition, many employers transitioned to a remote working environment with st;:iff working from home where possible. For 2020, overall consumption remained stable with prior years, with a shift seen from commercial to residential consumption Lower consumption in 2019 as compared to 2018, was due to an earlier start to fall precipitation which shortened the irrigation season. In 2013, the Board approved a price increase designed to accumulate funds for a Willamette Treatment Plant and a 2018 pnce decrease suspended the collection of those reserve funds while the Board refines the capacity and timing of the project.

Residential accounts make up 90% of the customer base of the Water*system, and approximately 60% of retail consumption Similar to the Electric system, residential consumption is more responsive to weather conditions than commercial ~nd industrial. Water sales revenue for retail customers was higher in_ 2020 and correlated to effects from the COVID-19 pandemic. State and county regulations designed to mitigate the spread of the coronavirus increased the am*ount of time people spent at home.

Recent residential price adJustments have been as follows:

2020 No change 2019 No change 2018 (effective February 2018) 4.5% decrease Commerci~I and industrial accounts make up 10% of the Water System's customer base, and approximately 40% of retail sales 2020 declines in commercial and industrial sales we_re seen as a symptom of COVID-19 economic difficulty and social distancing measures. 2019 commercial and industrial sales were 3.6% lower than 2018 due to corresponding drops in consumption.

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\

• Eugene Water & Electric Board _

Management's Discussion and Analysis Water System - Sales to Customers Increase* Increase I (Dea-ease) (Decrease)

(m thousands) 2020 2019 \ 2018 2020/2019 . 2020/2018

• Resldenf:Jal * $ 20,508 $ 19,492 $ 20,419. $ 1,016 $, 89 Commercial and mdusinal 14,053 14,768 15,315 {715) *;1,262)

,;a

$' 34,561 . $ 34,260 $ 35,734 $ 301 $ *'(1,173)

Water '

$ystem - Sales to Customers Kaai Increase 1, Ina-ease (Decrease). . (Decrease)

I 2020 2019 2018 2020/2019 2020/2018 Res1denf:JaJ 4,055 3,810 4,040 245 15 Commercial and lndustnal 3,213 3,487' 3,604 (274) ~391) 7,268 7,'297 7,644 ~29) (376)

. . I . l Wholesale sales .include s~les to River Road and San!a CJara Water Districts, the City of Veneta, and the Willamette Water Company.

2020 2019 2018 Retail sales $ 34,560,768 $ 34,259,654 $ 35,733,979.

Retail volume 7,268,259 7,297,482 7,643,762 I

"Average pnce per Kgal $ 4.76 $ 4 69 $ . 4.67 Wholesale sales $ 2,231,76q $ 2,121,747 $ 2,267,375 Wholesale volume 699,650 687,435 735,292 Average pnce per Kgal $ 3.19 $_ 3 09 $ 3 08 Operating Expenses

.

• I The Water System pumps and purifies all water sold and does not have wholesale purchase expense.

The largest production expenses are purification and transmi~sion and distli:>ution of water. Other significant' expenses are administrative and general, and depreciation. During 2020, water operating expenses increased 13% compared to 2019 and increased'18%.compared to 2018. Increases in source of supply were dnven by response efforts to the Holiday Farm Fire which destroyed areas of the McKenzie River watershed. . Increased contractor

. costs for watershed restoration work ' went toward erosion control and hazardous material stabilization. Transm1ss1on and distribution *costs were higher m 2020 due to contract work for patching and paving-and increased labor costs in operating expense with less internal labor qllocated to capital projects. *-

I

• I ...

The Water System's allocation of shared costs wrth the Electnc System was*updated in 2019 to 20% from 18%. The 2% increase contributed to increases in customer accounting, conservation expense and administrative and general* lh 2019, tran:;mission and distribution costs.were 4% lower compared to 2018 due to reduced maintenance costs. * * *

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, Eugene Water & Electric Board Management's Discussion and Analysis Water System - Operating Expenses Increase Increase I '

(Dea-ease) (Decrease)

(m thousands) 2020 2019 2018 2020/2019 2020/2018 Transm1Ss1on and distribution $ 7,269 ,$ S,840 $ 6,082 $ 1,429 $ 1,187 Sources of supply, pumping, and punficatlon 7,671 6,796 6,876 875 795 Customer accounting 1,975 1,780 1,364 195 611 Cooservatlon expenses 520 492 344 28 176 Adm1mstratrve and general 5,111 4,491 3,906 620 1,205 Deprec1atlon on ubirty plant 6,805 6,645 6,220 160 585 Operating expenses $ 29,351 $ 26,044 $ 24,792 $ 3,307 $ 4,559

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Oth~r Non-operating Revenue,* Expe~se, Capltal Contributions, and System Development Cllarges

,Non--0peratmg revenue of the Water System consists primanly of miscellaneous revenue not associated with core business* activities: as well as interest and investment revenue. In 2020, investment earnings declined in conjunction wrth the sustained low interest rate environment. 2019 illvestment ea*mings increased $277,000 compared to 2018 as interest rates had risen ~rthin the investment portfolio for that window of time Non--0peratmg expense is pnmanly interest expense for long-term debt and intercompany debt A bond issuance in 2020 secured funds for future construction projects, refunded pnor debt, and reduced a

aggregate debt service by $3.7 million Increased interest expense is function of the new construction funds and drove the increase in non-operating expense-. 2019 non--0peratmg expenses were lower than in 2018 as a result of scheduled debt service payments and corresponding reduced interest amounts Capital contributions are related to customer work to extend 9r relocate water mains and services. During 2019, act1vi1¥ increased and-included contributed plant assets associated wrth roadwork projects and subdiv1s1ons.

Qn thousands) Water System - Nrn'HleeratJ~ Revenue and Expense Increase Increase (Decrease) (Decrease)*

2020 2019 2018 2020/2019 : 2020/2018 Noi:,-operatJ~ revenue $ 762 $ 1,486 $ 1,744 $ (724) $ (982)

NOTHJperatJng expense - (2,307) (2,250) (2,274) (33) (9)

Capital contrtbutJ ons 2,354 4,675 3,071 (2,321) Q:17)

)

Total $ 809 $ 3,911 $ 2,541 $ (3,078) $ (1,708)

Speclal Items ,

In 2019, the Water_ System made a $5.3 million deposit to *an OPE.RS side-account It reduced EWEB's employer* contribution *rate as of November 1, 2019, and will provide ongoing savings In addition, this deposit received a $1.3 million match from the state's Employer Incentive Fun*d. There were no special items in 2020.

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Eugene Water & Electric Board Management's Discussion and Analysis Total Assets and Deferred Outflows of Resources Total assets for the Water System include utility plant, net of depreciation, current assets representing cal:!!l and short-term investments, a~unts receivable, matenals inventory, and ,pre-paid expenses, as well as non-current assets such as long-term investments.

In 2020, current ~ssets increased compared to 2019. Stable, strong operations increased unrestricted cash and investments and the bond issuance increased.construction* reserves

• In 2019, current ass~ts increased compared to 2018. The increase from 2018 to 201$ is due in part to continuecfstrong operations and.a reduction in purchase activity for investments Capital proJect activity

' * ~ ' ' l '

• also*reduced cash reserves from bond proceeds:

• Increased investment activity in 20_20 shifted investment balances to the non-current classification.

Portions of the proceeds from the new bond 1ssuaQce and unrestricted investments are held among securities with .a maturity beyond one year. ~

In 2019, the investments classified as non-current decreased compared to 2018 due in part to the use of ~

funds for OPERS. Fluctuations based-on actuarial assumptions in other regulatory assets related to ,

pensions and OPEB also contnbute to the change in amounts classified as non-current assets each year.

Deferred outflows of resources represent transactions occurring in future periods and are no_t classified as assets. 2020 deferred outflows of resources decreased due to a reducti9n of pension contri~utions after the measurement date for actuarial*reporting. They h,ad increased in 2019 with $6.6 million paid under the PERS Employer Incentive Fund _program where PERS offered a 25% match to employer contributions.

Water System - Assets and Deferred Outflows Increase, Increase (Decrease) (Decrease)

(m thousands) 2020 2019 2018 2020/2019 2020/2018 Net utlllty pl11nt $ 196,316 $ 185,692 $ 175,611 $ 10,624 $ 20,705 Current assets 42,610 37;989 36,520 4,621 6,090 Non-current assets 34,094 18,617 21,919 15,477 12,175 Deferred outflows of resources 13,201 15,201 9,648 (2,000) 3,553 L

Total assets and deferred outflows qf resources $ 286,221 $ 257,499 $ 243,698 $ 28,722 $' 42,523 Capital Asset Activity

• capital projects for the Water.System are categorized as Compulsory, Strategic, or Risk.Based lmp1"9vements.

Compulsory work is mandatory to ensure E_WEB meet$ minimum service, regulatory, and safety :

requirements. Compulsory work develops from both internal and external drivers. There is minimal opportunity to change the compulsory portion of capital plans due to legal and policy requirements.

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Eugene Water & Electric Board Management's Discussion and Analysis I '

Strategic projects and programs are derived from strategic direction and are typically multiyear and multimillion-dollar efforts. Strategic improvements are moderately flexible in nature and can be balanced with efforts to prioritize compulsory work or other drivers, such as affordability or operational improvements.

Risk Based Improvements are elective in that staff can plan and schedule them to balance within the boundaries of the capital plans and the l~ng-term financial plans as well as staffing and resources available. This work is driven by the goal to maintain system condition and Age of Asset metrics in order to maintain reliability. Reducing the level of work in this area will ultimately result in the increase of compulsory work and reduction in reliability.

Water System - Caeltal Assets Increase Increase (Decrease) (Decrease)

-Qn thousands) 2020 2019 2018 2020/2019 2020/2018 Plant in seivice $ 320,684 $ 300,822 $ 289,808 $ 19,862 ~$ 30,876 Accumulated depreaabon (135,864) (129,025) (123,146) (6,839) . (12,718)

Property for future Lise 1,999 2,397 2,397 (398) (398)

Construcbon work in progress 9,497 11,498 6,552 ~2,001~ 2,945 Net utility plant $ 196,316 $ 185,692 $ 175,611 $ 10,624 $ 20,705 Ongoing capital improvements incl,uded:

Water System - Capital Projects 2020 2019 2018 Water Intake and Filtration Water Intake and Filtration Water Intake and Filtration Plant Plant Plant Water Mains Water Mains Water!Mains Services- and meters Services and meters Services and meters Transportation Equipment Transportation Equipment - Reservoirs Pump stations Pump stations Transportation Equipment Reservoirs Reservoirs Pump stations AMI AMI AMI Water Laboratory Disinfection System Distribution system Customer Experience Water Laboratory Improvement Project Emergency Water Supply Emergency Water Supply Source of Supply More detailed information -about plant activity is available in Note 3 - Utility Plant, in the note disclosures to the financial statements.

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Eugene Water & Electric Board Management's Discussl~n and Analysis Debt Activity THe Water System issues revenue bonds or notes payable to fund certain capital projects Dunng 2020, the 'Nater Syste_m made scheduled debt ser:vice payments and issued $18.5 million in revenue bonds for capital improvements. In addition, $14.9'million in revenue refunding bonds were issued with proceeds used to *pay issuance costs and refund bonds previously issued in 2011. During 2019,'.the Water System made scheduled debt service payments which 9ecreased _outstanding_ debt compared to 2018-, For more detailed infonnation, see Note 12- Long-Term Debt and Note 13 - lntersystem items.

Water System bonds *are ~ed Aa2 by :Moody's Investors Service, AA by Standard and Poor's Rating Services, and AA+ by Fitch Ratings

• Water System - Debt.Activity Increase Increase (Decrease) (Decrease)

(rn tti'ousands) 2020 2019 201{1 2020/2019 2020/2018

.J Total outstanding debt $ 71,562 $ ' 53,644 $ . 56,298 $ 17,918 $ 15,264 Liabilities* and Deferred Inflows of Resources Current*habilitJes are primarily accounts payable, *accrued payroll, and the current p9rtion of long-term debt. Current liabilities increased in 2020 as a result of nonnal fluctuations in a~unts payabJe and accrued payroll*. The current portion of long-tenn deb\ due within one year also increased as a result of the new bond issuance and the pnncipal repayment structure used.. In 2019, current liab1lfty balances decreased compared to 2018 primarily due to changes in accounts payable The payables b'alance at 2018 included larger amounts for construction activity and equipment purchases compared to 2019.

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Water System - Liabrlrtles and Deferred Inflows

' Increase Increase (Decrease) (Decrease)

(rn thousands) 2020 .2019

• 2018 202oao1s 2020/2018 Current habrllties $ 6,584 $ s;810 $_ ~

6,630 $ n4 $ (48)

NCll'l-cuirent llabllrtles 97,095 80,614 81,911 16,481 15,184

~rred inflows of resources 7,330 6,396 2,480 934 4,850 Total habllrtles and  :

deferred Jnflows of resources $ 111,009 $ 92,820 ,$ 9.1,021 $

• 18,189 $ 19,988 c:::::::::=======

Net Position The net investment in caprtal assets component of net posItIon, which reflects the.value of capital assets net of the debt . incurred-to

. acquire .those assets* has I increased each year. since 2018. Capital asset' additions such as main replacements and improvements, AMI, and Hayden Bridge improvements have increased plant values and associated debt has decreased

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Eugene Water & Electric Board Management's Discussion and Analysis Restricted net position is subject to external legal restrictions on its use and Is primarily representa~e of reserves for payment' of debt service and deposits of System Development Cha_rges (SOC) for work not

• yet completed. In 2020, SOC reimbu_rsement reserves were used toward payment of debt service.

Increases from 2019 to 2018 are due to SOC revenue activity outpacing the *use of SOC impr,ovement reserves for eligible capital projects.

Unrestricted net position represents the accumulation of assets that are not capital assets, or subject to external restrictions on their use The Water System's unrestricted net position has increased by 30% and 46% compared to 2019 ~nd 2018, respectively reflecting strong operating activity for the year. Strong operating activity in 2019 contnbuted to the increase in that year.

Overall net posrtion has increased by approximately 6% compared to 2019, and 15% compared to 2018.

The financial position of the Water System has improved wrth strong operatmg activity in 2019 and 2020 Strong operations fueled reserve growth, even with large strategic. uses of funds to lower contnbution rates for pensions. Steady capital programs continue to make improvements to the utilrty infrastructure, as well '

water System - Net Posrtion

- Increase Increase (Decrease) (Decrease)

(in thousands} 2020 2019 2018 2020/2019 2020/2018 Net Investment in capital assets $ 131,358 $ 126,446 $ 119,474 $ 4,912 $ 11,884 Restrtcted

• 6,484 9,396 7,539 (2,912) (1,,055)

Unrestncted 37,370 28,837 25,663 8,533 11,707 Total net position $ 175,212 $ 164,679 $ 152,676 $* 10,533 \ $ 22,536 I

Reserves and Investment Activity l The Board of Commissioners has established \fl./_ater System designated reserves for specific p1,1rposes including the funding of routine capital activity and significant one-time expenses. In addrt1on, designated reserves accumulate funding for pension and post-retirem,ent benefits. Designated fµnds are1 CQnsidered unrestricted.because the Board has authority to:re-evaluate*and redirect reserves based on current priorities.

In 2020, the Board maintained reserves above target and increased reserves held in working cash. There were not any uses of reserves beyond normal operations whereas in 2019, the Board used $5.3 million of reserves to participate in an Employer_lncentive Fund program with PERS State contributed funds matched 25% of E\fv!=B contributions and reduced E\/\JEB's employer contnbution rate starting 'on November 1, 2019 During 2018, the Board used $7.8 million of,reserves,to pay down its pe11sIon liability with Oregor PERS, and $480,000 to fund the OPES Trust. Each year the Board reviews reserves Jn excess of-target for the highest and best use of cash. l: _, * ,

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\.

r, Eugene Water & Electric Board .r Management's Discussion and Analysis 0

(In thousands) Water System - Reserve Ba lances Target 2020 11\/orkmg cash $ 3,400 1 $ 19,545

. Designated funds Operating reserve 1,000 , 1,012 Seit-insurance reserve 280 288 Capital improvement reserve 7,000 12,149 Rate stabilization furid 1,000 1,000, Water stewardship fund - sep!Jc repairs 74

'second source- fund 5,4-50 Pension and post retJre~t medltal fund 393 Designated funds total $ 9,280 $ 20,366

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The Water System maintained restricted r~erves for purposes including the payment of principal and interest on debt. Restricted reserves*aIs0 included proceeds from bond issuance restricted for use on capital projects and funds collected through System Development Charges

• Working cash and short-term investments. were unrestricted and available for the day-to-day operations of the utility.

All Water System working cash and reserves were held in bank accounts, the Local Government Investment Pool, or _in high quality securities. Investment strategy focused on the following in priority order: preserving princi~al, liquidity of funds and investment returns.

Retirement Benefits Trust The Eugene Water & Electric Board Retirement Benefits-Trust (the Trust) '18s created in 2007 to fund ~t-employment benefits other than pension (OPEB). The plan provides $5,000 life insurance coverage for all retirees and subsidies toward health i~surance coverage under either the EWEB group plan or the Or~on PERS Health Insurance Prog~ (Oregon PHIP) Medicare supplement plan for retirees meeting eligibility criteria. Plan changes in 2016 and 2017rremoved the healthcare subsidies available to employees upon retirement if they were hired after 2002. -

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Financial statements for the OPEB plan, including accompanying notes, are a set of two statements. The statement of fiduciary net position reports the assets; liabilibes, and net position heid in trust o-n the day of December 31 ~r the years presented. The staterent o'ichanges-in net position, reflects-:the sources and uses of plan assets over the one-year periods presented. More information about the plan is provided in

, Note 17 and the Required Supplementary Information.

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Eugene yYater & Electric. Board

-Management's Discussion and Analysis Significant totals from the financial statements are below.

Condensed Financial Information (in thousands of dollars) 2020 2019 2018 Total assets $20,059 $ 19,273 $ 17,185 Total llab1litles 28 23 14 Total net posrtlon $ 20,031 $ 19,250 $ ,17, 171 ContrlbutJons $ 1,202 $ 1,854 $ 4,124 Net investment income 2,527 3,228 {952}

,r Total additions 3,729 5,082 3,172 Total deductions 2,948 3,003 3451 Net increase (decrease) 1n net posrtJon $ - 781 $ 2,079 $ (279)

Analysis Assets represent the Trust's investment portfolio, which increases with contributions from the Board and investment income. Assets decrease for.benefit payments and reductions in the market value of investments held Liabilities were for administrative and ben-efit payments pending at the end of each year.

Total assets as of December 31, increased each year*from 2018 to 2020. Investment income during 4020

- and 2019 was high. The money-weighted average return was 14.0% for 2020 and 19.8% for 2019. In addition, the Board made a one-time contribution at the end of 2018 The Board paid the actuarially determined contribution (ADC) to the Trust in 2018 and an additional $2 mil.lion in December of 2018 to improve the funded status of its OPES liability. Due to a significant decline in the fair value of the Trust's portfolio in December 2018, the one-time contribution didn't increase 'the Trust's assets until theJair values recovered in 2019 Continued appreciation of fair values during 2019, led to the highest investment returns experienced by the Trust smce its incepbon This pattern of decline and recovery followed by strong increases in fair values of investments was repeated m 2020. lnvestm~nt values decreased sharply, by $1 ..8 million, in March 2020 with investors' reactions-to the pandemic. By the end of May 2020,' the decline experienced in March was nearly fully recovered. See Note 17 for further infonnation on the portfolio's composition al')d investment r~turns.

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Eugene Water & Electric Board Management's Discussion and Analysis Contributions consist of payments from the Board and from retirees. The Board makes contribut1':>ns to the Trust monthly according the most recent ADC available.* Annual ADC amounts have been less than total benefit expenses in a year. This is an ~xpected outcome because the benefits are funded by the Trust and because benefit expenses are decreasing over time due to the benefit plan's design.

Contributions from retirees vary with the number of retiree participants and the requirements of their respective benefit plans. Retirees contributed $740,000 in 20?0, $?17,000 in 2019, and $775,000 in 2018.

Total deductions are primarily benefit expenses. Administrative costs are also included. Benefit expenses aeclined by $87,000 in 2020. Benefit expenses first declined significantly in 2019 by app~oXJmately .

$400,000. Prior to th~n, benefit expenses were level for seven years. The number of rE3tirees participating in the plan is near the maximum number of persons who may.qualify to receive a subsidy toward health care insurance in the future. As those participating in the medical benefits have aged, they have transferred from the EWES group medical insurance to Medicare supplement *plans which are less expensive than EVYEB group coverage. Medicare retirees were 7_4% of the plan's retirees participating m medical coverage in 2020, 6.9% m 2018. The significant drop in benefit expenses during 2019, corresponded to a decrease m retiree participation. Census data as of August 31, 2019, showed a population decrea~ of 40 retirees compared to August 31, 2018 *"Additionally, 27 retirees had opted out of the medical coverage they had carried as of the 2018 census.

