ML22115A039

Portland General Electric Co., Annual Financial Report for Year 2021

ML22115A039
Person / Time
Site:	Trojan File:Portland General Electric icon.png
Issue date:	04/14/2022
From:	Portland General Electric Co
To:	Office of Nuclear Material Safety and Safeguards
References
VPN-005-2022
Download: ML22115A039 (105)

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Table of Contents PAGE Board of Commissioners and Officers Report of Independent Auditors 2--4 Management's Discussion and Analysis 5-21 Financial Statements Statements of net position 22-23 Statements of revenues , expenses, and changes in net position 24-25 Statements of cash flows 26-28 Statements of fiduciary net position - OPEB 29 Statements of changes in fiduciary net position - OPEB 30 Notes to financial statements 31-84 Required supplementary information Schedule of proportionate share of the net pension liability - pension 85 Schedule of contributions - pension 86 Schedule of employer contributions - OPEB 87 Schedule of changes in total OPEB liability and related ratios - OPEB 88 Schedule of investment returns - OPEB 89 Supplementary Information Electric system long-term bonded debt and interest payment requirements ,

including current portion (unaudited) 90-91 Water system long-term bonded debt and interest payment requirements , including current portion (unaudited) 92 Electric system analysis of certain restricted cash and investments for debt service (unaudited) 93 Water system analysis of certain restricted cash and investments for debt service (unaudited) 94 Sustainability accounting standards disclosures (unaudited) 95-96 Audit Comments 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 Minimum Audit Standards 97-98

Board of Commissioners Ms. Mindy Schlossberg "At Large" President Mr. John Brown Wards 4 & 5 Vice-President Mr. John Barofsky Wards 2 & 3 Member Ms. Sonya Carlson Wards 6 & 7 Member Mr. Matt McRae Wards 1 & 8 Member Officers Mr. Frank Lawson General Manager, Secretary Ms. Anne Kah Assistant Secretary Ms. Deborah Hart Treasurer Mr. Aaron Balmer Assistant Treasurer Commissioners' contact information may be found at www.eweb.org. Written communication may be sent to the attention of commissioners or officers at this address:

EWEB 4200 Roosevelt Boulevard Eugene, OR 97402 1

MOSSADAMS Report of Independent Auditors The Board of Directors Eugene Water & Electric Board Report on the Audit of the Financial Statements Opinions We have audited the accompanying statements of net position of the Electric System, Water System and Combined Total Systems, and the statements of fiduciary net position of the Retirement Benefits Trust (the Trust) of Eugene Water & Electric Board (the "Board"), as of December 31, 2021 and 2020, and the related statements of revenues, expenses and changes in net position and cash flows of the Electric System, Water System and Combined Total Systems for the years then ended, and the statements of changes in fiduciary net position of the Trust for the years then ended, and the related notes to the financial statements, which collectively comprise the Board's basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the of the Eugene Water & Electric Board as of December 31, 2021 and 2020, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basisfor Opinions We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards (Government Auditing Standards), issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Board and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities ofManagement for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Board's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

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Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we

• Exercise professional judgment and maintain professional skepticism throughout the audit.

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of EWEB's internal control. Accordingly, no such opinion is expressed.

• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about EWEB's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary lliformation Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and pension and OPEB schedules on pages 5 through 21 and 85 through 89 be presented to supplement the financial statements. Such information is the responsibility of management and, although not a part of the financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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Other Information Management is responsible for the other information included in the annual report. The other information comprises the Electric System and Water System long-term bonded debt and interest payment requirements (including current portion) schedules and the Electric System and Water System analysis of certain restricted cash and investments for bond service schedules and sustainability accounting standards disclosures ("supplementary information") but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated.

If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 18, 2022 on our consideration of Eugene Water & Electric Board's internal control over financial reporting 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 is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Eugene Water & Electric Board's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Eugene Water & Electric Board's internal control over financial reporting and compliance.

Report on Other Legal and Regulatory Requirements In accordance with the Minimum Standards for Audits of Oregon Municipal Corporations, we have issued our report dated March 18, 2022, on our consideration of the Board's compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statues as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance.

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Julie Desimone, Partner, for Moss Adams LLP Portland, Oregon March 18, 2022 4

Eugene Water & Electric Board Management's Discussion and Analysis The following discussion provides an overview of the financial results of the Eugene Water & Electric Board (EWES) for the years ended 2021 and 2020. This unaudited discussion is intended to be used in conjunction with the financial statements and note disclosures following this section.

EWES is the largest publicly owned electric 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 City organized the Eugene Water Board to operate the City's electric and water utilities. The name of the Eugene Water Board was changed to the Eugene Water & Electric Board in 1949.

EWES is chartered by the City and supplies electric and water service within the city limits of Eugene and to certain areas outside the city limits. EWES operates as a primary government and is not considered a component unit of the City. EWES is governed by a five-member Board of Commissioners who are elected by voters residing in the City. The Board of Commissioners has authority to set prices for water and electric services. Prices 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, deferred inflows and net position at the end of the financial year, December 31. The Statements of Revenues, Expenses and Changes in Net Position report revenues and expenses occurring during the financial year. The Statements of Cash Flows report cash from operating activities, investing activities, non-capital financing activities as well as capital and related financing activities.

Electric System The Electric System supplies service to 96,000 residential, commercial, and industrial customers within the City of Eugene and areas along the McKenzie River between the cities of Walterville and Vida where two of EWEB's hydro-power plants are located. The total service area covers 236 square miles. The Electric System owns and operates approximately 1,100 circuit miles of overhead and underground distribution lines, 129 circuit miles of transmission lines, and 38 distribution substations. Power delivered to customers is supplied by Bonneville Power Administration (SPA) contracts, EWES-owned generation resources, other contracted resources, and purchases from the wholesale energy markets. EWEB's power supply sources are primarily hydropower, but also include wind, biomass, steam, and solar.

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Eugene Water & Electric Board Management's Discussion and Analysis MWh Power resource attributes 2021 2020 2019 Hydro-power 2,441,552 2,583,553 2,371,222 Wind 178,014 186,900 158,169 Steam 136,796 231,357 236,042 Biomass 119,932 121,193 114,588 Other market purchases 758,623 1,047,442 1,130,227 3,634,917 4,170,445 4,010,248 Power resources - owned, contracted, or market EWES-owned generation 430,596 530,943 421,512 Contracted generation 2,445,698 2,592,060 2,458,509 Market purchases 758,623 1,047,442 1,130,227 3,634,917 4,170,445 4,010,248 6

Eugene Water & Electric Board Management's Discussion and Analysis Electric System Condensed Financial Information (in thousands of dollars) 2021 2020 2019 Net utility plant $ 444,355 $ 429,157 $ 407,800 Current assets 138,359 147,456 153,657 Other assets 117,275 125,995 87,369 Total assets 699,989 702,608 648,826 Deferred outflows of resources 35,655 43,938 52,351 Current liabilities 37,682 36,491 38,378 Long-term debt 217,864 228,371 190,132 Other liabilities 41,646 70,126 72,951 Total liabilities 297,192 334,988 301,461 Deferred inflows of resources 43,046 24,018 21,277 Net investment in capital assets 254,288 251,254 241,620 Restricted 4,791 6,435 6,552 Unrestricted 136,327 129,851 130,267 Total net position $ 395,406 $ 387,540 $ 378,439 Residential $ 102,529 $ 99,374 $ 100,561 Commercial and industrial 93,497 92,941 100,605 Sales for resale and other 61,719 51,585 62,173 Operating revenue 257,745 243,900 263,339 Purchased power 141,721 134,594 153,922 System control 4,287 4,637 4,269 Wheeling 12,052 11,248 13,107 Steam and hydraulic generation 13,482 12,142 12,277 Transmission and distribution 24,507 24,510 24,526 Customer accounting 8,054 8,242 7,668 Conservation expenses 4,176 4,014 3,633 Administrative and general 22,879 20,751 20,467 Depreciation on utility plant 24,492 21,594 22,785 Operating expenses 255,650 241,732 262,654 Net operating income 2,095 2,168 685 Non-operating revenue 10,089 11,960 10,273 Non-operating expense (7,781) (7,637) (8,723)

Income before capital contributions 4,403 6,491 2,235 Capital contributions 3,463 2,806 2,606 Special items (12,528) lntersystem transfer (196)

Change in net position 7,866 9,101 (7,687)

Total net position - beginning of year 387,540 378,439 386,126 Total net position - end of year $ 395,406 $ 387,540 $ 378,439 7

Eugene Water & Electric Board Management's Discussion and Analysis Analysis of financial position and results of operations The electric system's overall financial position improved in 2021 and 2020 as a measure of overall increases in net position and net operating income.