Overall, the plan's financial position has improved and payments for medical subsidies are expected to continue to decrease over time r

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Eugene Water & Ele.ctric Board Statements of Net Position December 31, 2020 and 2019 Electrtc System Water System Total S;i!lem 2020 2019 2020 2019 2020 2019 ASSETS Caprtal assets l)tihty plant in service $ 803,7~2,684, $ 818,317,~2 $ 320,683,728 $ 300,821,763* $ 1,124,416,412 $ 1,117,139,336 Leu a=imulatad deprecmtion 461 027 186 446 919 036 13518841192 12910261071 68618911378 576 944 107 Net ubllty plant m serv1C6 352,705,498 '3B9,398,64B 184,819,63B 171,796,682 537,525,034 541,195,228 Property held for Mum use

• 37,049,750 1,344,865 1,999,288 2,396,812 39,049,038 3,741,867 0 Construction worl< in progress 39 4-01 817 37 068 305 9*496 708 11 498 352 4818981523 48 554 B57 I

Net utJ!rty plant *429 167 066 4-07 799 706 19613161530 18516911848 B25 1472 1595 5931491,552 Current assets' Cash and cash equrvalents 21,241,756 35,666,664 11,473,657' 9,972,388 32,715,312 46,637,972 Short-term investments 9,148,677 1,240,592 3,613,616 949,633 12,762,292 2,190,226 Reatncted cash and mV681menm 38,876,438 22,038,863 10,863,810 7,329,462' 49,&40,248 29,368,116 Designated cash and investments 42,087,860 53,265,411 11,872,031 14,838,363 63,969,881 67,903,774 Receivables, less allowances 29,135,704 34,006,020 3,577,626 3,846,886 32,713,331? 37,661,90~

Due from Water Syatem 376,128 367,124

• MateMls and supplies 4,676,862 6,052,&47 1,079,149 1,295,888 6,756,011 8,348,733 Prep11tds 915,461 1,018,922 130,609 157,3B4 1,048,080 1,178,286 Opbon premrums short-term 1 198 468 1101 832 1196 466 1101 632 Total current assets 147 456 323 153,656,795 42 610 397

• 37 986 972 18916911592 191~781843 Non-current alll!ets Investments - designated 30,112,526 18,245,411 8,494,062 5,014,191 38,606,588 23,259,602 Inveatmenta - unrestncted 11,144,265 857,893 4,457,348 666,888, 15,601,611 1,514,581 Investments - restncted 27,328,703 7,651,931 8,067,197 3,004,866 36,396,900 10,656,797 Recervables, conservation, and other 3,103,002 3,514,596 133,630 120,067 3,236,832 3,634,663

• Due from Water System 6,419,950 6,781,263 lnV811tment rn WGA 3,028,788 3,762,194 3,026,788 3,762,194 Investment rn Harvest Wind 18,943,625 19,995,274 18,943,825 19,995,274 Prel1m1nary 111VMl!gabons 128,497 8,109,460 1,302,816 1,302,816 1,431,313 9,412,266 Other ElllS8ts 25 787 737 18 1280 1821 11638794 8 518 546 37 426 531 26 779167 Total non-current aBl!ets 1261996,093 8713681623 34 094 046 18 617 174 163,669,188 99 204 544 DEFERRED OUTFLOWS OF RESOURCES 43 937 762 6~3611407 13 201 421 16 200 964 57 139 173 67 562 361 Total asselll and deferred outflows of resources $ 74816461233 S" 701 176 631 $ 286~1,393 $ 257,498,946 $ 1,025,9721648 $ 951,5271100 Note* Inter-system obhga!JOns and payments ara e!11rnnated in the total systems columna 24 See accompanying notes.

Eugene Water & Electric Board Statements of Net Positlon December 31, 2020 and 2019 Electric S:i!!tem Water System T otaJ System 2020 2019 2020 2019 2020 2019 LIABILITIES Current habdt!Jes Payables $ 21,897,140 $ 22,735,996 $ 1,343,138 $ 1,002,012 $ 23,2-4(),278 $ 23,738,008 Accrued payroD and benefrts 4,287,939 3,902,781 1,322,844 1,224,996 6,690,683 5,127,777 Due to EJectnc System 375,128 367,124 Payable from restncted assets Accrued interest on long-term debt 3,581,186 3,189,135 088,388 801,006 4,589,574 4,090,141 Long-term debt due wrthrn one year 8 745 ODD 8 54-0 DOD 2,555,000 2,325,000 9 300 ODO 10 866 ODO TotaJ current liabtll!Jes 36 491 285 38 377 012 8 68-4 208 5 810 138 42 700 435 43,820,028 Nol'I-Cllrrent liab~r!Jes Long4ermdebt 228,371,384 190,132,061 69,007,546 51,318,716 287,378,930 2-41,460,767 Due to Electnc System 6,419,950 6,781,253 Net pension habmty 57,307,318 58,544,416 18,097,048 18,487,710 75,404,366 77,032,126 Net OPEB liabllrty 10,307,702 11,898,235 ,3,256,06-4 3,757,338 13,662,766 16,655,573 01iler IISbtlr!Jea ~511,424 2 508 453 315 199 268 431 2 1826 1623 ~776,884 Total habdrhea 334,989,082 - 301 461 067 103,679,106 86,423,588 431,873119 380,736,276 DEFERRED INFLOWS OF RESOURCES 24,017,684 21,276,767 7,329,896 6,396,488 31,347,580 , 27,673,255 NET POSITION Net mVBAtment m caprtal asseta 261,253,683 2-41,619,954 131,358,176 128,446,037 382,611,759_ 368,066,991 Re11tncted 6,-434,467 6,552,063 6,483,739 9,396,512 12,818,206 16,947,575 Unrestncted 128,651,406 130,266,680 37 370 477 28,837,323 167~1,883 159 104 003 Total net posrtJon 387,639,466 378 438 697 175,312,392 164 678 872 662,751,848 543117 569 Total ltabjrtJes, deferred lllflows of resources, and net posrtion $ 746,646,233 $ 701 176 631 $ 286~1,383 i 257,488,848 $ 11025,87~648 $ 961,527,100 Note Inter-system obltgabons and payments are eilmmatad m the total systems columns See accompanying notes. 25

Eugen*e Water & Electric Board

• statements of Re_venues, Expenses, arid Changes In Net Position r

Years Ended December 31, *2020 and 2019 Electnc System Wllter~tem Total System 2020 '2019 2020 2019 2020 2019 Resldenllal $ 99,374,113 $ 100,560,404 $ 20,508,148 19,491{603

$ $ 119,882,261 120,062,297 CommerCllll and 1ndustn~1 92,040,923 100,605,227 ' 14,052,620 14,767,851 106,993,543 115,373,078 Salas for resale and other 51 584 582 6~ 172,806 4 310 880 3 832 676 55 904 463 66,005,572 Operabng reven~es 243 899 618 263 1338 1617 I 38 860 648 38 092 330 282 780 267 301,430,947 Purchased power ' 134,594,268 153,922,009 134,504,268 153,922,009 System control 4,637,338 4,268,927 4,637,338 4,268,927 Whee!mg 11,247,747 13,106,600 ( 11,2-47,747.

• 13,106,600 Steam and hydraulic generatio,n 12,141,792 .12,277,003 12,141,792 12,27-7 ,003 TrensmlSSlon and d1111nbutmn 24,509,483 24,526,361 7,266,704 5,840,4-08

• 31,776,260 30,366,769 Source of supply, pumpmg, and punflcabon 7,671,384 6,795,617 7,671,366 6,795,617 Customeraccounbng 8,242,160 7,667,709 1,975,022 1,780,201 10,217,179 9,447,910 Consarvation expensas, 4,013,768 3,632,917 520,141 492,380 4,533,929 ,4,125,297 AdnunJStratJve and general 20,750,800 20,-466,788 5,110,689 4,490,8-47 25,881,490 24,967,635 DepreclS'bon on ublrty plant I 21504275 22,785,219 6,805,228 6 844 489 26,399,503 29,429,888 Operabng expenses 241,731,651 28~653,533 29,351,238 26,043,922 271 082 889 288,897,455, r "

Net operatmg income - 2167 967 686 084 9 529410 12 048 4-08 11697378* - 12 733 492 I

tnvestment earnings 1,546,093 3,807,359 499,632 1,105,381 2,MS,925 -4,912,740

• Interest earnings; Weter 189,874 178,4-04 Other revenue 10243786 6 287 209 262 097 360 552 10 505 883 6 667 761 Non--operabng revenues 11959753 10 272 972 761 929 1 485 933 12 551 808 11580501 ,,

Note Inter-system obhga!Jons and payments are elminated in the total systems columns 26 See accompanying notes.

Eugene Water & Electric Board Statements of Revenues; Expenses, and Changes in Net Position Years Ended De~ernber 31, 2020 and 2019 Electnc System* WaterSf!lem Total System 2020 2019 2020 2019 2020 2019 Other revenue ded uctJons $ 476,259 $ 1,729,912 $ 60,490 $ 92,276 $ 636,749 $ 1,822,188 Interest expense and related amor!Jzabon 7,161,122 6,992,9TT 2,0TT,082 1,979,632 9,238,204 8,972,609 Intereat expense, Electnc 169 874 178 404 Noo-operatmg expenses 7 637 381 8 722 889 2 307 446 2 250 212 9 TT4 963 10 794 697

(

Income before caprtaJ cohtnbutJons and specw.l rtems 6 400 339 2 235 167 7 983 894 11 284129 14 474 233 13,519,296 ContnbutJona m aid of construcbon 2,389,691 1,704,748 713,122 1,443,11-4 3,102,813 3,147,862 Contnbuted Pl!mt aaaeta 416,521 901,624 524,179 1,566,473 940,700 2,468,097 System development charges 1 116 533 1684943 1°116533 1 664 943 Caprtal contnbubona 2 10oa 1212 2 1606 1372 2 353 834 4 674 630 6 160 046 7,260,902

'intersystem transfer (195,792) 196,792 Speaal rtems - PellSIOn revenue . 4,176,208 1,318,802 5,496,010 Special rterns - PensKln expense (16,704,832) (6,276~10) (21,980,042)

Change ITT net posrbon 9,100,769 (7;687,085) 10,533,520 12,002,261 19,634,279 4,315,166 I - Total net posrbon at begmrnng of year 378 438 697 388,125,762 164 678 872 152,676,621 643 117 669 638 180~-403 I

Total net posrbon et end cl year $ 387,639,466 $ 378,438,697 $ 175,212,392 $ . 164,678,872 $. 662,751,848 $ 543,117,569 S~ accompaQying notes. 27

Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2020 ~nd 2019 EJectnc System Water system '-.,

Total System 2020 2019 2020 2019 2020 2019

/'

CASH FLOWS FROM OPERATING ACTMTIES Recelpm from customers $ 262,065,995 $ 275,929,543 $ 38,994,488 $ 38,278,953 $ 301,060,483 $ 314,206,496 Othe!:rece1pts 7,109,214 4,649,151 639,558 792,780 7,748,T{2 5,441,931 Power-purchases (134,654,889) - (155,522,419) (134,664,889)' (156,522,419)

Payments to employees, employer paid benefits (48,306,478) (63,3~,017) (14,963,817) (19,123,421) (63,270,295) (82,457,436)

PaymerrtB to suppliers (36,489,293) (36,668,716) (7,013,593) (6,675,058) (42,502,886) (43,2-43,774)

Contrfbuflons m heu of t8lce6 (12,665,478) (13,498,50~ (1~856,476) (13,498,505)

Net cash from operating acilvrtles 37 669 071 11 555 037 17 656 636 13 371 254 66 525 707 24,926,291

. CASH FLOWS FROM INVESTING AC17VU1ES \

Purchases of investment securrtJes (167,570,099) (61,240,705) (43,185,717) (13,227,821) (200,755,816) *(64,468,626)

Proceeds from aale and matunbes of investments 96,155,000 106,639, 120 26,069,971 26,260,880 123,2-44,971 131,900,000 Interest on mvestments 1,237,264 1,897,990 317,954 423,040 1,555,216 2,321,030 Dlstnbubons from equrty mvestments 4 935 271 ~617,424 4 935 271 2 617 424 Net cash from inveating actrvrtJM (53,242,664) 59,813,829 (17,777,792) 12,456,099 (Z1 ,020,356) 72,389,928 CASH FLOWS FROM NON-CAPITAL FINANCING

- ACTIVITIES

. Intersystam obhgabons pe1d to Electrlc from VVater 352,680 344,067 (352,580) (344,067)

Interest recet pts/(payments) to Electnc from Weter 170 593 179 106 (170,693) (179,106)

Net cash from non-caprtal flnancmg eciJvrtJes 523 173 523 173 (523,173) (623,173)

Note Intersystem obhgebons and paymerrtB are ellm mated m the tote! gystems columns 28 See accompanying notes.

Eugene Water & *Electric Board Statements of Cash Fl6'NS

-Years Ended December 31, 2020 and 2019 Electnc Slstem Water System _Total System 2020 2019 2020 2019 - 2020 2019 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Pnnctpal paymenta $ (8,64-0,000) $ (8,445,000) $ (1,855,000) $ (2,230,000) $ (10,395,000) $ (10,875,000)

Proceeds from issuance of bonds 83,149,007 36,124,291 98,273,298 Payments to refund debt (17,147,475) (15,114,186) (32,261,661)

Addrt1ons to plant and non-utqrty property, net (44,131,710) (43,688,665) (17,874,127) (16,784,294) (61,805,837) (60,472,~59)

I ntarest payments (7,571,523) (7,927,892) (1,966,194) (2,220,788) (9,637,717) (10,148,680)

Addrtions to prel1mInary surveys and other 8,008,090 (776,422) 8,006,090 (776,422)

Capital contnbu1mns ~8061212 2 806 372 2 353 833 4 674 630 5 160 045 712801902 Net cash from caprtal and related fine ncmg acbll!IJes (3 I429 I 399l - (581231160z:l 868 617 (16 Isso Is62l (21560i782l Q'.4i702 I 1s0i CHANGE IN CASH AND CASH EQUIVALENTS (18,279,719) 13,760,432, 224,288 8,743,628 (18,055,431) 22,504,060 CASH AND CASH EQUIVALENTS, beginning of year 73 130 452 6913701020 201343;895 11800267 93 474 347 701970~87 CASH AND CASH EQUIVALENTS, end of year Incl ud111g cash and cash equlVBlenta reatncted and designated $33,608,979 and $9,094,622

($37,564,870 and $10,371,505 m 2019) for Electnc and Water, l'Mpectlvely $ 54 850 733 $ 7i3, 1301452 $ 2015681183 $ 201343,895 $ 75,4181916 $ 93 47-4 347 NON-CASH CAPITAL ACTIIVITY In 2020, plant !IBl!ets contnbuted by developers were $416,251 for the electnc system and $524,179 for the water system ($901,624 for the electnc ayatem and $1,566,473 for the water system ITT 2019)

Note Inter-system obhgllttons and payments are eUmmated m the total systems*columns See accompanying notes. 29

/

Euge,ne Water & Electric Boa.rd ,,

Statements of Cash Flows Years Ended December 31, 2020 an~ 2019 Electnc System Water System Total S~tem 2020 2019 2020, 2019 2020 2019 RECONCILIATION ,OF NET OPERATING INCOME TO NET CASH FROM OPERATING ACTIVITIES NBt operatmg mcome $ 2,167,967 $ 685,084 $ 9,529,411 $ 12,048,408 $ 11,697,378 $ 12,733,492 AdJuatmerrts lo recooo~ net operatmg income to net cash from operating actM1J811

• Depreciabon, 111cl udmg allocated 22,806,896 '23,993,206 6,805,228 '6,644,469 29,612,12-4 30,637,676

• Other revenue 7,350,081 4,500,375 709,202 747,605 8,060,163, 6,347,070

,* Other revenue aeductJona (321,642) (17,052,604). * (24,066) (5,275,200) (345,708) . , (22,327,003)

I (Increase) ~ e in auets \.

RecalVBblM 4,231,076 970,613 68,260 220,707 1:299,336 1,200,320 Matenals and supplies 376,964 (832,620) 216,737 (63,801) 602,721 (806:611)

Prepaymoots and 11peaal deposits 103,471 (66,743) 26,766 (23,201) 130,226 (79,044)

Con1181VB1:Jon Joana, net . 1,050,634 (1,166,376) 1,050,634 * (1,166,376)

Other assets, 204-,968 1,634,408 294,968 1,634,408 (Increase) decrease in deferred outflowa Fair value of hedging denvat!ves. 80,004 (1,063,260) 80,094 (1,063,260) '

Increase (d,ecrease) in ilab1hba&

Accountil payable, accrued payroll, and benefits (68,667) (1,641,084) 325,107 (936,624) 256,450. (2,678,608)

Other lrabrl rtJas

• 2,971 077,426 2,071 977,426 lncraase1111 deferred inflows of resourcea (214,874) 508 622 (214,874) 508 622 Net cash from operating BCIJvrtJes $ 37,860,060 $ 11 566 037 $ 17,666,634 $ 13,371,264 $ 55 525,703 $ 24,028~91

' (

/

~30 See accompanying notes.

Eugene Water & Electric Board Statements of Fiduciary Net Position - OPEB Trust December 31, 2020 and 2019

\

Retirement Benefits Trust 2020

• 2019 Ai:,SETS Money market investments $ 187,085 $ 210,113 Interest and dividends receivable 5,138, 5,712 Prepaid expenses 2,201 1,214 Investments, at fair value Corporate bonds Domestic 303,294 385,019 Mutual funds.and exchange traded funds -

Fixed income " 7,415,912 7,081,247 International 3,871,565 4,248,903 Domestic 7(,296,886 6,365,091 Real estate 977,~09 975,639 Total investments 19,864,967 19,055,899 I

Total assets $ 20,059,391 $ 19,272,938 LIABILITIES Administrative costs payable $ 27,920 $ , 22,516 Net position restncted for postemployment benefits other than pensions $ 20,031,471 $ 19,250,423 See accompanying notes 31

/

Eugene Water. & Electric Board

- Statements of Changes i'n Fiduciary Net Position - OPEB Trust Years Ended December 31, 2020 and 201,9

-Retirement Benefits Trust

__,, 2020 , 2019 ADDITIONS '**

eo*ntributions Employee $ 462,000 $ -1,137,500 Members - EWES group plan, only . 740,292 716,560 Total contributions 1,202,292 1,854,060 Investment income

• f'!et increase in fair value of investments 2,088,008 2,563,041 Interest- 1_5,30_8 18,8p4 Dividends 373,766 476,664 Capital gain distributions 101,704 221,805 2,578,787 3,280,364 Lessihvestmentexpense 51,703 51,944 Net investment income 2,527,084 3,228,420 Total additions $ . 3,729,376 $ 5,082,479 DEDUCTfONS, Benefits $ 2,118,257 $ *2,20,5,648

.Benefits funded by retirees - E\NEB group plan 749,292 716,,560 Administrative expenses 89,779 80,987 Total deductions 2,948,328 3,003,195' Net increase in net position 781,048 2,079,285 NET POSITION RESTRICTED FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Beginning of year 19,250,423 17,171,138 End of year $ 20,031,471, , ' $ 19,250,423:

32 See accompanying notes. L,

Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Pollcies I

Reporting entity Tbe Eugene Water & Electric Board (Board or EWEB) is an administrative unit of the City of Eugene, Oregon. However, as establisHed by the Governmental Accounting Stantjards Board (GASB) definition of a reporting entity, the Board is a p~mary government and is not a component unit of anoth~r entity. The Board is responsible for the ownership and operation of the Electric and Water Systems, and the basic financial statements include these two Systems The Board has a trust for funding post-employment retirement benefits other than pensions (OPEB),

which is a component unit of the Board. Financial statements for the OPEB trust are presented as a fiduciary fund.

The Board p~vides energy and water service to residential, commercial and industrial customers located in a 236 square mile area,_ including the City of Eugene and atjjacent suburban areas. The Board has the authority to fix rates and charges. In order to secure power resources, the Board has taken ownership of various generation facilities, and entered into various power purchase agreements In addition, the Board has partial ovmership in various generation facilities, which are joint ventures or separate entrtJes where the Board has taken an equity position. The operations and sale of energy generated from the Board's relationship with each of the facilities is subject to certain risks Operations are contingent on various factors, such as regulation, licensing agreements, river flow levels* and weather

-patterns -

lne Board is subject to various forms of regulation under federal, state and local ,laws and _is subject to vanous Federal Energy Regulatory c'ommission (FERG) regulations. Laws and regulations are subject to change and.may have a direct impact on the operations of the Board.

Ellmlnations

. Amounts ~ivable and payable between the Electric and Water Systems and related interest earnings and expenses are eliminated in the Total Systems columns of the financial statements (see Note 13).

Method of accounting The Board maintains its accounting re~rds in accordance with accounting principles generally accepted in the United States of America The Board applies accounting and reporting standards of the GASB. The

• financial statements use a flow o_f economic resources measurement focus to determine financial position and the change in financial position. The accounting principJes used a~e similar to those applicable to busin_esses)n the private sector and are maintained on the accrual basis of accounting*. Revenues are recognized when earned, and expenses are recognized when incurred.

33

Euge~e Water & Ele,ctric Board Notes to Financial Statements

• Note 1 - Summary of Slgnfflcant Accounting Pollcles (continued)

Effective January 1, 2019, the Board adopted GASB Statement No. 83, Certain Asset Retirement .

Obligations *and GASB Statement No 88, Certain Disclosures Related to Deb( Including Direct

(

Borrowings and Direct Placements. Statement No. 83 requires recognitipn of liabilities when incurred and reasonably estimable and measurement using probability weighting of current costs. Statement No 88 is to imwove the information disclosed in the notes to the financial s~tements related to debt, including

• separate information for direct borrowings and direct placements, unused lines of credit, assets pledged as collateral for the debt, and terms specified in debt agreements related to other specrf1c significant events. It also clarifies which liabilities should be included when disclosing information related to debt.

. . _/) '

The accounting and. reporting s~andards established ~y-these statements did not have any impact during the year of implementation. **

Effective January 1, 2019, the Board adopted GASB Statement No: 84, Fiduciary Activities. The

.

• statem~nt requires r:eporting of fiduciary funds li)<e EWEB's Retirement Benefits Trust for other post-employment benefits (OPEB). Implementation added presentation of the Statements of Fiduciary Net Position and Statements ot' Changes in Fiduciary Net Position as well as related disclosures for the OPEB Plan to the Board's financial statements.

Prior to January 1, 2019, the Board followed FASB EITF 03~11 to account for poV>fer related transactions that-did not result in physical .\

delivery of power. FASB's EITF is not applicable

. to 'the Board under GASB .

. Under the EITF, real~ed gains and losses on these transactions were reported net within wholesale sales and purchased power. Starting in ~019, the Board reported these transactions at gross amounts* The change is expected to reduce the complexity of budgeting and reporting for theseJransact1ons. The change has no effect on n~t operating income in 2019, and prior year.amounts were not reclassified.

In fl/lay 2020, GASB issued Statement No. 95, Postponement of the Effective Oates of Certain Authontative Guidance. The objectiv.e of this Statement is to provide temporary relief from,certain hew

• accounting and finandal reporti~g requirements in light of the COVID-19 pande~ic. The Statement Is*

effective immediately and the Board has adopted the provisions for the year ended December-31, 2020

. .. ' . )

In June 2018, GASB issued Statement No. 8~. Accounting for Interest Cost Incurred before the End of a Construc~on Peri~. The objective of this Statement.is (1) to enhance the relevance and comparability of information about capital as~ets and the cost of borrowing for a r~porting period and (2) to simplify accounting for .interest cost incurred before the end a construction period. This Statement is effective for the Board in fis~I year 2020. The B~ard previously used provisions of regulatory-accounting to

• discontinl!e the capitalized interest process and early adopted this pronouncement prospectively for fiscal year 2019 resulting in no current year)mpact " * '

Use of estimates The preparation of financial statements in conformity with accounting principles generally a~pted in the United States of America requ,Ires management to m~ke estimates and assumptions affecting the reported amounts of a~sets an.d liabilities and disclosure of contingent assets and liabilities at the da~e of the financial statements and the reported*amounts of revenues and expenses dunng the reporting period.

Actual results could differ from those estimates. *

\.

Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)

Recl~ssiflcatlons '

I Certain reclassifications have been made to the prior year financial statements to conform to the current year presentat1pn. Such r~lassifications have no effect on previous net revenue or net posrtion.

Utlllty plant In service and depreciation Utility plant is stated at onginal cost Costs include labor, materials and related indirect costs, such as engineering, transportation and allowance for funds used dunng construction (1.e. interest) Additions, renewals, and betterments with a cost of $5,000 or greater per item are capitalized. Repairs and minor replacements are recorded as operating expenses. Depreciation is computed using straight-line group rates. When property is retired, the property cost and any removal costs are charged to accumulated depreciation. The estimated useful lives of assets are those used commonly in the utility industry or they are based on the Board's experience with similar assets. * '

1 Estimated Depreciable Lives Asset Class in Years, Electric Water System System Land n/a n/a Intangible assets n/a n/a D1stribut1on plant 20-50 Hydraulic production 15-50 Steam production 15-50 Other production 15-50 Telecomniurncation-s 10 Tran_smiss1on plant 25-50 General plant 3-50 3-50 Pumping plant , 15-50 Supply plant 20-50 Treatment plant 15-50 Transmission & distribution plant

• 15-50 Cash equivalents For purposes of these statements, cash equivalents are defined as short-term, highly liquid investments both readily convertible to known amounts of cash and so near maturity theY. present insignificant risk*of changes in value because of changes in interest rates Generally, only investments with angina!

matunties of three months or less meet this definition The Board considers *money market accounts and gov~mmen~ investment pool holdings to be ciish equivalents *

• Fair value of financial instruments The carrying amounts of current assets, including unrestncted, designated and restricted cash and investments, and current liabilities approximate fair value due to the short-term_ maturrty of those instruments. The fair value of the Board's investments and debt are estimated based on the quoted

' \

market pnces for the same or similar issues.

35

Eugene Water & Electric B<;>ard Notes to Financial Statements Note 1 - Summary of Significant Accounting Pollcies (continued)

Restricted assets Cash and investments restricted by provisions of bond resolutions and aweements with other parties are identified as restricted assets. When the restricted assets are expendable within the terms of the agreements, it is the Board's policy to spend restricted resources first, then unrestncted re$OUrces as needed. *

• Materials and supplies Materials and supplies provide for additions and repairs to utility plant and are stated at weighted average co~ -

Prellmlnary lnvestlgatiorn; Preliminary investigations consist of costs for proJects the Board believes will b_e viable in the future.

Regulatory assets The Board has other assets to be charged to future periods matching the reporting periods when the expenses are include~ for rate-making purposes.

• Conservation assets - Cons*ervation assets for the Electric System represent installations of energy saving _m~sures at customer properties. The conservation asset balance 1s reduced as costs are recovered, which for the most part represent debt service payments included in rates for related borrowing.

• Unamortized bond issu~ costs - Unamortized bond issue costs represent the remaining expense related to various debt issuances. The asset 1s amortized over the duration of the related debt and recognition of these costs is included in the rate making process.

• Pension debits- Pension debits represent a portion of the change in net pension liability, as defined under GASB Statement No. 68. Regulatory accounti~g 1s us_ed to recognize_ pension expense in accordance with the required employer contribution rates set by the Oregon Public Employees Retirement Systen:i:

• Other Post-employmen_t Benefits (OPEB) de~fts- OPEB debits represent a portion of the change in net OPEB liability; as defined under GASB Statement No. 75. Regulatory accounting is used to recognize components of OPE~ expense in accordance wrth employer contributions mad~ by_the Board.

Debt refundings For current and advance refundings resulting in defeasance of debt, the difference between the reacquisition price aqd the n*et carrying amount of the old debt (gain or loss) is deferred and amortized as a component of interest expense ayer the rer,:iaining life of the old debt or the new debt, whichever is shorter. These amounts are reported as a deferred outflow of resources on the statement of net position.

36

Eugene.Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)

Net position Net posrt1on consists of.

• Net investment in capital assets - Net investment in capital assets is capital assets, net of accumulated depreciation and outstanding balances of any bonds and other borrowings attributable to the acquisition, construction, or improvement,of I

those assets.

• Restricted - Restricted components of net position have constraints placed on their use. Constraints include those imposed by creditors (such as through debt covenants), contnbutors, or laws or regulation of other governments or constraints imposed by law through constitutional provisions or through enabling legislation.

• Unrestricted - The unrestricted component of net position includes remaining amounts neither "restrictecf nor "net investment in capital assets."

Operating revenue and expense Operating revenues are recorded on the basis of service delivered while operating expenses include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expanses not meeting this definition are reported as non-operating revenues and expenses Revenues are deriv09 primarily from the sale and transmission of electricity and from the sale of water Revenue is recognized when power or water is delivered to and received by the customer. Estimated revenues are accrued for power and water delivered but not yet billed to customers.

At the discretion of management, a deposit may be obtained from the customer. Concentrations of credit risk wrth respect to receivables for residential customers are limited due to the large number of customers comprising the Board's customer base. Credit losses have been within management's expectations.

Similar to its evaluation of residential, commercial and industrial customers' credit reviews, the Bo9rd continually evaluates rts wholesale power customers (sales for resale rev*enue) by reviewing credit ratings and financial credit worthiness of existing and new wholesale customers.

• Receivables are recorded net of the allowance for doubtful accounts The allowance is determined by an examinatJon of write 'off experience in the preceding five years, and consideration of other influences as appropriate.

Contributions in lieu of truces In accordance with ORS 225.270, Use of surplus earnings, the Electric System*makes contributions in lieu of tax (CILT) payments to the City of Eugene at the rate of 6% of retail sales and a fixed component equal to $825,000. The fixed amount is subject to certain annual inflationary adjustments. The Board makes GILT payments to the City of Springfield at the rate of 3% of retail sales for a customer wrthin the boundaries of the City of Springfield.

37

Eugene Water & Electric Board Notes fo Financial Statements Note 1 - Summary of Significant Accounting Policies (continued)

Environmental expenses Fish and_ plant habitat enhancements, as well *as pollution prevention improvements are expensed or capitalized depending on their future economic benefits. Most pollution remed1at1on outlays, legal obligations t_o ~ddress existing poll,ution, do n?t qualify for capitalization and are accrued as liabilities and-expenses according to the estimated remediation costs on a current cost basis (rather than presenrvalue 1

of Mure costs).

Note 2 - Power Risk Management The j3oard's Power Risk Management Guidelines set forth policies, limits and control systems governing power purchase and sale activities for the El~ic System. The objectives of such policies are to maximize benefits to the customers from wholesale activities while mir\1m12ing the ris~ wholesale activities will adversely affect retail prices. The Board does not enter into contracts for speculatlve purposes.

During periods when resources are in excess of retail load, the Board may sell excess capacity into the wholesale markets, and is-exposed to commodity price risk. The Board enters into forward contracts intended to manage the price risk associated with power sales in the wholesale market Derivative -financial Instruments In accordance with policy guidelines, the Board utilizes derivative instruments to mmi!11ize rts exposure to commodity pnce risk. Hedging derivatives* are reported on the statement of_net position at fair value. The fair value of options and !>waptions are detennined using_ the Black fonilula. The fair value of financial swaps is detennined by comparing the contract prices with the forecasted market prices.- -

• All potential hedging denvatives were evaluated for effectiveness using the consistent crrtical tenns method. A derivative in~trument is effective under criteria for consistent critical tenns when the significant tenns of the hedging instrument and the hedgeable item are alike. The significant terms for hedgm*g denvatives are the time period, quantity, price index, and point of delivery.

As of Decembe~ 31, 2020, hedging derivatives with a fair value of $806,000 we~ reported a~ other -

assets and deferred inflows Hedging derivatives with a fair value of $1- .4 million w.ere reported as other liabilities and deferred outflows. Changes in fair value are reported as an increase in other assets or other liabilities and deferred inflows or outflows of resources-until the time of'settlem~nt. When hedging derivatives settle, revenue or expense is recorded as either purchased power or wholesale* sales.

" I l_

38

E~gene Water & Electric Board Notes to Financial Statements Note 2- Power Risk Management (continued) lnvestmen~ derivatives

_Hedging denvatives found through testing to be ineffective are classrfied as investment derivatives. At

- that time, the fair value, including any fair value changes previously deferred on the balance sh~t, are recorded as investment revenue and a deferred inflow. or outflow. As of December 31, 2020 and 2019, there were no investment denvatives or related investment revenue.

0 bans Hedging Derivatives Investment, Derivabves 2020 2019 2020 2019 Notlor)al value $ 1,365,058 $ 1,833,592 $ $

Fair value - asset 806,347 1,021,222 Fair value - habilrty 1,365,058 1,445,152 Cash paid 1,-365,058 1,833',592 Reference rates Micl-C mdex Mld-C Index Dates entered into 8/19 - 10/20 4/19- 8/19 Dates of maturity 1/21 - 6/22 1/20 - 3/21 Credit risk The Board enters into'forward purchase and sale contracts for electricity with other industry participants such ~s public and investor owned utilities, financial institutions, gas and oil producers, and energy marketers. Through this participation, the utility is exposed to credit risk related to the possibil_ity of non-performan-te by its counterparties. To limit the risk* of counterparty default or _non-performance, the Bo.arc!

uses an evaluation process assigning an internal measur~ of credrt worthiness to the Board's counterparties and sets limits to the dollar value of business transacted with counterpart1es. On a case-by-case basis, the Board may require letters of credit, cash collateral, pre-payment or other forms of cre_dit support to ensure counterparty performance. Other assurances may include accelerated invoicing or pre-payment. In addition, the Board generally establishes netting arrangements with counterpart1es.

As of December 31, 2020, all derivative instrument assets were with three counterparties and the aggregate fair value was $806,000. This represents the maximum loss that would be recognized if the c'ounterparties to the derivative instrument assets failed to perform as contracted. Counterparty creel~

ratings ranged from Baa2 to A+. This maximum exposure is reduced by_$669,000 of liabilities included in a netting arrangement.

Termination risk Hedging denvative contracts may be terminated by mutual agreement of the Board and the counterparty, or upon the occurrence of a termination event. Termination events include non-p_ayment, non-delivery, deterioration cf creditworthiness, or other material adverse changes. During the years 2020 and 2019,,

there were no terminations.

r 39

r

(*

Eugene,Water & Electric Board ,,

-Notes to Flnanclal Statements Note 3 - Utillty Plant The maJor classrfications of utility plant 1n service are as follows*

Electnc UtJli!i'. Plant Balance Balance December 31, December 31, 2019 Increases Decreases 2020

' j Plant m service *not subject to

) depreciabon Land '$ 9,337,835 '$ 274,899 $ - $ 9,612,734 Intangible assets 231,716 231,716 Plant In service l?Ub]ect to depreciabon l_ntang1ble assets 23,526,562 4,831 23,531,'393 Steam production 10,363,488 4,056 10,367,544 Hydro production 170,805,261 , 4,459,015 (52,213,900) 122,850,378 Transm1ss1on- 84,207,010 '309,113 (226,013) '84,290,110 Distribution 325,638,748 15,789,710 (4,232,808) 337,195,650 Telecomm*unlcatlons 19,753,7o;3 38,503 19,792,206 General plant 1'51, 186)20 1,850,591 (5,412) 163,031,899 Completed construcbon, rJot yet classified 11,466,539 32,829,054 (11,466,538) ' 32,829,055 Total utJlrty plant in serv1ce - 816,317,582 55,559,772 (68,144,671) 803,732,684 Accumulated depreciabon (446,919,036) (22,808,896) 18,698,746 (451,027,186)

_Plant not subject to depreciation Property held for future use 1,344,855 35,704,895 37,049,750 Construcbon worl<'m progress 37,056,305 39,2831956 (36,9381445) 39,401,817 Net utJhty plant $ 407,799,706 $ 107,741,727 $ (86,384,370) $ 429,157,065 40 \

Eugene Water & Electric Board Notes to Financial Statements

(

Note 3 - Utility Plant (continued)

Electric U1:Jli!i'. Plant Balance Balance December 31, December 31, 2018 Increases Decreases 2019 Plant in service not subject to depreciation Land $ 8,969,999 $ 367,836 $ - $ 9,337,835 Intangible assets 231,716 231,716 Plant in service subject to depreciation Intangible assets 23,526,562 23,526,562 Steam producilon 10,363,488 10,363,488 Hydro production 162,579,170 8,036,955 (10,864) 170,605,261 Wind producbon 11,789,767 (1'1,789,767)

Transmission 84,785,666 684,789 (1,263,445) 84,207,010 Distribution 313,808,256 14,964,158 (3,133,666) 325,638,7M,l Telecommunications 19,452,087 302,125 (809) 19,753,703 General plant 158,027,521 3,404,343 (245,144) 161,186,720 Completed construction, not yet

-classified 16,979,284 11,466,538 (16,979,283) 11,466,539' Total utilrty plant in service 786,986,954 62,753,606 (33,422,978) 816,317,582 Accum-ulated depreC1abon (436,984,343) (23,997,144) 14,062,451 (446,919,036)

Plant not subject to depreaatJon Property held for future use 782,512 562,343 1,344,855 Construction work in progress 16,972,396 33,613,421 (13,529,512) I 37,056,305 Net ubllty plant $ 367,757,519 ' $ 72;932,226 $ (32,890,039) $ 407,799,706 41

C

-Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant (continued)

I

' Water Utility Plarit Balance Balance December 31, December 31, 2019 Increases Decreases 2020 Plant in service not subject to depreaab.on Land '$ , 1,758,733 $ 36,224 $ - $ 1,294,957 Intangible assets 58,-188- 58,188 Plant in service subject to depraaatlon i Source of supply 24,670,897 781,439 25,452,336 .;

Pumping 14,245,161 *, 5,913 14,251,074 Water treatment 38,803,342 115,017 *.38,918,359 Transmission & distnbution 180,1_93,856 9,815,255 (735,998) "'189,273,113 General plant 38,832,453 731,666 (1,188) 39,562,931 Completed construction, not yet classified 2,759,123

• 11,872,769 (21759,123) 11,872,769 Total ublity plant in service 300,821,753 . 23,358,283 (3,496,309) 320,683,727 Accumulated depreaati,on (129,025,071) (7,124,019) 284,898 (135,'864, 192)

Plant not subject to depreciabon Property held for future use 2,396,812 .(397,523) 1,999,289 Construction work_ in progress 1\498,352 15,4,14,652 (17;416,297) 9,496,707

Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant (continued)

Water Utilrty Plant Balance Balance Decem~r 31, December 31, 2018 Increases Decreases 2019 Plant m seMce not subject to depreaatJon Land . $ 1,258,733 $ $ $ 1,258,733 Intangible assets 58,188 58,188 Plant In service subject to depreciation Source of supply 24,411,213 259,684 24,670,897 Pumping 12,404,017 1,95p,915 (114,771) 14,245,161 Water treatment 35,742,975 3,060,367 38,803,342 Transm1SSion & d1stnbu1:Jon 171,666,471 9,496,135 (968,750) 180, 193,856 General plant 37,847,775 1,021,504 (36,826) 38,832,453 Completed construcbon, not yet classified 6,418,961 2,759,123 {6,418,961~ 2,759,123 Total utJlrty plantln service 289,808,333 18,552,728 (7,539,308) f 300,821,753 Accumulated depreCJatlon (123,146,121) (6,932,826) 1,053,876 (129;025,071)

Plant not subject to depreciation Property held for future use 2,396,812 2,396,812 Construction work in progress 6,551,690 13,227,151 {8,280,489~ 11,498,352 Capltalcontnbutions Contributions in Aid of Construction and System Development Charges are Pc!id by developers and customers to cover the cost of new electnc and water infrastructure (capital assets). When devefopers I

• install and cover: the costs of the infrastructure directly, those assets are referred to as Contributed Plant Ass~ts.

Note 4 - Cash and Investments The Board maintains cash and investments in several fund accounts m accordance. with bond resolutions and Board authorization Descnpt1ons of these fund account types are as follows:

Restricted cash and Investments Customer deposits and other-;- Used to account for 1) deposits coHected from retail customers and held for future refund or application to customer account balances, and 2) donations to the Customer Care Program.

A3

Euge~e Water & Electric Board Notes fo Flnanclal Statements Note 4 - Cash and Investments (continued)

Harvest Wi(Jd escrow accounts - Funds include amounts_ held in escrow relat~ to E~B's investment_in the Harvest Wind Project, consisting of funds depos~ed t<? escrow from the receipt of federal energy grant funds .in 2010, and a.deposit in lieu of letter of credit with regard to the Project's transmission contract with Klickitat PUD.

~

Construction funds:... Used to account for legally restricted cash and investments for the purpose of /

construction of capital projects. Funds include p~eds frorri the issuance of bonds and notes.

System development charge reserves - Used to account for charges assessed and collected in coniunction with installation of new water services in the Water System and are restricted by State of Oregon Stqtutes to system enhancements and other related capital expenditures Debt service reserves - Deposits held for debt service coverage pursuant" to bond indentures and/or in lieu of bond sureties.  ;

• Investments for bond principal af!d interest- Used to account for .cash and investments restricted by Bond Indentures of Trust for future payment of pnncipal and interest on debt.

Detailed amounts for restncted cash and investments were as follows.

2020 2019 Electric Water Electric Water System- System System System Debt service reserves $ 6,6961693 $ 1,492,130 $ 6,638,349 $ 2,398,358 Customer deposit and other . 1,80~,957 1,800,310 Harvest Wind escrow accounts 1,952,824 1,985,591 ConstructJon funds 55,545,654 11,405,384 19,465,578 . -

System development charge reserves 6,033,489 7,935,754 Investments for bond prinapal and Interest 13 4 766 206 Total restricted cash and investments $ 66,005,141 $ 18,931,007 * $ 29,890,594 $ 10,334,318

\

Designated cash and Investments Rate stabilization fund..:. Used to account

~ J for cash and investments the Board has designated to reserve for one-time expenditures, with any allocations made at Board discretion.

Power reserve - Used to account for cash and investments the Board has designated to reserve for fluctuations in purchased power costs, load, generation levels, or margin_ requirements. *,._

Capital improvement reserve - Used to account for*cash and investments the Board has designa'ted to reserve for capital improvements.

44

I I Eugene Water & Electric Board Notes to Financial Statements Note 4- Cash and lnvesbnents (continued)

Second source fund - Used to account for cash and investments the Board has designated to reserve for costs incurred to create a secondary water source.

Operating reserves-* Used to account for cash and investments the Board has design~tecl for payments of emergency, operating costs and self-insured claims.

Pension and medical reserves - Used to account for cash and investments the Board has d~signated for pension and post-retirement medical costs Detailed amounts for designated cash and investments were as follows.

2020 2019 Electnc Warer Electric water System System Sysrem Sysrem Rate stab1hza1Jon fund $ 24,468,927 $ 1,000,000 $ 24,468,927 $ 1,000,000 Power reserve 17,000,000 17,000,000 Caprtal improvement reserve 23,900,770 12,148,754 22,188,327 11,206,669 Second source fund 5,449,521 5,861;521 Operating reserve 5,856,679 1,374,818 7,853,568 1,584,364 Pension and medical reserve 974,000 393,000 Total designated cash and Investments $ 72,200,376 $ 20,366,093 $ 71,510,822 $ 19,652,554 Deposits with financial institutions are comprised of bank demand deposits, certificates of deposit, and money ma_rket accounts. The.total bank balances, as recorded in bank-records at December 31°, 2020, were $34.5 million. Of the bank balances, $4.1 million were covered by federal depository insurance and

$30.4 million were.collateralized wrth securities.