The net investment in capital assets component of net position, reflecting the value of capital assets net of the debt incurred to acquire those assets, increased in 2021 and 2020. At a high level, steady infrastructure investments increased net utility plant balances while annual debt service payments reduced the associated debt. Capital asset and debt activity are discussed further in sections below.

Restricted net position is subject to external legal restrictions 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 2021 following the termination of an agreement related to initial financing of the Harvest Wind Project. Funds held in escrow were released without restriction. In 2020, restricted net position decreased due to lower debt service reserve requirements as part of the refunding of a portion of the 2012 bond series. The latest debt issuance, the 2020 bond series, had no debt service reserve requirement.

Unrestricted net position represents the accumulation of net position that are not capital assets, or subject to external restrictions on their use. Factors contributing to the unrestricted net position increase in 2021 were varied. A primary driver to the 2021 increase was reduction in the actuarial measurement of the net pension and other post-employment benefits (OPES) liabilities following strong market performance of investment portfolios.

Electric system net operating income was $2.1 million in 2021, and $2.2 million in 2020. Depressed economic activity during the COVID-19 pandemic reduced demand in both years. Operating expenses in 2020 included nearly $5 million in system restoration costs from the Holiday Farm Fire. $3.5 million in FEMA grant revenue was recognized as non-operating revenue in 2021 and reimbursed eligible costs from the wildfire damage.

Analysis of balances and transactions Operating revenue varies from year to year based on customer load, generation available for sale, and corresponding power market prices.

Residential customers make up approximately 90% of EWES's customer base and approximately 50% of customer revenue. Sales to residential customers are variable based on weather trends, and traditionally, EWES has been a winter-peaking utility. Recent peak loads during extreme summer weather reacted stronger than expected indicating growth of cooling load (building air conditioning) in EWES's service territory. Notable heat waves in June and August of 2021 where peak loads were comparable though still lower than winter peak loads. Annual average temperatures for 2021 and 2020 were above normal by approximately 2 degrees Fahrenheit.

Commercial and industrial accounts make up approximately 10% of the EWES customer base, and approximately 50% of customer revenue. Commercial and industrial sales are more reactive to economic conditions rather than weather conditions. Measures taken to stop the spread of COVID-19 restricted

. businesses' ability to operate to varying degrees throughout much of 2020 and 2021. Reduced commercial and industrial sales in 2020 were also impacted by the closure of a large industrial customer in May 2020; the closure was announced prior to COVID-19 impacts.

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Eugene Water & Electric Board Management's Discussion and Analysis Overall load reductions due to COVID-19 were no longer observed beginning in the third quarter of 2021 though a slight shift in demand from commercial to residential customer classes has remained. Broadly, many employees able to work from home as a pandemic mitigation measure are continuing to do so.

EWES sold power supply in excess of load into wholesale markets. The Electric System has an active hedging program to manage price risk associated with wholesale power sales. Regionally, lower than normal water supply for hydropower in 2021 contributed to higher wholesale prices. This increased the value of EWEB's surplus, but it also increased the cost of market purchases made during extreme peak load events. Market purchases were needed due to unbudgeted hydro variances from EWES-owned projects. 2020 market prices were lower due to increased hydro-electric generation in the region.

Electric System operating expenses include purchased power and wheeling expenses. Prices are set for BPA and contracted resources by their respective contracts, which may escalate over time. Market purchases are made at times when resources aren't adequate for customer load or to support the EWES hedging program and are subject to price variability to the extent not fully hedged. Purchased power costs increased in 2021 as a result of a below average water year and higher market prices, noted above.

Lower purchased power costs in 2020 were due to lower market prices.

Increased fuel costs for a co-generation plant in 2021 contributed to the rise in steam and hydraulic generation costs. Generation costs were higher in 2019, compared to 2020, due to maintenance for a co-generation plant.

Within the customer accounting classification, in 2020, the COVID-19 pandemic caused many businesses to reduce operations or close and led to increased costs for collections and customer assistance.