• Custo<;lial credit nsk for deposits is in the event of failure of a depository financial instrtut1on a depositor will not be able to recover deposits or will not be able'to recover collateral securities in possession of an outside party: Deposits not covered by d~pository insurance are exposed to custodial credit risk when collateral for deposits is held by the pledgir:ig institution or its trust department or agency, but-not in the name of the depositor. Wrthin the Public Funds Collateralization Program (PFCP) in Oregon, secunties*

pledged by, finandal institutions are required to be_ held in the name of the po?I, and, therefore, cannot be in the Board's name. However, provided an entity is recognized by the PFCP admini~or as an entrty

. covered by the pool, balances in excess of FDIC are covered by the collater:al of the pool.

The Board's investments during the year, which included obligations of the U.S. Government, are authorized by State of Oregon Statutes and bond resolution and by the Board's investment *policy.

• Authorized investments include the Oregon Local Government Investment Pool (LGIP), U.S Treasury securities, U.S. Government Agency securities, public funds money-market accounts, corporate commercial paper and bonds, and other investments enumerated. in and authorized by ORS 294.035, Investments of surplus funds of political subdivisions.

45

Eugene Water & Electric Board Notes to Flnancial Statements

. {

. Note 4- Cash and lnvesbnents (continued)

Jhe_ LGIP is included in the Oregon Short Term Fund (OSTF), which '#as establis~ed by tl)e State

• Treasurer. The OSTF is not subject to SEC regulation. The OSTF is subject to requirements estal:ilished

_in Oregon Revised Statutes, investment policies adopted by the Oregon lnvestment Council, and portfolio guidelines established by the OSTF Board. The Governor appoints the members of the Oregon Investment Council and OSTF Board. The fair value of the Board's position i,n the pool is the same as the value of the pool shares. Financial statements for the OSTF may be obtained from the Oregon State Treasurer's web~1te.

As of December 31, 2020, the Board held the following investments (Electric and Water Systems _

combined):

Weighted Average Investment Type Credit Ratins Carrying Value Mahmty (Years}  % of Portfollo Local Government Investment Pool Unrated $ 50,222,850 0.00 23.5%

U S. Agency Securrl:Jes FHLB 7,1~,970 3.4%

FNMA 13,402,909 63%

FHLMC 21,056,860 99%

FFCB 24,592,380 11 5%

FAMCA 8,039,000 3.8%

Other Agency 4,063,940 1 9%

Subtotal U.S Agency AA 78,306,059 1.33 368%

U.S. Treasury Securibes AAA . 65,534,556 1.42 30.7%

Munlclpal Bonds AA 3,031,884 1.52 1.4%

Corporate Bonds AA 16,290,420 1 53 7.6%

I Subtotal all securities 163,162,919 1 19 765%

Total $ 213,385,769 0.91 100 0%

- 'j 46

Eugene.Water & l;lectric Board Notes to Financial Statements Note 4 - Cash and Investments (continued)

As of December 31, 2019, the Board held the following investments (Electric and Water Systems combined):.

Weighted Average Investment TyP0 Credit Rabng Carrymg Value Matunty (Years)  % of Portfolio Local Government Investment Pool Unrated $ 49,528,363 0.00 362%

U.S Agency Securities FHL.B 15,762,207 11.5%

-FNMA 5,299,224 39%

FHLMC 14,406,218 10.5%

FFCB 11,479,910 84%

FAMCA 7,259,676 5.3%

Other Agency 2,044,460 1.5%

Subtotal U S. Agency AA 56,251,695 1 00 411%

U.S Treasury Secunbes AM 23,022,572 044 169%

Corporate Bonds AA 7,882,452 1.24 58%

Subtotal all secunbes 87,156?19 0.93 63.8%

Total $ 136,685,082 0.59 ' 100 0%

Concentration risk is when investments are concentrated in one issuer. This concentration presents a heightened risk of potential loss. This does not apply for pooled investments or investments directly in the US. government. ORS 294.035 limits investment in any single issuer of bonds to 5% of a portfolio, there is not a limit for investment in U S. Agencies. Many government-sponsored agency securities are not back~d by the full faith and credrt of the U.S. government, including those held by the Board, although .-

market participants widely believe the government would provide financial support to an agency if the need arose. The Board does not have a policy for investment concentration in those agencies. Regarding the LGIP, with the exception of pass-through funds, the maximum amount of pooled investments to be placed in the pool is limited by ORS 294.810, Local governments authorized to place limited funds in pool, to* $51.2 million as of December 31, 2020.

The "weighted average maturity in years" calculation assumes all investments are held until maturity.

47

Euger:ie Water & Electric Board Notes to Financial Statements Note 4- -Cash an_d Investments (continued)

As a means of limiting its exposure to fair value losses resulting from changes in interest rates, the Board's investment policy limits at least 25% of ~s investment portfolio to maturities _of less than 180 days.

Investment maturities are limited as follows* ' _,1 Maturity Minimum Investment Less than 180_days 25o/o Ldss than 1 year 40%

Less than 3 years 100%

Custodial credit risk for investments is in the event of the failure of the counterparty, the Board will not be able to recover the value of its investments or collateral se*cunt1es in the posses_sion of an outside party because they are neither insured nor registered and they are held by the counterparty or the _

counterparty's trust department or agent, but not in the investor's name. All of the aforementioned investments, and the investments i11 the LGIP, which are not evidenced by secunties, are held in the Board's name by a third-party custodian The Board's policy, which adheres to Oregon statutes, is to limit its investments to the top two ratings issued by nationally recognized credit rating organizations:_As a general practice, and in a further effort to minimize credit risk, the Board invests primarily in U.S. agency investments and in the LGIP.

Cash arid investments consisted of the following:

Cash and Cash Equlvalents and Total Carrying Total Carrying Restrtcted Cash Short-Tenn D~lgnated Amount Amount and Investments Investments Funds 2020 2019 8-ECTRIC SYSTEM Cash on hand $ - $ 13,560 $ - $ 13,560 $ 13,5B0 Cash In bank 2,773,384 13,491,147 16,264,531 34,926,439 Investments In the state of Oregon local government investment pool -13,468,063 7,737,048 17,367,532 38,572,643 ;38, 190,455 Investments - U S. Agencies, Treasuries, and Corp 49,763,694 20,292,942 54,832,844 124,689,480 65,935,031 Total electric system 68,005,141 41,534,697 72,200,376 179,740,214 139,065,485 WATER SYSTEM Cash in bank 778 8,917,194 a,911,gn 9,005,985 Investments in the state of Oregon local government investment pool 4,194,856 2,556,363 4,898,968 11,650,207 11,337,908 Investments - U S Agencies, Treasunes, and Corp 14,735,373 8,070,961 15,467,105 38,273,439 21,221,688 Total water system 18,931,007 - 19,544,518 20,366,093 58,841,618 41,565,581

$ 84,936,148 $ 61,079,215 $ 92,566,469 $ 238,581,832 $ 180,631,066 48

'.r r

Eugen'e Water & Electric'-Board Notes to Flnancial Statements Note 5 - Fair Value Measurement The Board categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles-The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs ar_e quoted prices in active markets for identical assets; Level 2

• inputs are significant other observable inputs; Level 3 mputs are significant unobservable inputs.

The Board determines disclosures related to these investments only need to be disaggregated by major type because investing is not a core part of the Board's mission. The Board has the following recurring fair value measurements:

As of December 31, 2020

-Fair Value Measurements Usina Quoted Pnces in Significant Mrve Markets for S19nrflcant other Unobservable ldenbcaJ Assets Observable Inputs Inputs 2020 (Level 1) (Level 2) (Level 3}

Investments by fair value level Debt secuntles U S. treasury secuntJes $ 63,534,556 $ 65,534,556 $ $

US agencies 78,306,059 78,306,059 Corporate bonds' 16,290,420 16,290,420 Municipal bonds 3,031,884- 3,031,884 Total debt securities $ 163,162,919 $ 65,534,556 $ 97,628,363 $

Derivative instruments Effective hedge-asset $ 806,347 $ $ 808,347 $

Effective hedge-lia~11ity (1,365,058) (1,365,058}

_Total denvabves $ (558,711) $ $ (558,711} $

49

Eugene Water*& Electric Board Notes to Financial Statements Note 6 - Fair Value Measurement (continued)

As of December 31, 2019:

Fair Value Measurements Usin!J Quoted Pnces In Significant Active Markets for S1gnrficant Other Unobservable Identical Assets Observable Inputs Inputs 2019 (Level 1.) (Level 2) (Level 3)

Investments by fair value level *

\. Debt securttles U.S treasury secunbes $ 23,022,572 $ 23,022;572 $ $

U S. agencies 56,251,695 56,251,695 Corporate bonds 7,882,452

• 7,882,452

. Total debt securfues $ 87,156,719 *$ 23,022,572 $. 64,134,147 $

• Denvatlve Instruments Effecbve hedge-a_sset I

' $ 1,021,222 $ $ 1,021,222 $

Effective tiedg&:liability" {1,445,152) (1,445, 152) -)

Total derivatives $ {423,930) $ $ {423,930) $

Debt securities classified in Level 1 _of the fair value hierarchy are valued using prices quoted in active markets for those secunties.

Debt securities classrfied in Level 2 of the fair value hierarchy are valued using various market and industry inputs,* including institutional bond quotes.

Derivative instruments classified in Level 2 of the fair value hierarchy are valued using an approach

_considenng contract prices.with forecast market prices 50

Eugene Water & Electric Board Notes to Financial Statements Note 6 - Receivables S1gnif1cant receivables were as follows.

2020 2019 Electnc Water Electnc Water System System System System Current receivables Accounts rece1Vable $ 25,372,317 $ 3,336,638 $ 30,385,872 $ 3,505,329 Allowance for doubtful accounts (367,405) (30,230) (414,708) (29,972)

Net accounts receivable 25,004,912 3,306,408 29,971,164 3,475,357 Loans to customers 1,914,952 110,833 3,250,137 69,486 Recervable from FEMA 844,519 51,625 Interest recervable 543,601 160,385 297,616 101,043 Miscellaneous receivables 827,720 435,478 Race1V8blas, less allowance $ 29,135,704 $ 3,577,626 $ 34,006,020 $ 3,645,886 Long-term recelV8blas Incentive loans to customers $ 3,103,002 $ 133,830 $ 3,514,596 $ 120,067 Long-term receivables, conseryatJon, and other $ 3,103,002 $ 133,830 $ 3,514,596 $ 120,067 Total amounts written off for the year ended December 31, 2020 were $512,000 ($58?,000 for 2019) for the Electric System and $63,000 ($45,000 for 2019) for the Water System.

Note 7 - Payables Current payables were as follO\Vs:

2020 2019 Elactnc *

• Water Elecbic Water System System System System Accounts payable $ 6,118,488 $ 813,744 $ 6,218,459 $ 689,330 Accrued purchased power 12,767,611 \

12,908,326 Construction payables 1,137,288 515,198 1,469,368 162,841

• Contributions in lieu of taxes f,232,085 1,223,831 Customer deposits 443,834 673,819

• Equipment purchases 102,309 175,274 118,239 Miscellaneous payables 95,524 14,196 66,919 31 602 Total payables $ 21,897J39 $ *1,343, 138 $ 22,735,996 $, 1,002,012 51

• Eugene Water & Electric Board Notes to Financial Statements

~ote 8 - Other Assets and Other Llabilities

,_ - \

Other assets and other liabilities were as follows:

2020 2019 Electric Water Electric' Water System System System_ System

• 1 Other assets Non-utilrty property $ 61,587 $ 579,162 $ 196,585 $ 181,639 Research & demonstratlon_projects 25,137 Derivatives at fair value 806,347 1,021,222 Option premiums long-term 166,600 343,520 Prepaid trans,m1ss1on expense -

Harvest Wind 769,908- 867,160 Regulatory assets Pension debits 15,994,929 8,144,637 9,654,702 6,142,460 OPEB debrts 5,514,092 2,266,036 3,900,071 1,756,345 Conservation assets 1,007,348 1,077,582 Unamortized bond ISSUe costs 1,466,926 648,957 1,174-,642 438,102 Other assets $ 25,787,737 -$ 11,638,792 $ 18,260,621 $ 8,518,546 Other llab1litles De,nvatJves at fair value $ 1,365,058 $ $ 1,445,152 $

EnVJronmental clean up 317,640 364,640 Sick leave - upon retirement 828,726 261,703 698,661 220,630 System development charge 53,496 47,801 Other Jiab1lrlles $* 2,511,424 $ 315,199 $ 2,508,453* $ 268,431 J

52 '-

Eugene W:ater & Electric Board Notes to Financial Statements Note 9 - Deferred Outflows of Resources and Deferred Inflows of Resources Deferred outflows of resources and aeferred inflows of resources were as follows:

2020 2019 Electric Water Electnc Water System System System System Deferred outflows of resources Accumulated decrease in fair value of r

hedging denvatives $ 1,365,058 ,$ $ 1,445,152 $

1 Unamortized losses on bond refunding 6,661,764 1,861,126 i,1 69,238 1,389,262 Pension - differences betvv'een expected and actual expenence 2,522,215 796,489 3,228,553 1,019,542 Pension - net drfference betv.ieen projected and actual earnings on investments 6,738,596 2,127,978 Pension - changes of assumptions 3,075,502 971,212 7,942,218 2,508,069 Pension - differences betv.ieen Board contributions and proportionate share of contributions 18,050,112 5,700,035, 3,285,869 1,037,643 Pension conbibutions supsequent to measurement date 2,720,112 858,982 23,763,750 7,504,342 OPEB - changes of assumptions 2,804,393 885,599 5,516,627 1,742,096 Deferred outflows of resources $ 43,937,752 $ 13,201,421 $ 52,351,407 $ 15,200,954 Deferred inflows of resources Accumulated increase in fair value of hedging denvatives * $ 806,347 $ $ 1,021,222 $

Pension - net difference between projected ana actual earnings on Investments 1,659,674 524,108 Pension - changes of assumptions 107,759 34,029 Pension - changes in proportion 19,642,451 6,202,879 15,627,064 4,934,861 OPEB - net difference bet\veen expected and actual experience 2,116,711 668,435 2,288,496 722,683 OPEB - net difference between proJected and actual earnings on investments 1,344,416 424,553 680,312 214,835 Deferred inflCMIS ~f resources $ 24,017,684 $ 7,329,896 $ 21,276,768 $ 6,396,487 53

Eugene Water & Electric Bqard Notes to Financial Statements Note 10 - Investment In Western Generation Agency The ~oard is a party to an lntergovemmefltal Agency, Western Gen'eration Agency 0AfGA), which is governed equally by the Board and Clatskanie RUD. WGA owns a* 36 MW nameplate cbgeneration project (the Project) at the Georgia Pacific mill in Wai.ma, Oregon The investment in W~ consists of 50% of net income and losses, and distributions from excess cash.

During 2020, $3.2 million in dist~butions.was received ($1.0 million in 2019). The balance of the:

investment as of December 31, 2020, was $3.0 rpillion including estimated income of $2.4 million ($3.8 million at December 31, in 2019 including estimated income of $1.8 million) Income is repqrted. with 1

,

• investment earnings. *

'The _Board and .Clatskanie PUD each purchase 50% of the Project's output. Financial information for the Project is included in the financial statements of WGA and may be obtained from Clatskanie PUD Note 11 - Investment in Harvest Wind

)

The Board Is a party to a Joint ownership agreement, whereby the Board made an equity investment in the Harvest Wind project, a 98.9 megawatt wind generating facility located in Klickitat County, Washington. The Board's ownership share of Harvest Wind is 20%. Other owners are Peninsula Light Co., 20%, Cowlitz PUD, 30%, and Lakeview Light & Power, 30% Commercial operation*s began on December15,2009 .. ' *

[)uring 2009, the joint owners of Harvest Wil']d elected to classify the project as an association taxable as a corporation. At ~he time of the election, all project assets were treated as contribute~ to the corporation.

The corporation received a 4% share, ,and the joint owners received shares in proportion to their ownership. Owners share in power output, income and expenses according to th'e1r ownership shares.

The investment in Harvest Wind' consists of the Board's share of costs to develop the project, 20% of the Project's net income and losses, and any distrib~tion*s. At December 31, 2020 the balance ofthe.Board's investment in ~arvest Wind was $18.9 million ($20.0 m1lhon at December 31, 2019) including estimated

-income of $745,000 ($451,000 in 2019) and distributions of $1.8 million ($-1 6 million in 2019).

The Board is committed, through an energy purchase agreement, to purchase its:share,of the output from the Project, and pay its share of project expenses through year 2029. Addrt1onally, the Board is committed; through a transmission service ~greement and a transmission payment agreement, to subsidize the construction and repl~cement of transmission lines, deposit funds to ensure contract performance, and purchase transmission from the owner of the transniission lines through the year 2029 Under the terms of a payment agreement, the Board deposited $1,340,000 from 2010 "treasury grant proceeds in an escrow account to ensure payment of its share of contingent liabilities of the corporation. If no such contingencies occur, the funds will be released from escrow 54

Eugene Water & Electric Board

,Notes to Financial Statements Note 11 - Investment In Harvest Wind (continued)

Under the tenns of a transmission agreement, the Board has $577,000 as of De-cember 31, 2020 ,

. ($6fO,000 at December 31, 2019) on deposit in an escrow account to ensure the payment of monthly transmission interconnection expenses.

Financial infonnation for the project is included in the financial statements of the project and may be obtained from the Board.

Note 12- Long-Tenn Debt On June 4; 2020, the Water System issued $18.5 m1l!ion in revenue bonds for the purpose of capital improvements and $14.9 m1,llion in revenue refunding bonds. Proceeds from the refunding bonds of $1.4.9 million plus $932,000 released ,from debt service funds were used to refund the Seri~s 2011 bonds and to pay costs of issuance. The refunding reduced aggregate debt service payments through year 2040 by

$3.7 million. The economic gain was $2.2 million On June 11, 2020, the Electric System issued $39.2 million in revenue bonds for the purpose of capital improvements and $16.8 million-in revenue refunding bonds. Proceeds from the refunding bonds of $16.8 million were used to refund a portion of the Series 2012 bonds and to pay costs of issuance. The refunding reduced aggregate debt service payments t~rough year 2038 by $2.7 million. The economic gain was $2 5 million. -

n,e Board has defeased bonds by placing proceeds and other sources of cash in an irrevocable trust to provideJ9r all future debt service payments on the old bonds. Accordingly,-the trust account assets and the liability for the defeased bonds are not included in the Board's financial statements. At December 31, 2020, $75.1 million of Electric System' bonds and $14.3 milllon of Water System bonds are considered defeased ($63 1 million of Electric System bo,nds at December 31, 2019).

The resolutions a-uthorizir)g the issuance of revenue bonds contain vanous covenants, sinking fund requirements and obligations wrth which the Board must comply. The pnnc1pal and interest requirements are reflected in the supplementary schedule "Long-Tenn Bonded Debt and Interest Payment Requirements." To comply with sinking fund deposit requirements, the Board makes semi-annual deposits with the trustee, less accumulated interest earnings. The interest payments are made semi-annually on February 1 and August 1-, and principal payments on August 1. At December 3-1, 2020 and 2019, no assets were pledged as security.for the outstanding bonds of the Electric and Water Systems.

55

Eugene Water*& Electric Board*

Notes fo Financial Statements

• Note 12 - Long-Tenn Debt (continued)

Bonds and notes payable were as foll?'-":f

_2020 2019

\.

Electric Utility System Revenue and *Refunding Bonds 2011 Series A, 6-08-11 issue Serial bonds 1.90%-2.85%, due 2017-2020 $ $ 2,475,000 2011 Series B, 6-08-11' issue Serial bonds 1.00%1--4.35%, due 2013-2023 2,845,000 3,720,000 \

2012 Series, 8-1-12 issue .

Serial bonds 2.00%-5 00%, *due 2013-2032 9,370,000 14,510,000

• Term bonds, 5.00%, due 2033-2038 10,165,000 Term bonds, 3.75%, due_2039-2042 8,475,000 8,475,000 2016 Series A, e:-7-16 issue Serial bonds'2.00%-5 00%, due 2017-2036 80,665,000 81,565,000 Term bonds 4.00%, due 2037-2040 8,065,0,00 8,065,000 2016 Series* B, 9-7-16 issue .

_Serial bonds .835%-1.840%, due 2017-2022 8,585,000 12,405,000 2017 Series, 9-21-17 issue Serial bonds 5,00%, due 2027-2043 23,635,000 23,635,000 Term bonds 5.00%, due 2043-2047 10,160,000 10,160,000

)

2020_Series A, 6-11-20 issue )

Serial bonds 3.00%1-4 00%, due 2027-2040 19,840,000 Term bonds 4.00%, due 2041-2045 9,910,000 Term bonds 4.00%, due 2046-2049 9,450,000 2020 Series B, 6-11-20 issue Senal bonds 1.341%-2.827%, due 2024-2038 16,790,000 207,790,000 175,175,000 Add unamortized premium 27,326,384 23,497,051 Electric System bonds payable 235,116,384 198,672,051 Less current portion 6,745;000 8,540,000 Electric System bonds patable, net of current portion 228,371,384 190,132,051

- -r 56

Eugene Water -& El_ectric. Board Notes to Financial Statements Note 12- Long-Tenn Debt ~c~ntlnued) 2020 2019 Water Utility System Revenue and Refunding Bon-ds 2011 Sanes, 6-08-11 issue Serial bonds, 2.00%-4.25%, due 2014-2031 $ $ 6,790,poo renn bonds, 4.50%-5.00%, due 2032-2040 7,935,000 2016 Series, 5-19-16 issue Serial bonds, 2.00%-5.00%, due 2017-2037 25,570,000 27,425,000 Term bonds, 4.00%, due 2038-2045 6,860,000 6,860,000 2020 Series A, 6-04-20 issue Serial bonds, 3.00%-c-4.00%, due 2023-2040 10,490,000 Term. bonds, 3 00%, due 2p.41-2044 3,290,000 Term bonds, 3.00%, due 2045-2049 4,690,000 2020 Series B, 6-04-20 issue Serial bonds, .923%-2.631 %, due 2021-2035 10,475,000 Term bonds, 3 123%, due 2036-2040 4,430,000 65,805,000 49,010,000 Add unamort!,zed premium 5,757,546 4,633,716 Water System bonds payable 71,562,546 53,643,716 Less current portion

.. /

2,555,000 2,325,000 Water System bonds payable, net of current portion 69,007,546 51,318,716 Total System long-tenn debt, net of c,urrent portion $ 297,378,930 $ 241,450,767 The schedule of maturities for principal and interest on bonded debt Is as follows.

Electnc System Water System PnnaElal Interest Princieal Interest 2021 $ 6,745,000 $ 8,594,847 $ 2,555,000 $ 2,372,132 2022 8,260,000 8,419,242 2,660,000 2,2~9,659 2023 9,095,000 8,177,558 2,390,000 2,161,399 2024 7,980,000 7,747,310 2,490,000 2,070,052 2025 8,275,000 *7,370,236 2,575,000 1,986,913

• 2026-2030 48,345,000 30,987,700 14:425,000 8-,366,765 2031-2035 44,09_5,000 20,041,545 13,040,000 1 5,733,315 2036-2040 35,995,000 12,800,920 13,705,000 3,346,041 2041-2045 24,650,000 6,186,588 8,160,000 1',444,800 2046-2049 14,350,000 1,334,098 3,805,000 289,350

$ 207,790,000 $ 111,660,044 $ 65,805,000 $ ~0,040,426 57

Eugene Water & Electric 89ard

• Notes to Financial Statements I

• Note 12.:.. _Long-Tenn Debt (continued)

Long-term debt activity for the year. ended December 31, 2020 was .as follows:

Outstanding Outstanding December 31, DueWthln January 1, 2020 AddrtJons Reductions 2020 One Year

~

Booiic revenue bonds $ 175,175,000 $ 55,99'0,000 $, (23,375,000) $ 207,790,000 $ .. 6,745,000 Water revenue bonds 49,010,000 33,375,000 . (16,580,000) 65,805,000

- 2,555,000 Total borxled debt $ 224,185,000 $ 89,365,000 $ ~39,955,00,0), $ 273,595,000 $ , 9,300,000 ,

Long-term debt activity for the year ended December 31, 2019 was as follows.

OUtstanding Outstanding December 31, Due Vv'lthm January 1, 2019 Additions Reductlons 2019 One Year Bectr1c revenue bonds $ 183,620,000 $ - $ (8,445,000) $ 175,175,000 $ 8,540,000 Water revenue bonds 51,240,000 (2,230,000) 49,010,000 2,325,000 Total borxled debt $ 234,860,000 $ - $ (10,675,000) $ 224,185,000 $ 10,865,000 I

Note 13 - lntersystem Items

1. Obligations 2020 Electric Water Total System System . Systems Due from Water, (Due to) Electric Current Interest $ 13,825 $ . (13,825) $

Roosevelt Operations Center '361,303 {361;303}

375,128 (375,128)

Non--cu1TSnt Roosevelt Operations 'center 6,419,950 {6,419!950}

Totals $, 6,795,078 $' {6,795,078) $

58

Eugene Water & Electric Board Notes to Firianclal Statements Note 13 - lntersystem Items (continued) 2019 Electric Water Total System System Systems Due from Water, (Due to) Electnc Current Interest $ 14,544 $ (14,544) $

Roosevelt Operabons Center 352,580 (352,580) 367,124 (367,124)

Non-current Roosevelt Operations Center 6,781,253 (6,781,253)

Totals $ 7,148,377 $ (7,148,377) $

Amounts receivable and payable between the Electric and Water Systems and related interest earnings and expense are eliminated in the Total System columns of the financial statements Roosevelt Operations Center The Electric System financed the acquisition and construction of the Board's Roosevelt Operations Center consisting of land, buildings, equipment and personal property placed into service during November 2010, Both the Electnc and Water System~ occupy the property. A payment schedule was established in November 2010 whereby the vyater System will repay the Electnc System for its estjmated share of the fair value of the property and the associated financing costs inc.urred by the Electric System without gain to the Electric System. The Roosevelt Operations Center was recorded in equal amounts as Plant in Service and an obligation fo( the Water System, along with depreciation expense and a receivable.for the Electrfc System.

Paymen'ts are revised for refinancing of underlying debt incurred by the Electric System. The obligation is also revised for cap1talized improvements at the facility if they are financed by the Electric System.

Monthly payments were approximately $44,000 as of December 31, 2020 and December 31, 2019 on a capitalized value of $17.6 million for the Water System.

Annual totals for payments (including interest) as of December 31, 2020 were as follows:

2021 $ 523,173 2022 523,173 2023 523,173 2024 523,173 2025 523,173 2026-2030 2,615,863 2031-2035 2,615,863 2036 317,253

$ 8,164,844 59

Eugene Water & Electric Board Notes to Financial Statements Note 13.:.. lntersystem Items (continued)

2. _lntersystem Transfer - The Electric System transferred approximately $1'96,000 to th~ Water System in 2020 for cumulative rental income received by the Electric System pertaining to property of the W~er System.

Note 14 - Net posit.ton Components of net position as of December 31, 2020 and 2019 are as follows:

2020 2019 Electnc Water Electric Water System System System System.

Net Investment m capital assets $ 251,253,583 '$ 131,358,176 $ 241,619,954 $ 126,446,037 Restricted for: .

Customer care program' 1,366,122 1,'126,491 Harvest Wind escrow 1,952,824 1,985,591 System development changes 5,979,'993 7,887,954 Debt service . 3,115,521 503,746 3,439,981 1,507,558 6,434,467 6,483,739 6,552,063 9,395,512 Unrestncted 129,851,406 37,370,477 130,2661680 28,837,323

$ 387,539,456 $ 175,212,392 $ 378,438,697 $ 164,678,872 Note 15- Special Items In 2019, the Board made a $22.0 n:i1llion deposrt to an Oregon Public Employees Retirement System (OPERS) side-account. It reduced EWEB'.s employer contribution rate as of November 1, 2019 and will provide ongoing savings In addition, this deposrt received a $5.5 million match from the state's Employer Incentive Fund.

• Note 16- Power_Supply ~eso'urces.

Bonneville Power Administration

_Bonneville Power Administration Contract~ - A contract was signed on December 4, 2008 providing power to EWEB from October 1, 2011 through September 30, 2028. _The Board reselected a combination of both Block and Slice System power prcx:lucts from those offered by Bonneville Power Administration.

• -. (BPA) in the previous contract which ended September 30, 2011. While Slice and Block are still the offered prQducts, BPA implemented ne:-v policies on how it s~lls power and what it will charge to meet customer's future load growth. Under BPA's tiered rate methodology policy, BPA' has allocated the power output and_ operational costs of the existing low-cost federal resources into a tier 1 pool., The tier 1 power

• was allocated to public power customers like EWEB based on each customer's 2010 actual weather-adjusted load. The allocation determined the maximum planned amount of tier 1 power.

60

Eugene Water & Electric Board Notes to Financial Statements Note 16 .;.. Power Supply Resources (continued)

Each product provides attributes bringing different kinds of flexibility to the Board's power p_ortfolio. The

• Slice product provides a percentage of BPA's resources rather than a guaranteed amount of power and in exchange the Board-pays its.Slice contract J percentage share of BPA's costs. Slice output, i'n combination with the Block and other E\NEB resources, may be more or less than what is needed to serve EWEB's ho'urly retail loads. In the spring months, available must- run water in the Columbia system is typically high due to the runoff from snow melting,. c:!nd the increased power generation may require BPA to rely on spilling water as_a tool to balance generation with demand. However, to maintain safe water cond1t1ons to protect fish, spills are limited. The risk associated with the Slice product is managing the water variability and available Slice storage to economically meet hourly load obligations and to optimally dispatch the value of the surplus portion ,of the Slice product The Slice product consists of a Slice share of BPA's Federal Base System generation. Under the contract, the Board's initial Slice percentage share is 1.81 %. The -amount of actual power received under the Slice product will vary with seasonal water year conditions, the performance of the Columbia Generating Station (CGS) nuclear plant and the performance and availability of all other Federal Base System resources. In years of heavy water flow and lack of overall storage in the Federal System, the Board may have rights to power in excess of their needs, and in low water years the Board would need to augment rts share of Slice output with its own generation, market purchases, or storage releases from EWEB's share of Slice storage The second BPA product purchased is the Block, which provides a fixed hourly amount for a given month, and varies by month. The value of the Block prcx:luct is the certainty of a fixed volume of energy, shaped to monthly load requirement, and the monthly predictability of prices for the known quantity of power.

The annual amount of power the Board is entitled to under this contract is based on the actual weather adjusted load during the -period between October 1, 2009 and September 30, 2010, with some adjustments specified in BPA's tiered rate methodology, is approximately 250 aMW BPA Transmission Contract- In 2001, the Board signed the Network lntegratio~ Tr_ansmission Service contract with BPA to provide transmi_ssion for the Board's generation projects and BPA power to serve EWEB's load. The current contract term extends through September 30, 2028. EWEB has firm roll-over rights with this contract.

EWEB-owned resources Carmen-Smith Hydroelectric Project- EWEB owns and operates the Carmen-Smith Hydroelectric ProJect (Carm~n-Smith Project) within the fy'lcKe~1e River-basin. The Carmen-Smith Project includes the Carmen Powerhouse with two generating units with a nameplate capacity of 52 MW each. The Carmen-Smith Project also includes the Trail Bndge re-regulating facility, with an additional generating unit with a nameplate capacity of 10 MW.

61

Eugene Water & Electric Board' Notes to Financial Statements Note 16..:.. Power Supply Resources (continued)

A new 40-year federal operating license for the Camien-Smith Project was issued on May 17, 2019. The license, which includes requirements for fish, wildlife, vegetation, water quality, land and,road ,,

management and recreation enhancements, is supplemented by a Settlement Agreement that was filed with FERG in November 2016. Of note, EWEB will be modifying the Carmen-Smrth Project for fish _

passage at Trail Bridge Dam. When complete, the Trail Bridge Powerhouse will transition from a r&-

regulatmg generation facility to the low-level outlet from Trail Bndge Reservoir In addition, the Board is refurbishmg the power plant to perform over th_e lrfe of the new license.

International Paper Industrial En,ergy Center Cogeneration Project-The Board and International Paper Company jointly operate a cogeneration facility at the International Paper Springfield plant The unit, which has a nameplate capacity of 25.4 MW (average output is approximately 20 aMW), is owned by the "

Board, with International Paper providing operation support and fuel. Under terms of the current ,

agreement (which expires in September 2023), the proJect costs and output for this ynit are shared

.. equally by the parties. " ' '

Leaburg Waltervil/e Hydroelectric Project- The Board owns and operates the Leaburg ,Walterv1lle Hydroelectric Project (L-W Project) on the McKenzie River in Lane County, Oregon. The L-W Project Is comprised of two run-of-nver facihti~ located at different points on the McKenzie River. The Leaburg facility includes a diversion dam on the McKenzie River, a canal and two generating units with a combined nameplate capacity 9f 15.9 MW. .See note 21 - Temporary Impairment for additional information The Wa!terville facility includes a canal diverting water from the McKenzie River and one generating unrt with a nameplate capacrty of 8 MW. In April 2000, FERG granted the Board a1new hydroelectric ,license fqr the L-W Pr:oject The license is for a term of 40 years. *

• Stone Creek Hydroelectric Project- The Stone Creek Project has one turbirie with a peak capacity of 12 MW The facility is ori the Clackamas River approximately 45 miles southeast of Portland. The proJect is a run-of-the-river development located between two hydroelectric facilities that are owned and operated by'

-.' ~ortland General Electnc (PGE). The Stone Creek facility is operated and maintained for EWEB by Energy Northwest and is licens~ through August 2039.

I..,

Jointly-?wned resources _

Foote Creek I Wirid Project- The Board and PacifiCorp were the Joint owners of the Foote Creek I Wind Project with the Board having a 21.21 % ownership, which translates*to 8.8 MW of the project capacity The proJect is located along the Foote Cree~ Rim in Carbon County, Wyoming EWEB has sold 26% or 2.3 MW of its share to BPA under terms_ of a 25 year power purchase agreement, pursuant to which BPA has committed to purch~s~ 1°5.3 MW of the Project's total G9pacrty. Net of sales to HPA, the Board received approximately 2.5 aMW per year from the Foote Creek I Project. EWEB sold its interest in the project in June of 2019.

Harvest Wind Project~ The Board, Cowlitz PUD, Lakeview Light and Power, and Pen_insula Light Company are the joint owners of the Harvest Wind ProJect, with the Board having a 20% ownership share. The project has a nameplate capacity of 98.9 MW and is located m Klickitat County, Washington.

All project assets are held by a corporation formed' by the owners. The Board and other owners have committed to P,Urchase power from the corporation in prop.oition to their ownership shares through _.

• December 2029.

62

Eugene Water & Electric Board Notes to Financial Statements Note 16...:. Power Supply Resources (continued)

Western Generailon Agency- The Board and Clatskanie People's UtilitY District (CPUD) equally govern the Western Generation Agency, which owns a 36 MW nameplate cogeneration project at the Georgia Pacific mill in Wauna, Oregon. The generation facility includes a steam turbine and a fluidized bed boiler.

EWES and CPUD each purchase 50% of the output. The power p_urchase agreement will expire April 6, 2021, the effectiveidate of'a WGA Agreement to sell the project to Georgia Pacific. See note 22 -

)

Subsequent Events for more infonnation Contract resources Stateline Wind Project- In 2002, the Board agreed to purchase 25 MW from Phase 1 of the Stateline Wind Project located in Walla Walla County, Washington and Umatilla County, Oregon. The project consists of 454 wind turbines with a total project nameplate capacity of 300 MW. The contract for this p~er expires on December 31, 2026.

Klondike Ill Wind Project- In* 2006, the Board agreed to purchase 25 MW from Phase 3 of the Klondike Wind project located near the town of Wasco in Shannan Gounty, Oregon. The project consists of 125 wind turbines with a total nameplate capacity of 224 MW. The contract for this power expires on October 31, 2027.

Seneca Sustainable Energy- In 2010, the Board entered into a Renewable Power Purchase Agreement with Seneca Su_stainable Energy LLC 'to purchase the total output of the b1om~ss fueled electric cogeneration facility located in Eugene, Oregon. Nameplate capacity is 19 8 MW. Expected average output is approximately 14.aMW. The contract for this.power expires on April 5, 2026.

Priest Rapids and Wanapum Hydroelectric; Projects..,. The Board purchases power from the Priest Rapids Project composed of the Priest Rapids Dam and the Wanapum Dam, two large hydroel~ric developments on the Columbia River in Washington OV,(ned by Public Utility District No. 2 o(Grant County, Washington (G.rant County PUD). Under this contract, EWEB's share of purchased physical power from Grant County PUD is 0.14% of the project output or about 1.4 aMW per year The contract for this power'continues through March 31, 2052.

Smith Creek Hydroelectric Project- The Smith Creek project is a nm-of-t.he-river hydroelectric project on Smith Creek, a tributary of the Kootenai River in Northern Idaho. It Is compri_sed of three uni.ts with a combined nameplate capacity of 38.3 MW. The Board sold this project for $22.3 million in May of 2016, entenng into a three year power purchase agreement with the new owner The contract for this power

. expired on June 30, 2019.,

\.

63

Eugene Water & Electric Board Notes to Financial Statements Note 16..:.. Power Supply Resources (continued)

Energy Northwest-*Energy Nor:thV"'.est is a Washingtoffmunicipal_corporation, engaged iri the construction of five nuclear generation facilities (Projects Nos. 1,2,3,4 and 5), of which EWES purchased a 0.061 percent share of ProJect No 1. The Board is not a member of Energy Northwest -EWES, Energy -

Northwest, and Bonneville entered mto a separate Net Billing Agreement, under which EWES purchased from Energy Northwest, and in tum, assigned to Bonneville, EWEB's share of the capability. Construction of Project_No 1 was terminated in 1994. However, under the Net Billing Agreement, Bonneville is responsible for EWE~'s percentage share of the total annµal cost ~f Projects No 1, including, debt service on revenue bonds issued to finance the cost of construction, whether or not the Project was completed.

This has resulted in zero payments by, or credits to EWES under the Net Billing Agreement. In the event that Bonneville fails to make a payment, or the parties terminate the agreement to directly pay, the

-original obli~ations of the Net Billing Agreements wou-ld resume. Bonneville haf always met all of its obligations to Energy Northwest. '

Solar PV Purcha~es-::- EWEB supports.the development of Solar PV generation* in Eugene through the provision of net metering rates to thqse customers with small systems that wish to self-generate power and renewable generation rates for customers with larger systems. To date, EWEB's Net Metered program has a total 1nstalled capacity of slightly over 6.0 MWand 0 69 aMW of energy and direct generation contracts with a total capac;ity of Just over 2.8 MW and 0.32 aMW of energy Note 17 - Retirement Benefits

1. Pension Plan Plan description - Board employees are provided with pensions through OPERS. It 1s a cost sharing multiple-employer defined.benefit pen~ion plari. All Board employees are eligible to participate in OPERS after six months of employment. Oregon PERS, a component unit of the State of Oregon, issues a comprehensive annual financial report, which may be obtained from the OPERS website, www.oregon.gov/pers. * ,

Description of Benefrt Tenns-AII benefits of the OPERS are established by the legislature pursuant to ORS Chapters 238 and 238A.

• Tier OnefTier Two Retirement Benefit (Chapter 238) Tier One/Tier Two Retirement Benefit plan is closed to new m~mbers hired on or_after August 29, 2o'0_3.

Pension benefits - The PE(~S retirement allowance is payable monthly for life. It may be se!ected from 1,3 retirement benefrt options. These options include survivorship benefits and lump-sum refunds. Retireme,nt benefits are determined as 1.67 percent of the employee's final average salary times the employee's years of retirement credit. Ben-efrts may also be calculated under either a formula plus annuity (for members who were contributing before August 21, 1981) or a money match cornputation if a greater benefit results.

• 64, I '

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (continued)

A member is considered vested and will be eligible at minimum retirement ag~ for a service retirement allowance if he or she has had a contribution in each offive calendar years or.has reached at least 50 years of age before ceasing employment with the Board. General service employees may retire after reaching age 55. Tier One general service employee benefits are reduC:ed if retirement occurs pnor to age 58 with fewer than 30 years of service. Tier Two members are eligible for full benefits at age !;50 Death benefits - Upon the death of a non-retired member, the beneficiary receives a lump-sum refund of the member's apcount balance (accumulated contributions and interest). In addition, the beneficiary will receive a lump-sum payment from employer funds equal to the account balance, provided one or more of the following conditions are met..

the member was employed by a PERS employer at the time of death, the member died within 120 days after termination of PERS-covered employment, the member died as a result of injury sustained while employed in a PERS-covered job, or the member was on an official leave of abse~ce from a PERS-covered job at the time of death.

Disability benefits -A member with 10 or more years of creditable service who becomes disabled from other than duty-connected causes may receive a non-duty disability benefit A disability resulting from a job-incurred inju~ or illness qualifies a member (including PERS judge members) for disability benefrts*regardless of the length of PERS-covered service. Upon qualifying for either a non-duty or duty*disability, servi~ tii:ne is computed to age 58 (55 for police and fire members) when determining the monthly benefrt. *

/

Benefit changes after retirement- Members may choose to continue participation in a variable equities investment account after retiring and may experience annual benefit fluctuations due to changes in the market value of equity investments.

Under ORS 238.360 monthly benefits are adjusted annually through cost--0f-living changes.

Under current law, the cap.;n the COLA in fiscal year 2015 and beyond will vary based on 1.25 percent on the firs, $60,000 of annual benefit and 0.15 percent on annual benefits above

$60,000.

• OPSRP Pension Program Pension Benefits Pension benefits - The Pension Program *(ORS Chapter 238A) provides benefits to *members hired on or after August 29, 2003.

• 65

)

Eugene Water-& Electric Board Notes to Financial Statements Note 11.:... Retirement Benefits (continued)

I I

This portion of OPSRP provides a life pension funded by employer contributions. Benefits are calculated with the following formula for members who attain normal retiremeqt age: General service: 1.!', percent is multiplied by the number of years of servi~ and the final average salary.

Normal retirement age for general service members is age 65, or age 58_ wrth 30 years of retirement credit.