Collection and customer assistance costs remained elevated in 2021 compared to pre-pandemic levels.

Administrative and general costs increased in 2021 due to multiple factors, including labor increases, software costs, and purchased services.

Depreciation expense increased in 2021 as a function of prior year capital closeout activity. Various assets were finished near the end of the year, including improvements at the Carmen Smith facility, and depreciation recognition began early in 2021. Depreciation expense decreased in 2020 as depreciation associated to the Leaburg hydroelectric project was not recognized. In 2020, the Leaburg hydroelectric project was moved to property held for future use. Federal Energy Regulatory Commission (FERC) ordered the project to dewater the canal which forced the generation plant offline.

For the Electric System, non-operating revenue was primarily miscellaneous revenue from sources unrelated to core business functions, including investment earnings, rental revenue and claims revenue.

In 2021, non-operating revenue included recognition of a $3.5 million public assistance grant from FEMA tied to the 2020 Holiday Farm Fire. In 2020, non-operating revenue included recognition of a $3.1 million public assistance grant from FEMA tied to the 2019 snowstorm. Also, in 2021 and 2020, earnings from equity investments, Western Generation Agency (WGA) and Harvest Wind, were especially strong, $3.2 million in 2021 and 2020 as compared to $2.2 million in 2019.

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Eugene Water & Electric Board Management's Discussion and Analysis Early in 2021, WGA agreed to sell its generation assets to the mill where WGA's generation plant is located, Georgia Pacific in Wauna, Oregon. The $3.5 million sale occurred in April 2021 and non-operating revenues recognized in 2021 include EWEB's allocation of sale proceeds.

Non-operating expense is primarily 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.

Other transactions of note include the Oregon Public Employee Retirement System (OPERS) valuation.

The net pension liability for the Electric System fell by $27 million from 2020 to 2021. The change was driven by better than projected earnings on pension assets. From 2019 to 2020, the net pension liability decreased by $1.2 million for the Electric System. For more information, see Note 16 - Retirement Benefits Significant variations in original and final budget amounts The Board of Commissioners has authority to set prices and annually budgets for spending in two categories: Capital and Operations & Maintenance (O&M). Annual budgets dictate revenue requirements and rate changes among different customer classes based on a cost-of-service analysis.

Recent residential price adjustments have been as follows:

2021 No change 2020 No change 2019 No change For the Electric System, significant variations in the original and final O&M budget tend to revolve around purchased power costs. Volatility in regional energy markets has increased in recent years and is accentuated by supply and/or demand during extreme weather events. 2021 purchased power budgets were set under the assumptions of a 90% water flow year for regional hydro generation and included reduced demand due to COVID-19.

2021 Approved Operations & Maintenance Budgets $217,700,000 Operational Changes:

Purchase Power 25,100,000 Shift of Labor and Overhead from Capital to O&M 3,900,000 Total O&M Budget Amendment $29,000,000 Total Amended O&M Budgets $246,700,000 The 2021 O&M budget was amended to authorize additional spending of $25.1 million for purchased power costs related to higher wholesale market prices, increased retail demand, portfolio balancing activity, and unbudgeted outages at EWEB owned facilities. The increased wholesale market prices impacted both purchased power costs and wholesale revenue, as did the increased portfolio balancing activities. The increases in purchased power costs were offset by increases in retail and wholesale revenues.

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Eugene Water & Electric Board Management's Discussion and Analysis Lower projected capital spending shifted costs from capital to O&M, as noted in the table. The 2021 Capital budget was initially approved at $51.3 million and was amended to $47.4 million.

2020 variances are outlined in the table below. Purchase power costs were expected to exceed budget by $8.8 million, primarily due to lower EWEB-owned hydro generation from poor water conditions on the McKenzie River and unplanned operational outages related to the wildfires. The increased purchased power costs were largely offset by higher wholesale revenue. The Electric System also expected to have increased costs due to the wildfires. Lower projected capital spending and accounting guidance for software capitalization shifted costs from capital to O&M.

2020 Approved Operations & Maintenance Budgets $221,000,000 Operational Changes:

Purchase Power 8,800,000 Wildfire Damage 2,800,000 Software shift from Capital to O&M 1,200,000 Shift of Labor and Overhead from Capital to O&M 1,500,000 Total O&M Budget Amendment $14,300,000 Total Amended O&M Budgets $235,300,00 The 2020 capital budget was initially approved at $49.1 million and was amended to $46.4 million due to the shifts in spending.

Significant capital asset activity Type 1 General Capital is budgeted year-by-year for routine capital expenditures less than $1 million and is funded with rates and customer contributions. Typical examples include "pole replacements" as part of Transmission & Distribution.

2020 activity included:

• Restoration efforts from the Holiday Farm Fire. This accounted for approximately $1.25 million additional capital spending.

• Leaburg Canal: Approximately $1 million of work associated with the Leaburg Hydroelectric project was deferred due to uncertainty around the Leaburg Canal Path forward. This includes deferred Holden Creek and Leaburg Substation work at the generation plant.

• Substations: Approximately $1 million was spent in 2020 due to two emergent transformer failures that resulted in replacement work (IP and Willow Creek).

• IT: Data center storage at a disaster recovery site and the Roosevelt Operations Center as well as firewall upgrades 2021 activity included:

• Procurement of property off Bertelsen Road, near the Roosevelt Operations Center

• Fleet purchases accelerated from the 2022 budget year Type 2 capital projects are discrete, with a defined completion period, and lifetime expenditures over $1 million. Depending on the project, this work may be funded with rates, customer contributions, or bond funds.

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Eugene Water & Electric Board Management's Discussion and Analysis 2020 activity included:

• Downtown Network: Installed four 15kV manual tie switches for downtown network feeders &

upgraded all 8 feeder cables. This project substantially increased resiliency of the Downtown Network and will allow for reduced switching time from days to hours in the event of a source substation equipment or line failure.

• Advanced Metering Infrastructure (AMI): Completed aspects of installation of communications infrastructure for improved radio coverage and to support meter installation. Design completed to transfer deployment method to plug and play and procure a deployment contractor, most of this work was deferred to 2021.

2021 activity included:

• In early 2020, the Currin Substation rebuild project was initiated and an engineering contractor began work in fall 2021 with design estimated to be completed in 2022. Engineering started procuring long lead items and drafting temporary system designs to support construction.

Construction is planned to begin late in 2022.

• AMI: Mass meter deployment occurred in 2021. Due to supply chain issues, the deployment of electric meters was postponed in October 2021. Once EWEB's meter vendor is able to restart mass production of meters, the installation will resume at a rate of 100% of plan.

Type 3 projects are large strategic programs with long term impacts and are generally bond-funded. The only current type 3 project for the Electric System is Carmen Smith.

2020 activity included:

• Turbine Runner replacement and Generator Rewind for Unit 2 - This project was delayed due to COVID-19 and contractor performance delays. EWEB completed digital governor conversions for both generating units and an exciter upgrade for one unit. The second exciter upgrade was completed in January 2021.

• Aquatics Management Plan: Fish passage design has been completed and regulatory review began in January 2021.

• Other Management Plans: With submission of the Carmen-Smith Water Quality Management Plan in November 2020, all 10 high level resource management plans required by the FERC license were completed. Deployment activities in 2021 for the resource management plans will continue through the 40-year term of the license.

2021 activity included:

• Completion of fish passage design, and initiation of design for habitat improvement projects and Smith Dam spillway expansion.

• Review critical dam safety elements of the fish passage designs, as well as potential project impacts associated with the discovery of sinkholes in Trail Bridge Reservoir.

• Relocation of a section of the transmission line and rebuilding the Chinook Salmon Spawning Channel were completed.

• Construction of improvements to Trail Bridge Campground achieved more than 50-percent completion.

• Rehabilitation of the first turbine generator unit at the Carmen Plant started in July and the construction of reliability improvements at Trail Bridge went under contract for execution in 2022.

More information about plant activity can be found in the note disclosures to the financial statements, Note 3 - Utility Plant.

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Eugene Water & Electric Board Management's Discussion and Analysis Long-term debt activity, credit ratings, debt service coverage The Electric System issues revenue bonds or notes payable to fund certain capital projects. During 2021, the Electric System made scheduled debt service payments. In 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. For more information, see Note 12 - Long-Term Debt.