A member of the OPSRP Pension Program becomes vested on the earliest of the following dates: ~he date the member completes 600 hours0.00694 days <br />0.167 hours <br />9.920635e-4 weeks <br />2.283e-4 months <br /> of service in each of five calendar*years, the date the member reaches normal retirement age, and, if t~e pension program is terminated, the date on which termination becomes effective Death benefits,- Upon the death of a non-retirecl'member, the spouse or other person who is constitutionally required to be treated in the same manner as the spouse, r~ives for life 50 ,

percent of the pension that would otherwise have been paid to the deceas~ member.

Disability benefits - A member who has accrued 10 or more years of retirement credits before

_the member becomes disabled or a member who becomes disabled due to Job-related injury shall receive a disability benefit of 45 percent of the member's salary determined as of the last full month of employment before the disabil!ty occurred.

- Benefit changes after retirement- Under ORS 238A.210 monthly benefits are adjusted annually through cost-0f-living changes. Under current law, the cap on the COLA in fiscal year 2015 and beyond will vary based on 1.25 percent on the first $60,000 of annual benefit and 0.15 percenton annual benefits above $60,000.

Contributions PERS funding policy provides for monthly employer contributions at actuarially determmed rates. These contributions, expressed as a percentage of covered payroll, are intended to accumulate sufficient assets to pay benefits when due. This funding policy applies to the PERS Defined Benefit Plan and the Other Postemployment Beriefrt Plan_s.

Effective in 2017, the Board elected to join the State & Local Government Rate Pool (SLGRP) rather than continue as an independent employer. The Board made a one-time contribution of.$32.6 million in*

2018. to cover the transition liability.associated with Joining the pool. The transition liability was the estimated amount hE10ded to achieve n;ite equity wrth other m~mbers of the pool. During 2019, the

• Board made a lump-sum contribution of $22 million to,qualify for a matching contribution from the Oregon Employer Incentive Fund of $5.5 million. The decreased erpployer contribution rates effective November 1, 2019 include the impact of these contnbutions.

66

,)

Eugene Water & Electric Board Notes to Financlal Statements Note 17 - Retirement Benefits (continued)

Employer contribution rates during tl)e penod were based on the December 31*, 2015 actuarial valuation. The rates based on a,percentage of payroll, first became effective- July 1, 2017. Employer contnbution rates changed dunng 2019, based on the December 31, 2017 actuarial valuation. The state of Oregon and certain schools, community colleges, and political subdivisions have made lump sum 1

payments to establish side accounts, and thejr rates have been reduced. The Board has *elected to make [ump-sum payments to OPERS during 2019, 2007, and 2001, which has had the effect of

-lowering the employer contribution rate. The Board's contribution rates effective July 1, 2017 were 27.51% for Tie~ One/Tier Two members and 21.33% for OPSRP General service members. The Board's contribution rates effective July 1, 2019 were 30.5% for Tier One/Tier Two members and 24.94% for OPSRP General service members Effective November 1, 2019 following a side-account deposit, employer contribution rates dropped to 19.35% for Tier One/l7er Two members and 13. 79% for OPSRP Employer contribut1on-s based on payroll for the year ended December 31, 2020 were $6.9 million ($9.2 millioh in 2019).

Pension llablllty, pension expense, deferred outflows of resources, and deferred inflows of resources related to pensions At December 31, 2020, the Board reported a net pension liability of $75.4 million for its proportionate share of the OPERS net p~nsion hab1lrty ($77.0 million in 2019). The net pension liability was measured as of June 30, 2020 and the total pension liability for each plan used to calculate the net pension liability was d.etermined by an actuarial valuation as of December 31, 2019 rolled forward to June 30, 2020 using standard update procedures. The Board's proportion of the net pension liability was based on a projection of the Board's long-term share of contributions to the plan ,relative to the projected contnbutions for all participating employers, actuarially determined. The Board's proportionate share of the net pension liability as of June 30, 2020 was 0.34552008%.

For the year ended December 31, 2020, the Board's proportionate share of system pension expense was

$17 2 million ($19.7 million in 2019) The Board has elected to use regulatory accounting to recognize pension expense in conjunction with the required employer contribution rates Accbrdingly, the Board recognized pension expense related to Tier One/Tier Two and OPSRP of $6.9 million ($9 2 million m 2019.

67

Eugene Water &- Electric Bo~d Notes to Financial Statements r

Note 17 - Retirement Benefits_(contlnued)

The Board reported d~ferred outflows of resources and deferred inflo~ of resources related to pensions from the following sources* '

December 31, 2020 Deferred Deferred O'utflows of Inflows of

-Resources Resources Net difference between projected and actual earnings o~ \

plan investments , * $ 8:866,574 $

Differences between expected and actual experience 3,318,704 Changes in assumptions 4,046,714 141,788 Changes in employer proportion 25,845,330 Differences between employer contributions and- proportionate .

share of contrihutions

• 23,750,147 Pension contributions subsequent to measurement date 3,579,094

$ 43,561)33 $ 25,987,118 December 31, 2019 Deferred Deferred Outflows of Inflows of Resources Resources Net difference between projected and actual earnings on plan investments _ -$ $ 2,183,782 Differences between expected and actual experience 4,248,095 Changes in assumptions 10,450,287 Changes in employer proportion 20,561,925 Drfferences between employer contributions and proportionate share of contributions ' 4,323,512 Pension contributions subsequent to measurement date 31,268,092

$ 50,289,986 $ 22,745,707

_$3.6 million reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the_net pension liability in the year ended December 31, 2021 ($31.2 million *as of December 31, 2020).

68

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (continued)

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions are to be amortized as*pension debrts and pension credits as follows:

Difference Between Net Difference Differences Employer Between Between Changes of Changes of Contnbutlons (

Projected and Expected and Assumptions Assumptions and Proportionate Actual Earnings Actual (Deferred Inflows (Deferred Outflows Changes m Share of Fiscal Year on Investments Expenence of Resources) of Resota"CeS l Proportion Contnbutlons 2021 $ (1,796,069) $ 1,287,664 $ (32,974) $ 2,027,383 $ (8,305,421) $ 6,080,088 2022 2,793,176 92~,475 (32,974) 2,027,383 (7,117,865) 5,763,173 2023 4,732,762 774,992 (32,974) - (14,063) (6,206,619) 5,478,476 2024 3,136,705 279,857 (32,974) (24,232) (3,396,906) 4,971,575 2025 47,716 ~9,892) 30,243 (818,619) 1,466,835

$ 8,866,574 $ 3,318,704 $ (141,788) $ 4,046,714 $ (25,845,330) $ 23,750,147 Actuarial methods and assumptions used in developing the total pension llablllty The total pension liability in the December 31, 2018 actuarial valuations were determined using the following actuarial assumptions.

Valuation date December 31, 2018 Measurement date June 30, 2020 Actuarial cost method Entry age normal Actuarial assumptions:

Discount rate - 7.20%

Inflation 2.50%

Payroll growth 3.50%

Projected salary iricrease 3.50~

Investment rate of return 7.20%

Mortality rates for healthy retirees and beneficiaries were based on the Pub-2010 sex-distinct tables, as appropriate. Mortality rates for active members are a percentage of healthy retiree rates that vary by group, as described in the valuation. For d_isabled retirees, mortality rates are based on the Pub-2010 generational disabled mortality sex-distinct table.

Actuanal valu~t1ons of an ongoing plan involve estimates of the value of projected benefits and assumptions about the probability, of events far into the future. Actua~ially determined amounts are.

subject to continual revIsIon as actual results are compared to past expectations and new estimates are made about the future. Experience stud_ies are performed as of December 31 of ev_en numbered y~ars The methods and assumptions shown above are based on the 2018 Experience Study which reviewed experience for the four-year period ending on December 31, 2018.

,69

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits {continued)

Discount rate The discount rate used to measure the total pension liability was 7.20 percent for the Defined Benefit Pension Plan The projection of cash flows used to determine the discount rate assu!'lled contributions from plan members and those of the contnbuting employers are made ,at the contractually required rates, as actuarially determined. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all,projected future benefit payments of current plan members.

Therefore, the long-term expected ri:lte of return on pension plan inv~tments for the Defined Benefit Pension Plan was applied to all periods of projected benefit payments to determine the total pension liability .

Long-term expected rat~ of return To develop an analytical basis for the selection of the long-term expected rate of return assumption, the PERS Board reviewed long-term assumptions developed by both Milhman's capital !'llarket assumptions team and the Oregon Investment Council's (OIC) investment advisors. The table below shows rylilliman's assumptions for" each of the asset classes in which the plan was invested based on the OIC, long-term target asset allocation. The OIC's description of each asset class was used to map the target allocation to the ass_et classes shown below. *Each asset class assumption is based on a consistent set of underlying assumptions, and includes adjustment for the inflation assumption.

, 70

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (continued)

These assumptions are not based on historical returns, but instead are based on a forward-looking capital market economic model.

Compound Annual Return Asset Class Target (Geometric)

Core Fixed Income 9.60% 4.07%

Short-Term Bonds 9.60% 3 68%

Bank/Leveraged Loans 3.60% 5.19%

High Yield Bonds 120% 5.74%

Large/Mid Cap US Equities 16.17% 6.30%

Small Cap US Equities 1.35% 6.68%

Micro Cap US Equities 1 35% 6.79%

Developed Foreign Equities 1348% 6.91%

Emerging Market Equities 4.24% 7.69%

Non-US Small Cap Equities 1.93% 7.25%

Private ~guity 17.50% 8.33%

Real Estate (Property) 10.00% 5.55%

Real Estate (REITS) 2.50% 6.69%

Hedge Fund of Funds - Diversified 1.50% 4.06%

Hedge Fund - Event-Driven 0.38% 5.59%

Timber 1.13% 5.61%

Farmland 1.13% 612%

Infrastructure 2.25% 6.67%

Commodities 1.13% 3.79%

Assumed Inflation - Mean 2.50%

Sensitivity of Net Pension Liability to Changes in the Discount Rate (in Millions) As of June 30, 2020:

Current 1% Decrease Discount Rate 1% Increase Employers' Net Pension Liability (6.2%) (7.2%) (8.2%)

Defined Benefit Pension Plan $ 111,969,237 $ 75,404,366 $ 44,743,123 Pension plan fiduciary net position .

Detailed information about each pension plan's fiduciary net position is available.in the separately issued OPERS financial reports. .

• Payable to the pension plan The Board had no contributions payable to the pension plan for the year ended December 31, 2020.

71

Eugene Water & Electric Board Notes to Financial Statements

.Note 17 - Retirement Benefits (continued)

Changes in plan provisions during the measurement period There were no changes in plan provisions dunng the measurement period.

(

Changes In plan provisions subsequent to the measurement period There were no changes in plan provision subsequent to the measurement period Defined contribution pension - OPSRP Individual Account Program (OPSRP IAP) .

Pension benefits - Participants in the OPERS defined benefit pension plan also participate 111 the OPERS defined contribution plan. An IAP member ~ecomes vested on the date. the employee account is established or 09 the date the rollover _account was established. If the employer makes optional employer contnbutions for a member, the member becomes vested on the earliest of the following dates: the date the member completes 600 hours0.00694 days <br />0.167 hours <br />9.920635e-4 weeks <br />2.283e-4 months <br /> of service in each of five calendar years, th'e date the member reaches normal retirement age, the date the IAP Is terminated, the date th*e active member becomes disabled, or the date the active member dies.

Upon retirement, a member of th.e OPSRP Individual Account Program (IAP) may receive the amounts in his or her employee account,_ rollover account, and vested employer a~unt as a lump- sum payment or in equal installments over a 5-, 10-, 15-, 20-year period or an anticipated life span option. Each distribution option has a $200 minimum distribution limit.

• Death benefits - Upon the death of a non-retired member, the beneficiary receives in a lump sum the me.mber's accx;ilint balance, rollover account balance, and vested employer optional contribution account balance If a retired member dies before the installment payments are completed, the benef1c1ary may receive the remaining installment payments or choose a lump-sum payme~t.

• Recordkeeping - PE~S contracts_ wrth VOYA Financial to maintain IAP participant records.

Contributions - Covered employees are required to contribute 6% of thelr salary to the plan. The Board has chosen to pay the employees' cor:itributions.to the_plan. For 2020, the Board contributed $2.7 million for employees ($2.6 milljon for 2019).

Changes.in plan provisions during the measurement period There were no changes .in plan provision duril}g the measurement period.

Changes ln*plan provisions subsequent to the measurement period Under Senate Bill 1049, as of July 1, 2020 a portion of the employees' contributions to the IAP are being redirected to fund the defined benefit pension. Contributions to the IAP were 6% of salaries. For Tier

• _1mer 2 employees the contributions are no~ 3 5% IAP and 2 5% defined benefit. For OPSRP employees, the contributions are 5.25% IAP and .75% has b~n redirected to the defined benefit pension 72

Eugene Water & Electric Board Notes to Financial Statements

2. Postemployment Benefits Plan Other than Pensions Eugene Water & Electric Board Retirement Benefits Trust Summary of significant accounting policies Basis of accountin[!- The accrual basis of accounting 1s used; plan member contributions are recognized when they are due, benefit expenses and refunds are recognized when they are due and payable.

Employer contnbutions are recognized only when they are due and accompanied by a fonnal commitment from the employer to pay them. Changes in the fair value of investments are recognized as increases or decreases to income.

Investment vafues- Investments are measured at fair value as provided by the Corporate Co-Trustee using recognized pricing services. Purchases and sales are recognized on a trade-date basis. Investment income is recognized as it is earned.

Plan description The Board provides postemployment health care and life insurance benefits to certain employees who retire under OPERS with at least 11 years of service at EWES The plan 1s administered by a board of trustees, acting solely on the authorization of EWES, as the Eugene Watejr & Electric Board Retirement Benefits Trust (The Trust). The board of trustees consists of 5 voting members and one commissioner of I

EWES who serves as an ex-officio member with no voting power. The plan is a single-employer defined benefits plan. Plan assets are dedicated solely to providing benefrts to retirees and their beneficiaries, and plan assets are legally protected from cr~itors of the Board and the plan's administrators.

The lrfe insurance benefit is a fixed amount of $5,000 per retiree. Health care coverage is provided in the fonn of a subsidy toward insurance premiums. The subsidy varies wrth ye~rs of service and the benefrts offered by the Board at the time of an employee's hire and retirement. Medicare eligible retirees choose from Medicare supplement plans offered'through OPERS. The subsidy for Medicare supplement coverage 1s established by the Board; however, the coverage is administered by OPERS as a cost sharing plan. Eligible retirees under the age of 65 receive coverage under the group plan the Board offers torts active errpJoyees, until such time as retirees reach Medicare eligib1lrty. Those group benefit/

provisions are established by the Board, and-eoverage is generally 80% of eligible medical costs. Dental and/or vision benefits are offered in a retiree group plan for reti~ with earlier hire and retirernent dates.

During 2016 and 2017, _the 80,;1rd changed plan provisions for active _employees hired on or: after January 1, 2003. At retirement, those employees will not receive a subsidy toward healtti care coverage.

Employees retiring before age 65 continue to have access to EWES healthcare insurance offered to the active employees; however, the retirees pay the insurance premiums in full. This access to coverage before age 65 is also required by Oregon law.

The obligation for payment of insured benefits rests with the insurance companies providing coverage The Board does not guarantee benefits in the event of an insurance company's insolvency.

73

.J Eugene Water & Electric Board Notes to Financlal Statements Note 17 - Retirement Benefits {contin~ed)

Plan membership m

Enrolling health care coverage is at the time of retirement Therefore, there are no inactive plan members__entitled to qut not yet receiving benefits. Once a retiree opts out of coverage, there is no reinstatement. The plan's,latest actuarial valuation dated August 31, 2019, rolled forward to December 31, 2019 and December 31, 2020 included 531 retirees or surviving spouses of retired*

employees, of which 115 opted out of health care coverage, and 455 actjve employees.

Investments 1,The Trust has a third-party investment manager who has discretion 9 ry investment authority within. the guidelines of the Trust's investment policy as approved* by the board of trustees. The investment policy has a- long-term objective of full funding for the plan through capital appreciation and reasonable consistency of.earnings and growth. The policy acknowledges ongoing needs for liquidity to pay benefits and diversification of investments to minimize capital erosion. The Trust's__adopted asset allocation as of July 31, 2019 has-targets of 40% fixed income, 55% equities and 5% real estate.

• For the years ended December 31, 2020 and 2019, the annual money-weighted rate of return on investments, net of investmen_t expense, was 14.0% and 19.8%, respectively. The money-weighted rate of rej:um expresses investment performance, net of investment ewense, adjusted for changing amounts actually invested.

The fixed income portfolio of the Trust is to be diversified with respect to average maturity, duration, and credit quality.

Credit ratings an~ maturities at December 31, 2020 were as foll(?ws*

Matu Credit 12 Months 13 to 24 25 to 36 37 to_60 More Than I

Investment Tz'.Ee Ranna Fair Value or Less Months Months Months 60 months Corporate bonds -'

AA $ 153,196 $' - $ 153,196 $ - $ $

Corporate bonds A+ 150,098 150,098 Total $ 303,294 $ $ 303,294 $ $ $

Credit ratings and maturities at December 31, 2019 were as follows:

Maturtty Credit 12 Months 13 to 24 25 to 36 37to 60 More Than Investment Type Ratmg Fair Value or Less Months Months Months 60 months Corporate bonds AA $ 153,260 $ ., $ $* 153,260 $ $

Corporate bonds AA- 154,245 154,245 Corporate bonds *A 76,517 76,517 I -

Total $ 384,022 $ - $ 76,517 $ 307,505 ,$ $

74

Eugene Water & Electric Board Notes to Financial Statements

.- Note 17 - Retirement Benefits (continued)

Custodial credit risk- Cu~ial credit nsk for investments I\> the risk that in the event of the counterparty's failure, the Trust would not be able to recover the value of its investments that are in the possession of an outside party. l_nvestments of the Trust are book entry securities held by the Corporate Co-Trustee who is both the investment manager and custodial trustee. Investments are held in a trust account under the name of the Corporate Co-Trustee, however, custodial-credit risk is avoided because the custodian's internal records identify the Trust as the owner of the securities. '

Bank trust accounts, being neither depository nor' brokerage accounts are not insured.

Fair value measurements - Fair values are the estimated prices that would be received to sell these investments in their principal market Level 1 inputs showing a quoted market price for an identical asset in an active market provides the most reliable evidence of fair value. Level 2 inputs are quoted prices for (similar assets in active markets. *Level 3 ir,puts, which is the last category, and doesn't apply to the investments held at December 31, 2020 and 2019 for the OPEBTrust, would include valuation techniques which make use of unobservable inputs using the best information available under the e1rcumstances.

75

Eugene Water.& Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (continued)

• Fair Value Measurements Usin9 Quoted-Prices in Significant Active Markets Other for Identical Observable .

Assets Inputs 12/31/2020 {Level 1} {Level 2}

Investments by fair value level Corporate bonds Domestic $ 303,294 $ $ 303,294 Mutual funds Fixed income 7,415,912 7,415,912 International 3,871,565 3,871,565 Domestic 7,296,886 7,296,886 Real estate " 977 309 977 309 Total inv~tments by fair value level $ 19,864,966 $ 19,561,672 , $ - 303,294 Fair Value Measurements Usin9 Quoted Prices in Significant Active_ Markets Other for Identical Observable Assets Inputs 12/31/2019 {Level 1} {Level 2}

Investments by fair value level Corporate bonds Domestic $ 385,019 $- $. 385,019 Mutual funds Fixed* income 7,081,247 7,081,247 I ntemational 4,248,903 4,248,903 Domestic 6,365,091 6,365,091 Real estate *- 975,639 975,639 Total.investm,ents by fair value level $ 191055,899, - $ 18,6701880 $ 385,019 Contributions*

Contributions* toward health care premiums;requirad from retirees are established in the plan and may be amended by'the Board. Contributions from participating retirees are either a flat rate or a percentage of premium costs and vary by participant according to the benefits in place when the participant was hired

. and/or retired. The Board's subsidies toward premiums are capped for the more recent retiree's. T~e cap 1s expressed as a percentage of the Board's share of premium increases each year compared_ to prem1,uins beginning in a base year of 2003. T~e cap was 6% beginning in 2017 and is to remain that am?unt each year thereafter. -

I

, I, Eugene Water & Electric Board* .

Notes to Financial Statements Note 17 - Ret!rement Benefits (continued)

During 2020, the plan recognized $740,000 in contributions from retirees who had insurance coverage under the Board's group plan for active employees ($717,000 during 2019). The contributions are applied to insurance pren:iiums. Retirees with Medicare Supplement coverage also pay a portion of their premiums, however, those contributions are recognized by the OPERS OPEB plan.

Funding It is the Board's intent to pay the actuarially determined contribution (ADC) to the trust annually.

The ADC was approximately $214,000 and $501,000 for years 2020 and 2019 respectively. *n,e Board ..,,

contributed $462,000 m 2020 and $501,000 dunng 2019. Contributions were recognized in admirnstrative and general expenses: $351,120 for the Electric System and $110,880 for the Water System in 2020

($381,000 for the Electnc System and $120,000 for the Water System m 2019). The expenses differ from the Board'.s OPES expense determined on an actuarial basis, which was $3.3 ~rillion for 2020 ($3 9 million for 2019). The Board has elected to apply regulatory accounting to recognize OPES expense based on the tImmg and amount of contnbutions included in the rate.making process Components of the actuanally determined OPES expense are shown below:

2020 ;2019 Service cost $ 240,509 $ 235,056 Interest cost 1,268,479 1,468,903 Expected earnings (1,202,976) (1,086,400)

Administrative earnings 141,482 132,931 Change in benefits Recognition of deferred outflows 5,033,637 3,568,730 Recognition of deferred inflows {2,192,929} {452,859}

I

$ 3,288,202 $ 3,866,361 77

Eugene Water & Electric Board*

Notes to Flnancial Statements.