Electric System bonds are rated as follows:

Moody's Investors Service Aa2 S&P Global Ratings AA-Fitch Ratings AA-The Electric System monitors Debt Service Coverage as a requirement under its master bond resolution.

Under the resolution, net revenues available for debt service must be at least 1.0x the annual debt service on all outstanding bonds. Within financial policy, the Board targets a range of 1.75x - 2.0x for debt service coverage.

• Net Revenue Available Debt Annual Debt Service Year for Debt Service Service (000s)

(000s) Coverage 2021 $34,725 $15,340 2.3x 2020 $32,297 $16,112 2.0x 2019 $43,617 $16,373 2.7x Currently known facts, decisions, or conditions expected to have a significant effect on financial position or results of operations In 2020, the Leaburg hydroelectric project was moved from plant in service to property held for future use.

FERG ordered the project to dewater the canal forcing 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. Initial canal soil studies concluded in 2020 and the Board is discussing possible remediation of the canal for storm water conveyance or restoration to power generation.

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 purification of water occurs at the Hayden Bridge Water Filtration Plant. In addition to the filtration plant, the Water System owns and operates 22 storage tanks, 25 pump 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 Water System Condensed Financial Information (in thousands of dollars) 2021 2020 2019 Net utility plant $ 209,504 $ 196,316 $ 185,692 Current assets 39,078 42,610 37,989 Other assets 34,189 34,094 18,617 Total assets 282,771 273,020 242,298 Deferred outflows of resources 10,736 13,201 15,201 Current liabilities 7,690 6,584 5,810 Long-term debt 65,899 69,008 51,319 Other liabilities 18,861 28,087 29,295 Total liabilities 92,450 103,679 86,424 Deferred inflows of resources 13,297 7,330 6,396 Net investment in capital assets 138,942 131,358 126,446 Restricted 4,048 6,484 9,396 Unrestricted 44,770 37,370 28,837 Total net position $ 187,760 $ 175,212 $ 164,679 Residential $ 21,409 $ 20,508 $ 19,492 Commercial and industrial 15,167 14,052 14,768 Sales for resale and other 5,542 4,320 3,832 Operating revenue 42,118 38,880 38,092 Transmission and distribution 6,632 7,269 5,840 Sources of supply, pumping, and purification 9,736 7,671 6,796 Customer accounting 1,782 1,975 1,780 Conservation expenses 545 520 492 Administrative and general 4,504 5,111 4,491 Depreciation on utility plant 7,263 6,805 6,645 Operating expenses 30,462 29,351 26,044 Net operating income 11,656 9,529 12,048 Non-operating revenue 1,031 762 1,486 Non-operating expense (2,494) (2,307) (2,250)

Income before capital contributions 10,193 7,984 11,284 Capital contributions 2,355 2,353 4,674 Special items (3,956)

Intersystem transfer 196 Change in net position 12,548 10,533 12,002 Total net position - beginning of year 175,212 164,679 152,677 Total net position - end of year $ 187,760 $ 175,212 $ 164,679 14

Eugene Water & Electric Board Management's Discussion and Analysis Analysis of financial position and results of operations The water system's overall financial position improved in 2021 and 2020 as a measure of overall increases in net position and net operating income.

The net investment in capital assets component of net position, reflecting the value of capital assets net of the debt incurred to acquire those assets, increased in 2021 and 2020. Capital asset additions such as main replacements and improvements, advanced metering infrastructure, and Hayden Bridge improvements have increased plant values and decreases in associated debt occurred as annual debt service payments were made.

Restricted net position is subject to external legal restrictions on its use and is primarily representative of reserves for payment of debt service and System Development Charges (SOC). The use of SOC reimbursement reserves toward payment of debt service decreased restricted net position in 2021 and 2020.

Unrestricted net position represents the accumulation of assets that are not capital assets, or subject to external restrictions on their use. A driver to the 2021 increase was reduction in the actuarial measurement of the net pension and OPEB liabilities following strong market performance of investment portfolios Increases in the Water System's unrestricted net position also reflect strong operating activity for the last several years.

Analysis of balances and transactions Consumption of water varies depending on the season and the weather patterns of a particular year with peak consumption in the summer months. 2021 and 2020 were impacted by COVID-19. Social distancing and pandemic mitigation measures required many commercial facilities to reduce their typical operations.

In addition, many employers transitioned to a remote working environment with staff working from home where possible. In 2021, overall consumption increased as drought conditions in Oregon corresponded with higher-than-normal consumption through the spring and summer months. Annual water production was the highest since 2008. 2020 overall consumption was stable with prior years with a small shift from commercial to residential consumption.

In the wake of the Holiday Farm Fire during September 2020, significant recovery needs were identified within the McKenzie River Watershed. In planning for increased source protection and water quality efforts, a Watershed Recovery Fee took effect in July 2021. The Watershed Recovery Fee is assessed to all residential and commercial customers based on meter size. For most residential and business customers, the fee is a flat $3 per month (based on a 1-inch or smaller water meter). Some customers, such as large businesses and those with extensive irrigation needs, pay more ($4.50 to $30 per month) based on meter size.

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 and industrial. Water sales revenue for retail customers was higher in 2020 corresponding to extended dry weather in September and October, compared to 2019, when September rains brought an end to the typical dry summer weather with over 5 inches of rain. 2021 consumption and revenue increased, due to drought conditions beginning early in the year.

15

Eugene Water & Electric Board Management's Discussion and Analysis Commercial 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 were a symptom of COVID-19 economic difficulty and social distancing measures. Commercial sales rebounded in 2021, with drought conditions early in the year and an early start to the irrigation season.

Wholesale sales include sales to River Road and Santa Clara Water Districts, the City of Veneta, and the Willamette Water Company.

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

The largest production expenses are purification and transmission and distribution of water. Other significant expenses are administrative and general, and depreciation. During 2020, increases in source of supply were driven 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. 2021 increases in source of supply were similar and geared toward the McKenzie River Watershed restoration efforts. Increased costs are funded through the Watershed Recovery Fee that took effect July 2021", noted above. Transmission and distribution costs were higher in 2020 due to contract work for patching and paving and increased labor costs in operating expense with less internal labor allocated to capital projects. Reduced customer accounting and administrative costs in 2021 were a function of overhead allocations to capital work. Overhead is applied to capital assets as they are constructed and effectively allocates current period costs to constructed assets where it is ultimately recognized as depreciation expense in a future period. Capital spending was higher in 2021 than 2020, increasing overhead allocations.

Similar to the Electric System, depreciation expense increased in 2021 as a function of prior year capital closeout activity. Various assets were finished near the end of the year, including improvements at the Hayden Bridge facility, and depreciation recognition began early in 2021.

Other transactions of note include the OPERS valuation. The net pension liability for the Water System fell by $8.5 million from 2020 to 2021. The change was driven by better than projected earnings on pension assets. From 2019 to 2020, the net pension liability increased by $390,000 for the Water System.

For more information, see Note 17 - Retirement benefits.

Analysis of significant variations between original and final budget amounts The Board of Commissioners has authority to set prices and annual budgets for spending in two categories: Capital and Operations & Maintenance (O&M). Annual budgets dictate revenue requirements and rate changes among different customer classes based on a cost-of-service analysis.

Recent residential price adjustments have been as follows:

2021 No change 2020 No change 2019 No change Following the Holiday Farm Fire during September 2020, significant recovery needs were identified within the McKenzie River Watershed. Budgeted spending for 2021 was categorized as Risk Based, Resiliency, and Strategic, and included activities such as erosion control, revegetation, floodway acquisitions and restoration, and reforestation.

16

Eugene Water & Electric Board Management's Discussion and Analysis 2021 Approved Operations & Maintenance Budget $20,200,000 Pro osed Investment Levels:

Risk Based 2,250,000 Resiliency 1,550,000 Strategic 150,000 Total O&M Budget Amendment $3,950,000 Total Amended O&M Bud ets $24,150,000 Water capital budgets were not amended in 2021.

2020 O&M budget amendments included funds for Water Source Protection following the Holiday Farm Fire, and addressed delays and shifts in spending from Capital to O&M.

2020 Approved Operations & Maintenance Budgets $20,700,000 Operational Changes:

Water Source Protection 1,000,000 Software shift from Capital to O&M 300,000 Shift of Labor and Overhead from Capital to O&M 600,000 Total O&M Budget Amendment $1,900,000 Total Amended O&M Bud ets $22,600,00 The shifts from capital to O&M noted in the O&M budget amendment above, reduced the Capital budget.