Note 17 - Retirement Benefits (continued)

- C The Board reported deferred outflows of resources and deferred inflo~ of resources related to OPES

,- from the following sources:

\

December 31, 2020 Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ $ 1,768,969 Changes-of assumptions 3,689,992 -

Net difference between projected and_ actual earnings on OPES plan investments 2,785,146 Total $ 3!689,992 $ 4,554!115 December 31, 2019 Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ $ 3,011,179 Changes of assumptions 7,258,722 Net difference between projected and actual earnings on OPES plan investments 895,147 Total $ 7,258,722 $ 3,906,326 Amounts recorded as deferred inflows and outflows of resqurces will be subject to amortization and regulatory deferral in future years as_ follows. - '--

Net Deferred Outflows/

(lnfl,ows)

Amortization 2021 $ 2,118,904 2022 (1,181,049)

\

2023 (-~ ,526,819) 2024; (275,159) 2025

$ (864,123)

C ,

78

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (co'1tinued)

Net OPEB liability Components of the net OPEB liability and funded percentage are below*

December 31, 2020 2019 Total OPEB liability $ 33,594,237 $ 34,905,996 Plan fiduciary net position (20,031,471) (19,250,423)

EWEB's net OPEB llablllty $ 13,562,766 $ 15,655,573 Plan fiduciary net position as a percentage of the total OPEB liability 60% 55%

Changes in the net OPEB liability The Board's total net OPEB liability of $13.6 million was measured as of December 31, 2020 Total OPEB Fiduciary Net Net OPEB Liability Position Liability Beginning of year 1/1/2020 $ 34,905,996 $ (19,250,423) $ 15,655,573 Employer contributions (462,000) (462,000)

Retiree contributions (740,292) 740,292 Expected investment inGQme (1,202,976) (1,202,976)

Difference between expected and actual investment income (1,375,811) (1,375,811)

Benefit payments - implicit (702,490) (702,490)

Benefit payments . (1,377,965)

Administrative and trust expenses 1,tJ:!~; 141,482 Service cost 240,509 240,509 Interest on total OPEB liability 1,268,479 1,268,479 Changes of assumptions Difference between expected and a0ual experience End of year 12/31/20 $ 33,594,237 $ (20,031.,471} $_ 13,562,766 79

.Eugene Water & Ele~tric Board Notes to Financlal Statements Note 17 - Retirement Benefits (continued)

. (

The Board's total net OPl;B liability o( $15. 7 million was .measured as of Decemb~r 31, 2019

)

Total OPES Fiduci,ary Net Net OPEB Liabilrty' Position Liability Beginning of year 1/1/2019 $ 40,505,496 $ (17,171,138) $ 23,33{358 Employer contributions (1,137,500) (1,137,500)

Retiree contributions (716,560) 716,560 Expected investment income (1,086,490) (1,086,400)

Difference between expe~ed and actual investment income (2,193,964) (2,193,964)

Benefit payments - implicit (672,219), (672,219)

Benefit payments * (1,489,088) 1,489,088 Administrative and trust expenses 132,931 132,931 Service cost 235,056. 235,056 Interest on total OPES llab11ity 1,468,903 1,468,903 Changes of assumptions 1,723,170 1,723,170 Difference between expected and actual expenence (6,148,762) (6,148,762)

End of year 12/31 /19 $ 34,905,996 $ (19,250,423) $ 15,655,573 Actuarial assumptions .

The total OPES liability as of December 31, 2020 and December 31, 2019 was deterrrnned using the following significant actuarial assumptions and inputs:

Discount rate

• 3.76%

Inflation rate 2.50%

Salary increases 350%

Health care cost trend rates 3 00%-7.00%

M*ortalrty rates used are the sam~ as those used in the December 31, 2019 Oregon PERS Actuarial Valuation and are based on the Pub-2010 tables. .

Reti~ment and termination* rates are b;sad on an experience study covering data from 2010 through 2014 The discount rate used to .measure the total OPEB liability i,yas 3:76%. Based on an expected 6.53%

long-term rate'of return on plan assets, the fiduciary net position was projected to be available to *make projected OPEB payments for plan participants through 2034. Therefore, the expected long-term rate of return is blended with the December 31, 2019 rate of 2.74% from tt,e 20-year Genera'! Obligation Municipal Bond Index as published by the Bond Buyer. .

80

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (continued)

The long-term expected rate of return on the Trust's investments was determined using a building-block method in which,est1mates of expected Mure real rates of return (expected returns, net of investment expense and infla_t1on) are developed for each major asset class. These ~nges are combined to produce the long-term expected rate of return by weighting the expected Mure real rates of return by the current asset allocation percentage, and by adding expected inflation. The asset allocation estimates of ,

arithmetic real rates of return for each asset c_lass are summarized below:

Expected Long-Term

% of Total Real Rate Fund TYPe Portfolio of Return Domestic equity 33% 5.9%

Foreign equity 22% 6.3%

Fixed income 39% 1.5%

Real estate 5% 5.4%

3-month Treasury bills 1% -0.9%

100%

The following table presents the sensitivity of the net OPEB liability to changes in the discount rate, assuming the current rate, ~nd rates that are one percentage point lower, and one percentage point higher than the current rate 'as of December 31, 2020: \

1% Decrease Current Rate 1% Increase (2.76%} (3.76%} . (4.76%}

Total OJ:>EB liability $ 38,190,888 $ 33,594,237 $ 30,642,862

' Fiduciary net position (20,031,471} (20,031,471} (20,031,471}

Net OPEB liability $_ 18,159,417 $ 13,562,766 $ 10,611,391 The following presents 'the sensitivity of the net OPEB liability to changes in *the healthcare cost trend rates assuming the current rate, rates that are one percentage point lower, and one percentage point higher than the current rate-1% Decrease Current Rates 1% Increase Total.OPES liability $ 30,345,763 $ 33,594,237 $ 38,500,250 Fiduciary net position (20,031,471} (20,031,471} (20,031,471}

'\.

Net OPEB liability $ 10,314,292 $ 13,562,766 $ 18,468,779

\

81

Eugene Water & Electric Board Notes to Financial Statements Note 17 - Retirement Benefits (continued)

The actuarial funding method used to determine the plan cqst is the er,try age*normal cost method. Ur:ider

-this method the actuarial preseht value of the projected benefits of each active employee included in the valuation is allocat~ on a level.percentage of pay basis over the service life of the employee between entry age (date of hire) and assumed exrt age.

Note 18 - Deferred Compensation The Board offers all employees a deferred compensation plan created*in aqcordance with Internal Revenue Code (IRC) Section 457. The plan permits them to defer a portion of their salary until Mure years. Participation in the plan is optional. Payment from the plan Is not available to employees until termination, retirement, death, or unforeseeable emergency.

• The Board works with separate investment providers who also provide third-party administration for all deferred compen,sation program funds: Participating employees have several investment options with varying degrees of market risk The Board has no liability for losses under the plan The Board has little administrative involvement with the plan and does not perform the investing function.

Therefore, in accordance with GAAP, the plan assets are not included in the accompanying _Statements of Net Position.

• Note 19 - Trojan Nuclear Plant The Trojan Nuclear Plant (Project) Is jointly owned by Portland General Electric Company (PGE), 67.5%;

the City of Eugene, acting by and through Eugene Water & Electric Board, 30%, and Pacific Power and Light Company, 2.5%, as tena_nts in common. The Project ceased commercial OP,eration in 1993 and is decommissioned. The Project is now classified as an Independent Spent Fuel Storage Installation. In accordan*ce with GASB No. 14, The Financial Reporting Entity, the Project is reported as a joint venture on the equity method of accounting. ,

• Under the tenns of the Net Billing Agreements, executed in 1970, BPA is _obligated_ to pay*the Board amounts sufficient to pay all of the Board's costs related to the Project including decommissioning and debt service, .no~hstanding the termination of plant output BPA pays those costs primanly by issuing credits against the Net Billing participant's purchases of electricity from BPA, but in some cases also makes payments in cash. The Board is required to transfer from its Electric System Fund to the Trojan Pr_bject Fund an: amount equal to all net'b1lling cr~dits received through this agreement. The Board is then responsible for makin,g payments from the Trojan Project Fund to the Trojan Project for the Board's share of costs.

82

Eugene Water & Electric Board Notes to Financial Statements Note 19-Trojan Nuclear Plant (continued)

Smee BPA 1s obligated to pay the Board's share of all Trojan Project costs and has provided the Board with legally binding written assurances of its commitment to that obligation, the Board does not expect the closure and decommissioning of the Trojan Project to haye any adverse effect on the Board's Electric or Water Systems. As such, the equity interest in the Project is zero However, under the terms of the onginal agreements, rf one of the tenants in common fails to perform on their financial obligation, the other tenants may be liable This obligation may not be covered under the Net Billing Agreement mentioned previously. However, the Board believes this nsk is minimal.

A summary of the balance sheets for EWEB's share of the Trojan Project as of September 30, 2020 and September 30, 2019 is as follows.

Unaudited Unaudrted September 30, September 30, 2020 2019 -

ASSETS Current assets $ 1,691,918 $ 1,905,206 Long-term receiyable, BPA, net 3\8951157 3216551240 Total assets $ 33,587,075 $ 34,560z446 LIABILITIES Current liab_1lities $ 2,004,000 $ 1,873,472 Accumulated provision for decommissioning costs 31,583,075 32,686,974 Total liabilities $ 331587,075 $ 34,5601446 The Trojan Nuclear Plant financial statements can be obtained from the Board Note 20 - Commitments and Contingencies Electrlc Pro,lects Carmen-Smith Project-Design .and construction contracts, primarily for powerhouse upgrades, were

$18 8 million. ($17.1 million for.powerhouse and substation upgrades, and approximately $1.7 million, primarily for fish passag~, trap-and-haul and spillway modifications ~t December 31, 2019).

The Board has an arrangement,with the U:S. Forest Service .to provide for maintenance and enhancement measures on th~ National Forest Ser:vice land where the project is located. The Board expects to make annual payments of varying, prescheduled amounts to the Forest Service m accordance with settlement provisions. The payments ?re to total approximately $1 5 million before inflation indexing over the life of the license.

\

83

Eugene Water & Electric Board Notes to Financial Statements Note 20 - Commitments and Contingencies (continued) r Water projects Construction contracts primarily for main replacements and an emergency water station were approximately $618,000 at December 31, 2020 ($131,000 at December 31, 2019 for design of a water quality lab).

• Other projects Contractual commitments for construction at the Roosevelt Operations Center were $121,000, and for advanced metering $2 5 m1ll1on at D~ember 31, 2020 ($1'.2 million for construction at Roosevelt

-Operations Center, $1.4 million for advanced metering, -and $313,000 for software at D.ecember 31, 2019).

Self-Insurance The Board 'is expo~ed to various risks of loss because of the Board's self-insurance retention, up to V,e first $2,000,000 of exposure,* per occurrence. Excess liability coverage protects the Board after the Board's self-insured limit is exhausted. However, public entities are also protected under State of Oregon tort limits ORS 30.260 - 30.300, Tort actions against public bodies, which reduce the liability for any single occurrence for property damage or personal injury. Limits are adjusted for the cost of living annually oy the Oregon State Court Administrator. The most recent limits are $126,200 for a single claimant and $630,800 to all claimants for property damage. For injury or death, the most recent limits are

$769,200 for a singll:l claimant and $1,538,300 for multiple claimants. Conse'quently, except in extreme ca~es. the Board's exposure 1s mitigated by law. The limit is subject to change by State of Oregon legislation.

Clai,ms liabilities recorded in the financial statements are based on the estimated ultimate loss as of the statement of net position date, adjusted from current trends through a case-by-case revie1<< of all claims, including incurred but not reported claims. Non-incremental claims adjustment costs such as salaries are not included in the 'claims estimates. At December 31, 2020 a total claims liability of approximately

$108,000 is reported in the financial statements. All prior and current-year claim liabilities were ,fully reserved and have not been discounted Current Year Llabtnty Balance Clanns and at Beginning Changes m l.JabTirty Balance of Year Esllmates Clalm Payments , at End of Year 2018 General l.JabiTity $ 165,548 $ 146,426 $ (105,119) $ 206,855 2019 General l.Jab!Oty $ 206,855 $ 233,291 $ (340,856) $ . 99,290 2020 General l.Jablllty $ 99,290 $ 160,738 $ (151,648) $ 108,380 84

Eugene Water & Electric Board Not~ to Financial Statements

.- Note 20 - Commitments and Contingencies (continued)

Clalms and other legal proceedings EVv'EB was not11ied in September 2020 the US Attorney's Office was investigating the origin, cause, and consequences of the Holiday Farl!l Fire. EWEB has cooperated with the investigation including documentation requests and personnel interviews. At the time of issuance, the latest request for information was made in November 2020. EWEB has received tort claim notices and intends to contest them.

The Board is involved in various litigations In the opinion of management, the ultimate outcome of these claims will not have a material effect on the Board's financial position beyond amounts already accrued as of December 31, 2020.

Note 21 - Temporary Impairment The service utility of the Leaburg hydroelectric project has s1grn1icantly declined Following increased -

seepage along the canal, indicative of unstable soils, FERG deemed the canal a public safety risk and ordered the canal to be dewatered in 2018. Wrthout water, the Leaburg generation plant ceased operations. This was unexpected in the life of the project Seepage along the canal has occurred for decades and,because of the regulatory action taken by FERG, the nature of the impairment is judged to be temporary as of December 31, 2020. Initial canal soil studies concluded in 2020 and the Board continues to discuss possible remediation of the canal for storm water conveyance or restoration to power generation. The path forward is uncertain.

In 2020, carrying values for the project's assets were classified as Property- held for future use on the Statements of Net Position Note 22 - Subsequent Events On- January 5, 2021, Western G~neration Agency reached agreement to sell its generation assets to 'the mill where WGA's generation planfis located, Georgia Paclfic in Wauna, Oregon. The sale will occur on April 6, 2021. A corresponding agreement, whereby WGA has covenanted with Georgia Pacrfic to continue its existence for 18 months after the sale was also executec;l. During its continued existence, WGA will satisfy its obligations and settle any claims that might arise as specified in the covenant. The owners of WGA, the Board and Clatskanie PUD, will not be purchasing output from the generation plant at Georgia Paclfic after the sale.

85

Required Supplementary Information Eugene Water & Electric Board Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2020 Last Ten* Years*

2014 2015 2016 2017 2018 2018 2020 Proportion of the net pensmn asset 0 86136868% 0 78250364% 0 70531024% 0 62730522% 0 58283304% 0 44633405% 0 34552008%

Propor!Jonate share of the net panS1on asset/(habilrty) $ 19,525,251 $ (45,501,280) $ (105,883,444) $ (84,560,881) $ (86,806,387) $ (77,032,126) $ (75,404,366)

Covered-employee payroll $ 41,130,143 $ 45,250,685 $ 44,141,183 $ 44,353,871 $ 38,805,750 $ 43,024,470 $ 44,541,688 Proporllonate share of the net penS!On asset/(hab1lrty) as percentage of covered-employee payroll 47% 101% 240% 191% 225% 179% 169%

Plan's fidl.!Clary net poohon $ 65,401,492,662 $ 64,923,626,094 $ 62,082,059,102 $ 66,371,703,247 $ 69,327,500,445 $ 70,203,720,619 $ 68,319,296,993 Plan's fiduClary net posrtJon as a percentage of the total pension 1Jab1lrty 103 60% 91 90% 80 50% 8310% 8210% 8020% 75 80%

• 1 o ysar trend mformatJon will be presented prospectJvely 86

Eugene Water & Electric Board*

Schedule of Contributions Pension As. of June 30, 2020 Last Ten Years*

2014 2015 2016 2017 2018 2010 2020 ContractualJy l'llqllred conlnbutum (actuamity determined) $ 0,544,586 $ 0,734,173 $ 8,189,004 $ 8,256,068 $ 0,413,237 $ 7,660,562 $ 7,043,528 Corrtnbu!Jono ITT rela!Jon to the i,ciul!OIUIX deterrruned conlnbution $ 0,544,586 $ 0,734,173 $ 8,189,004 $ 8,256,069 $ 0,413,237 $ 10,662,356 $ 33,680,008 Corrtnbubono de!lo900' (!!XCeBB) $ $ $ $ $ $ ' (3,001,764) $ (25,737,440)

Covered-employee p8Yf'lll $ 41,130,143 $ 45,250,685 $ 44,141,103 $ 44,353,071 $- 39,005,750 $ 43,024,470 t 44,541',698 Conlnbubono as a percentage of covered-employee peyroll 2321% 2151% 1855% 1861% 2350% 2478% 7562%

Notes to Scheduht Yaiueboo data Methods El!ld BUUmpbons used to de!!lfTTllne contnbu1Jon rateo Smgl& and agent employero Entry age normal Entry BQ'B normal Entry age normal Entry age normal Entry age normal Entry age normal ' Entry age noonal 2012, pubttohed 2012, pub!mhed 2014, puhll!lhed 2014, pubJ18hed 2!)16, pmhshed 2016, pub~ed 2018, publtshed Expenance Bludy report Septerrber 18, 2013 September 1 B, 2013 September 23, 201 !5 September 23, 2015 . Jtiy 28, 201 \ July 26, 2017 24-Jul-10 tevel percentage of Liwel p<<centage of Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Arnortizebon melllod payrol, closed payroll, closed payroll, dosed payroll, closed payroll, cioMd payroll, ciOBed payroll, closed

. Reimmmg amortJzabon penod Tier one,'!Jer two-' Trer on8/bar two - Trer ooe/tJer two - Tier one/her two - ~ Tter ooe/ber two - Tier one/!18r two - Tu,r one/her two -

\,_ 20 year; OPSRP - 20 year, OPSRP - 20 year, OPSRP - 20 year, OPSRP - 20 yeoc, OPSRP - 20 year, OPSRP - 20 yam-, OPSRP -

16 Y,,,,1"8 1Byears 16yeers 16,yearo 16ye,n 1Byein 16yean .

/

Asset veluabon method

• Market value of assets Mar1<et value of BSllets Manu.i value of assets Mar1(et value of assets Marl(et value of assets Flllr value Market value of as9e!s lnflalion 275% 275% 2!50% 250% 250% 2!50% 250%

. Salary lncreftBM I 375% 375% 350% 350% 350% 350% 350%

lnveslment rate of return 775% 775% 750% 760% 720% 720% 720%

Rellrement age 55 for Tier 1/Tier,2, 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for]ier 1/TLM 2, 55 for Tier 1mer 2; 56 for Tier 1/Tier 2, 55 for T111r 1/T,er 2, 65 for OPSRP 6!5 for OPSRP 65 for OPSRP 65for0PSRP 66forOPSRP BS for OPSRP 66for0PSRP Mortalrty RP-2000 Sex-dl8bnct RP-2000 Sex-d1sbnct RP-2000 S1tX-dIstmct RP-2000 Sex-dJsmct RP-2014 Sex-dulbnct RP-2014 Sex-disbnct Pub-2010 SeJc...cist,nci tables tables tableo !lib!"" tables tables tableo Discount rate 775% 775% . 750% 750% 7.20% 720% 720%

• 1 O year trend lllformebon ~ be presented prospecbvely 87

E;ugene.Water & Electric Board Schedule of Employer- Contributions OPEB As of December 31, 2020

• Last Ten Years*

2020 2019 2018 2017 '

Actuanally detemuned contnbutlon $ 214,-406 $ 501,3-42 $ 1,284,204 $ 1,3-48,797 Contnbubons m relation to the actuanally detemuned contnbubon -462 000 1137500 3 348 797 980~98 Contnbubon excess (deficiency) .$ 636 158 $ 636 158 $ 2 064 593 $ (368,499)

Covered-employee P8Yr0'1 $ 51,660,696 $ 47,799,139 $ 44,880,815 $ 44,353,971 ContnbutJons as a percentage of covel'8lHlmployee payroll 0 90% 238% 7-46% 221%

• 10 year trend infonnabon will be presented prospectJvely Veluabon dates August 31, 2019 and December 31, 2017 Methods and assumptions used to detemune contnbulion rates Aciuanal cost method Entry age normal AmortrzatJon method Level percentage of payroll, closed AmortJzatlon method 1O years Asset wluatJon method Marl<et wlue lnflabon 2 5%

Healthcare cost trend increases OPERS I\AedlCBfll and MedJCare Supplemental RX 5%

Dental 5%

V1s10n 3%

V1!KJ11 3%

Salary1naeases 35%

Ret.crernent age Baaed on experience study years 2010-2014 Age 6&-68 10%

Age 59-64 16%

Age66 100%

\Mthd rawal age Age 16-29 6.3%

Age 30--49 4.7%

AgeS0-64 37%

Methods and asaumptJons used to cleterm 111e contnbutJon rates, which vaned by year Mortality Pub 201 O RP-201-4 General Service Investment rate ex return 3 76% 4 32%

Healthcare cost trend Ina-el!&e!I EYIIEB group medlCal, December 31, 2017 valuallon 10%, decreasing to ufllmate rate of 4% by 2026 EWEB group medJCBi, December 31, 2019 valuallon 7%, decreaamg to ultrrnate rate of 4% by 2027 88

Eugene Water & Electric Board Schedule of ~hange~ in Total OPEB Liablllty and Related Ratios OPEB As of December 31,, 2020 Last Ten Years*

Total OPEB l.Jabil~

2020 2019 2018 2017 Se!VlCe cost $ 240,509 $ 235,066 $ 279,685 $ 270,227 Interest 1,268,479 1,468,903 1,747,818 9TT,047 Changes m benefit terms {263,960)

Drlferences between expected and actual experience (6,148,762) -4,969,184

• Changes in assumptJons 1,723,170 15,538,406 Benetrt payments (~820,74!) (2 18TT 166!) * (3,402, 142l (3,280,201)

Net change in OPES IJabmty 11 1311,759l (5,599,SOOl (1,374,639) 18 210 713 Total OPES habdrty- begmnrng 34,905,996 40 505 496, 41880135 - 23,669,422 Total OPES habdrty- ending $ 33,594~37 $ 34,905,996 $ 40,505,496 1 41,880,135 Plan Fldu~ Net Posrtron 2020 2019 2018 2017 ContnbutJons $ (462,000) $ (1,137,500) $ (3,348,797) $ (980,298)

Contnbutions from plan members - EvVE B group Insurance (740,292) (716,560) (TT5,3-45) (740,089)

Net investment income (2,527,084) (3,280,364) 952,424 (2,204,942)

Benefit payments 2,658,549 2,922,208 3,361,962 . 3,365,729 Adrrumstrative expen8e 89,TT9 ~ 132 931 88 919 81,076 Net change In plan fld uaary net posrt!on Q:81,048) (~079,285) 279 163 (458,524l Plan flduaary net posrtion - begmnihg (19~,423) (17 1171 1138l (17,450,301l (16,991,777)

Plan fiduciary net posrtJon - ending $ (20,031,471) $ , (19~50,423) .$ (17,171,138) $ (17,450,301)

Net OPES ilabthty $ 13,58yaa $ 15,855,573 $ 23,334,358 $ 24,429,834

~Ian flduCISI)' ne! posrtron as a percentage of the ,.

total OPES habthty 596% 551% -424% 41 7 Cover"'.(f-employee payroll $ 51,560,696 $* 47,799,139 $ 44,880,815 $ 44,353,971 Net OP EB hab~rty 88 a percentage of covered payroll 283% 328% 520% 55 1

• 1 o year trend l11formatJon WJi be presented prospectJvely Notes to schedule:

Benefit changes: Dunng 2016 Md 2017, the subsidy for employees hired on or after January 1, 2003 was d1SCOnbnued Changes iii a88Ull1pbons For the valuabon dated December 31 , 2017 The dlSCOUnt rate decreased from 8% to 4 32% Health care cost trend 111creases for 'the Oregon PERS Medicare plans and EV'IEB supplemental Rx plans went up from 4 % to 5% The mortalrty table, RP-2000, pJ'OJected to 2018 umg Scaie M, was replaced wrth RP-2014 I -

For the August 31, 2019 valuabon. The expocted long-term rate of retwn was decreaeed from 7% to 6 ~%; blended wrth the 20-year General Obligal!OO l,_lumcipaf Bond_ Index rate of 2 74% 88 of December 31, 2019, the investment and discount rate decreased from 4 32% to 3 76%

89

Eugene Water &.Electric Board Schedule of lnvesbnent Returns _

OPEB Trust As of'December 31, 2020 Last Ten Years*

-2020 2019 2018 2017 Annual money-weighted rate of return, net of Investment expense 14.0% 19.8% -5.6% 14.1%

• 10 year trend Information will be presented prospectively.

90

' rs,.

Supplementary Information

Eugene Water & Electric Board Electric System Long-Term Bonded Debt and Interest Payment Requirements, Including Cufrent Portion Year Ended December 31, 2020 Revenue Refunding Revenue and Revenue Refunding Revenue Refunding Revenue and Revenue Refundmg 2011 B Sanes 2012 Sanes 2016A Senes 2016 B Senes 6-29-11 8-1-12 9-7-16 9-7-16 Pnna~I Interest Pnna~I Interest Pnnci~I ln1erest Pnn~I Interest 2021 $ 915,000 $ 120,963 $ 485,000 $ 654,719 $ 1,215,000 $ 4,073,550 $ 4,130,000 $ 151,604 2022 945,000 63,0_10 515,000 636,319 2,345,000 4,024,950 4,455,000 61,972 2023 986,000 42,646 1,610,000 609,569 6,300,000 3,931,150 2024 1,040,000 537,169 6,625,000 3,616,150 2025 495,569 6,675,000 3,264,900 2026 495,589 6,675,000 2,94{150 2027 495,569 6,000,000 2,607,400 2026 495,569 6,400,000 2,307,400 2029 1,315,000 495,569 6,615,000 1,967,400 2030 1,360,000 454,475 6,945,000 1,656,650 2031 1,400,000 410,275 7,290,000 1,309,400 2032 1,445,000 364,775 6,935,000 1,017,600 2033 317,613 5,175,000 740,400 2034 317,613 1,685,000 533,400 2035 317,613 1,755,000 466,000 2036 317,813 1,830,000 395,800 2037 317,813 1,900,000 322,600 2038 317,813 1,975,000 246,600 2039 2,005,000 317,813 2,050,000 167,600 2040 2,080,000 242,625 2,140,000 65,600 2041 2,155,000 164,625 2042 2,235,000 63,812 2043 2044 2045

• 2046 2047 2048 2049 2,645,000 246,641 17,645,000 6,859,699 88,730,000 35,715,900 6,586,000 233,576 Less current portion 915 000 485 000 11215 1000 4 1130 1000

$ 1,930,000 $ 246 841 $ 17,360,000 $ 6,859,899 $ 87,515,000 $ 35,715,900 $ 4,455,000 $ 233,576 91

~*

Eugene Water & Electric Board Electric System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2020

• Revenue Revenue Revenue 2017 Sanes 2020ASenes 2020 B ~nes 9-21-17 6-11-20 6-11-20 Total Electnc System PBlments Pnncieal Interest PrinC1J2!!I Interest

• PrinctJ2!!1 Interest PnnCIJ2!!1' Interest -Totals

--2021 ,$ $ 1,689,750 $ $ 1,516,250 $ $ 387,991 $ 6,745,000 $ 8,594,847 ~$ 15,339,847 2022 1,689,750 1,516,250 387,991 8,260,000 8,419,242 16,679,242 2023 1,689,750 1,516,250 387,991, 9,09p,OOO 8,177,558 17,272,558 2024 1,689,750 - 1,516,250 315,000 387,991 7,980,000 7,747,310 15,727,310 2025 1,689,750 1,516,250 1,400,000 383,767 8,275,000 7,370,236 15,645,236 2026 1,689,750 1,516,250 1,420,000 363;313 8,095,000 7,006,032 15,101,~2 2027 945,000 1,689,750 1,085,000 1,516,250 1,445,000 338,945 9,475,000 6,647,914 16, 122,9~4 2028 995,000 1,642,500 , 1,130,000 1,472,850 1,475,000 312,704 10,000,000 6,231,023 16,231,023 2029 1,045,000 1,592,750 1,175,000 1,427,650 283,543 10,150,000 5,786,912 15,936,912 2030 1,095,000 1,540,500 1,225,000 1,380,650 283,543 10,625,000 5,315,818 15,940,818 2031 1, 150,000* 1,485,750 1,270,000 1,331,650 283,543 11,110,000 4,820,618 15,930,618 2032 1,205,000 1,428,250 1,325,000 1,280,850 283,543 10,910,000 4,375,218 15,285,218 2033 1,270,000 , 1,368,000 1,375,000 1,227,850 1,680,000 283,543 9,500,000 3,937,606 13,437,606 2034 1,330,000 1;304,500 1,430,000 1,172,850 1,720,000 242,770 6,165,000 3,571,333 9,736,333 2035 1,400,000 1,238,000 1,490,000 1,115,650 1,765,000 199,305 6,410,000 3,338,768 9,746,768 2036 1,465,000 1,168,000 1,550,000 1,056,050 1,810,000 153,821 6,655,000 3,091,484 9,748,484 2037 1,540,000 1,094,750 1,610,000 994,050 1,855,000 105,368 6,905,000 2,834,581 9,739,581 2038 1,620,000 1,017,750 1,675,000 929,650 _ 1,905,000 53,854 7,175,000 2,565,667 9,740,667 2039 1,700,000 936,750 1,725,000 879,400 7,480,000 2,301,563 9,781,563 2040 1,785,000 851,750 1,775,000 827,650 7,780,000 2,007,625 9,787,625 2041 1,875,000 762,500 1,830,000 774,400 5,860,000 1,701,525 7,561,525 2042 1,965,000 668,750 1,900,000 701,200 6,100,000 1,453,763 7,563,763 2043 2,065,000 570,500 , 1,980,000 625,200 4,045,000 1,195,700 5,240,700 2044 2,170,000 467,250 2,060,000 546,000 4,230,000 1,013,250 5,243,250 2045 2,275,000, 358,750 2, 14p,ooo 463,600 4,415,000 822,350 5,237,350 2046 2,390,000 245,000 2,225,000 378,000 4,615,000 623,000 5,238,000 2047 2,510,000 125,500 2,315,000 289,000 4,825,000 414,500 5,239,500 2048 2,405,000 196°,400 2,405,000 196,400 2,601,400 2049 ~505 1000 100 200 2 1505 1000 100 200 2,sos,200 33,795,000 31,695,750 39,200,000 29,784,550 16,790,000 5,123,528 207,790,000 111,660,044 319,450,043 Less current por!Jon 6 745 000 6,745,000

$ 33,795,000 $ 31,695,750 $ 39,200,000 $ 29,784,550 $ 16,790,000 $ s, 123,528 $ 201,045,000 $ 111,660,044 $ 312,705,043 92

Eugene Water & Electric Board Water System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion

-'Year Ended December 31, 2020 Revenue and Revenue Refunding Revenue Revenue Refunding 2016 Sanes 2020ASenes 2020 B Senes 5-9-16 6-4-20 6-4-20 Total Water System P~ents Prioo~ Interest Pnnaeal Interest PnnciE!!I Interest Pnncle!!I Interest Totals 2021 $ 1,936,000 $ 1,416,250 $ $ 610,050 $ 620,000 $ 346,832 $ 2,555,000 $ 2,372,132 $ 4,927,132 2022 2,030,000 1,319,500 610,050 630,000 340,109 2,660,000 2,269,659 4,929,659

/

2023 1,340,000 1,218,000 416,000 610,050 635,000 333,349 2,390,000 2,161,399 4,651,399 2024 1,415,000 1,151,000 430,000 593,450 645,000 326,602 2,490,000 2,070,062 4,660,052 2025 1,470,000 1,094,400 450,000 576,250 666,000 316,263 2,675,000 1,986,913 4,561,913 2026 1,630,000 1,035,600 465,000 668,250 865,000 305,796 2,680,000 1,899,648 4,559,646 2027 1,810,000 969,100 485,000 539,650 675,000 293,553 2,770,000 1,792,303 4,562,303 2028 1,690,000 878,600 605,000 620,260 685,000 280,461 2,880,000 1,679,301 4,559,301 2029 1,770,000 794,100 626,000 500,050 700,000 265,991 2,995,000 1,560,141 4,555,141 2030 1,860,000 705,600 645,000 479,050 715,000 250,724 3,120,000 1,435,374 4,555,374 2031 1,125,000 631,200 570,000 457,250 735,000 234,772 2,430,000 1,323,222 3,763,222 2032 1,175,000 586,200 690,000 434,450 760,000 217,640 2,515,000 1,236,290 3,753,290 2033 1,225,000 539,200 615,000 410,850 770,000 199,407 2,610,000 1,149,467 3,759,467 2034 1,270,000 490,200 640,000 386,250 790,000 179,918 2,700,000 1,058,388 ' 3,756,388 2035 1,320,000 439,400 660,000 367,050 805,000 169,528 2,785,000 B66,B78 3,750,978 2036 1,375,000 386,600 676,000 347,250 830,000 138,349 2,880,000 672,199 3,762, 1BB 2037 1,430,000 331,60~ 700,000 327,000 860,000 112,428 2,990,000 771,028 3,761,028 2038 1,465,000 274,400 720,000 306,000 885,000 86,670 3,0B0,000 666,970 3,756,970

, 203B 660,000 215,000 740,000 284,4/JO 910,000 57,932 2,330,000 557,332 2,887,332 2040 710,000 167,800 760,000 262,200 945,000 29,512 2,415,000 479,512 2,894,512 2041 735,000 169,400 765,000 239,400 1,620,000 398,800 1,918,800 2042 765,000 130,000 810,000 216_.850 1,575,000 346,850 1,920,650 2043 796,000 BB,400 835,000 1B1 ,550 1,630,000 2BO,B50 1,920,950 2044 830,000 67,600 860,000 166,500 1,BB0,000 234,100 1,924,100

'2045 860,000 34,400 865,000 140,700 1,745,000 175,100 1,920,100 2046 910,000 114,150 910,000 114,150

• 1,024,150 2047 940,000 86,850 940,000 86,850 1,026,850 2048 965,000 58,650 965,000 58,650 1,023,650 2049 990 000 29 700 990 000 29 700 1 1019i700 32,430,000 15,144,550 18,470,000 10,423,150 14,905,000 4,472,726 66,805,000 30,040,426 95,845,426

~ess current portion 1935000 620 000 ~555,000 2,555,000

$ 30,496,000 $ 15,144,650 $ 18,470,000 $ 10,423,150 $ 14,285,000 $ 4,472,726 $ 63,260,000 $ 30,040,426 $ 93,290,426 93

Eugene Water & Electric B.oard r -

Electric System Analysis of Certain Restricted Cash and Investments for Bond Service Year Ended December 31, 2020 Investments for Customer &

Bond Principal Debt Service Construction Escrow Deposit Total

& Interest Reserve Funds Reserve All Funds

)

Ending balance- December 31, 2019 $ 765 $ 616381349 $ 19,465,577 $- - 3,785,903 $ 29,8901594 Deposits from general fund 16,110,584 46,000,000 243,789 62,354,373 Investment earnings - 190 58,344 388,932 (2,480) 444,986 Other transfers

/'

Receipts 16,1101774 58 344 46,3881932 241,309 62,799,359 Principal payments 8,540,000 8,540,000 Interest payments 7,571,523 ~

7,571,523 Transfers to general fund 3 10,308,855 264,431 10,573,289 Disbursements 16111 \526 10,308,855 264,431 26,684,812 US. secunties, at market 6,696,088 41,179,587 1,888,019 49,763,694 Cash in bank 13 605 1,323,013 1,449,753 - 2,773,384 State of Oregon Local Government 1

Investment Pool 1310431055 425,008 13,4681063

• Ending balance - December 31, 2020 $ 13 $ 6,696,693 $ 55,545,654 $ 3,762,780 $ 6*6,005,141 _

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Eugene Water & Electric Board Water System Analysis of Certain Restricted C~sh and lnvesbnents for Bond Service Year Ended December 31, 2020 Investments for Bond Principal Debt Service Construction Total

& Interest Reserves SDC Reserves Funds All Funds Ending balance - December 31, 2019 $ 206 $ 2,398,358 $ 7,935,754 $ $ 10,334,318 Deposits .from 9eneral fund 3,820,540 1,059,638 20,003,302 24,883,480 Investment earnings 52 26,271 108,486 47,942 182,751 Receipts 3,820,592 26,271 1,168,124 20,051,244 25,066,231 Principal payments 1,855,000 1,855,000 Interest payments 1,965,779 1,965,779 Transfers to general fund 15 932,499 3,070,389 8,645,860 12,648,763 Disbursements 3,820,794 932,499 3,070,389 8,645,860 16,469,542 U.S. securities, at market 1,491,356_ 4,582,156 8,661,861 14,735,373 Cash in bank 4 774 778 State of Oregon Local Government Investment Pool 1,451,333 2,743,523 4,194,856 Ending balance - December 31, 2020 $ 4 $ 1,492,130 $ 6,033,489 $ 11,405,384 $ 18,931,007 95

r Eugene Water & Electric s*oard

, Sustainability Accounting Standards* Disclosures Years Ended December 31, 2020 and 2Q19 The following metrics are standardized d1sclos.!!res recommended by the Sustainability Accounting Standards Board for electnc and water util~ies.

The di~closures ar~ voluntary and are not meant t,o demonstrate compliance with laws or reg1,.1lations.

Electric *5ystem Topic Metric 2020 2019 2018 '-

Number of customers served in-markets subject to renewable *,

portfolio sta~dards (RPS) . 95,000 94,000 93,000 (All retail customers)

Greenhouse Gas Em1ss1ons & Energy Resource Planning RPS target before exempbons 465,707 MVl/h 361,808 MWh 365,674 MWh

-, (

Percentage fulfillment of RPS target by market

• Greater than 100% 100% Greater. than 100%

Number of incidents of non-compliance with water quallty and/or Water Management None None None quantity permits, standards, and regulations

. Total recordable Injury rate I 4.1 3.9 4 Workforce Health & Safety - Fatality rate 0 0 0

- r Customer electricity saVJngs from 15,053 MWh 10,958 MWh 13,238 M\Nh

• efficiency measures \

End-Use Efficiency r'

\

3.7 MW reduction in 2.2 MW reduction In 3.5 MW reducbon In I (In total across all customer types) peak demand peak demand peak demand System Average In'terruptior:i Duration _Index (SAIDI), 41.49 minutes 69 37 minutes 53 63 minutes per customer Gnd Resiliency . System Average Interruption Frequency Index (SA!Fl), 0 32 outages I. 0 47 outages 0 44 outages per customer ,

Customer Average lnterruptron Duralion Index (CAIDI), 130.15 minutes 146.91 minutes 121.19 minutes

- per outage RPS compliance mformation above 1s preliminary. Flnal information Is published to eweb.org annually by June 1. Savings from efficiency measures are calculated based on the Regional Technical Forum of the Northwest Power and Conservation Council as adopted by Bonneville Power Administration for Its regional resource acqwsltlons.

96 -

Eugene Water & Electric Board Sustalnabillty Accounting Standards Disclosures Years Ended December 31, 2020 and 2019 Water System Topic Metnc 2020 2019 2018 Total fresh water sourced from regions wrth high or extremely None None None high baseline water stress None

- None Fresh water purchased from a third party None Wate~ Scarcity Volume of recycled water del!Vered ~one None None Number of acute health-based,_non-adrte health-based, and non-Dnnking Wafer Quality None None None health-based drinking water violations

-Distribution Network 2% of 816 miles .2% of 814 miles 3% of 811 miles Water pipe replacement rate Efficiency or 1.8 miles or 1 9 miles or 2.6 miles Treatment plant IS Treatment plant Is Treatment plant is Water treatment capacrty located In FEMA Spooal Flood outside flood zone, outside flood zone, outside flood zone, Network Res111en'cy &, Hazard Areas Intake Is wrthin intake is within Intake Is wfthln Impacts of Climate Change 257 286 268 Number of service disruptions, populatlol) affected, and 1043 customers 1152 customers 973 customers average duration - 94 minutes 125 minutes 99 minutes VVater pipe 1s distribution pipe for potable water measuring 2 inches to 60 inches in diameter. Replacements do not include new construction. Total miles for these pipelines i_s all pipe including new construction.

97

\

Audit Comments

' u

MOSSADAMS Report of Independent Auditors on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Oregon MinimwnAudit Stwtdards ,

Board of Commissioners Eugene Water & Electric Board We have audited the individual and combined financial statements of the Eugene Water & Electnc Board (the "Board") as of and for the year ended December 31, 2020 and have issued our report thereon dated March 19, 2021. We conducted our audit in accordance wtth auditing standards generally accepted in the United States of America and the provisions of the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

Compliance As part of obtaining reasonable assurance about whether the Board's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, grants, inclu'ding provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules OAR 162-10-0000 to 162-10-0330, as set forth below, .noncompliance with which could have a direct and material effect 6n the determination of financial statement amounts*

• ThE:l accounting records and related internal control structure.

• The use of various depositories to secure the deposit of public funds.

• The requirements relating to insurance f1nd fidelity bond coverage.

• The appropriate lc!_WS, rules and regulations pertaining to programs funded wholly or partially by other governmental agencies.

• The statutory requirements pertaining to the investment of public funds.

'-

• The requirements pertain_ing to the awarding of public contracts and the construction of public improvements.

However, providing an opinion on compliance wrth those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances ofnoncompliance that are required to be reported under Minimum Standards for Audits of Oregon Municipa/. Corporations, prescrioed by the Secretary of State. 0 98

Internal Control Over Financial Reporting '

In planning and performing our audit of the financial statements, we considered the Board's inte!71al control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial

_statements, but not for the purpose of expressing an opinion on the effectiveness of the Board's internal control. Accordingly, we do not express an opinion on the effectiveness of the Board's internal control. *

• A* deftCiency in internal control exists when the design or operation of a control does not allow l

management or employees, in the normal course qf performing their assigned fun~ions, to prevent, or detect and correct, misstatements on- a timely basis. A material weakness 1s a deficiency, -or a combination of deficiencies, in internal control such that there is a reasonable p-ossib1lrty' that a material mJSstatement of the entity's financial statements will not be prevented, .or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is,less severe than a matenal weakness, yet important enough to,merit attention by those charged with governance. - '--

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might .be material weaknesses or significant(deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses However, material weaknesses may exist that have not been identified.

Purpose of the Report _

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance wrtt, Minimum standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State, in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

~fp~-

Julie Desimone, Partner, for Moss Adams LLP Portland, Oregon March 19, 2021 99