In addition, the Water Utility had an increase to amend the capital budget to cover their portion of an emergent opportunity for technology hardware replacement, offsetting planned costs in future years.

2020 Approved Capital Budget $18,000,000 Software shift from Capital to O&M (300,000)

Shift from Capital to O&M (600,000)

Higher than Estimated Costs 600,000 Total Amended Ca ital Bud et $17,700,000 17

Eugene Water & Electric Board Management's Discussion and Analysis Description of significant capital asset activity during the year Type 1 General Capital is budgeted year-by-year for routine capital expenditures less than $1 million and is funded with rates and customer contributions. Typical examples include "main replacements" as part of Distribution & Pipe Services.

2020 activity included:

• Source - Water intakes & Filtration Plant: Numerous smaller projects were completed at Hayden Bridge in 2020 in conjunction with progress on larger resiliency efforts at the filtration plant. These included some pipe improvements to the 'house water system', replacement of a variable frequency drive at the finish water pump station, and an upgrade of the filter control system. In addition, source water quality equipment was purchased to help with watershed monitoring going forward. Also, several projects are underway to help the plant handle potential source quality issues including improvements to the sodium hydroxide and powder activated carbon systems.

• Distribution Pipe and Services: Water main replacements and improvements are the largest component of the Type 1 work. COVID impacts slowed work early in the pandemic. Several large projects were contracted out in the second half of the year. Some of the large projects include a main replacement on Saratoga Ave and a large main replacement in the Willagillespie area in North Eugene.

2021 activity included:

• Source - Water intakes & Filtration Plant: Improvements at the Hayden Bridge Filtration Plant include starting improvements for the chlorine building and continued work on powder activated carbon system retrofits.

• Distribution Pipe and Services: Water main replacements and improvements are the largest component of the Type 1 work. Large main replacements for 2021 included areas of Cross Street, Crest Drive, and the Willagillespie area in North Eugene.

Type 2 capital projects are discrete, with a defined completion period, and lifetime expenditures over $1 million. Depending on the project, this work may be funded with rates, customer contributions, or bond funds.

2020 activity included:

• Hayden Bridge Lab and Backup Services Building: Design was completed in 2019 and the Board approved a contract for the construction of the lab in early 2020. The new building was approved for occupancy in late December. Finish site work remained for 2021.

• Distribution & Pipe Services: Design of a riverfront transmission extension project and boring for a main under a railroad as identified in the water system master plan.

• Planning and conceptual design work occurred for placement of new reservoirs at three locations:

East 40th Ave., College Hill, and Hawkins Hill. The first reservoir to be constructed will be at East 40th Ave. Construction is planned to start in mid-2021 and be completed by the end of 2022.

• AMI: Completed aspects of installation of communications infrastructure for improved radio coverage and to support meter installation. Design completed to transfer deployment method to plug and play and procure a deployment contractor, most of this work was deferred to 2021.

18

Eugene Water & Electric Board Management's Discussion and Analysis 2021 activity included:

• Second phase of a 42-inch transmission main project extending from the EWEB headquarters site across University of Oregon property

• E. 40th Reservoir. Excavation work occurred for two tanks at this site. The project is on schedule.

• AMI: The deployment of water meters continues but at the rate of 30% of the original plan.

Type 3 projects are large strategic programs with long term impacts and are generally bond funded.*

2020 activity included:

• Work in this area was focused on continued efforts to construct emergency water distribution sites. Efforts were largely focused on the Bethel area and Lane Event Center emergency water distribution sites.

2021 activity included:

• Work in this area was focused on continued efforts to construct emergency water distribution sites. This year, this effort was largely focused on the South Eugene site. Coordination efforts with the Eugene School District, City of Eugene, and the YMCA delayed construction on this site.

Planning efforts continued for potential emergency sites in Southeast and Southwest Eugene.

More information about plant activity is available in Note 3 - Utility Plant, in the note disclosures to the financial statements.

Long-term debt activity, credit ratings, debt service coverage The Water System issues revenue bonds or notes payable to fund certain capital projects. During 2021, the Water System made scheduled debt service payments. During 2020, the Water System made scheduled debt service 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. For more information, see Note 12 - Long-Term Debt and Note 13 - lntersystem items.

Water System bonds are rated as follows:

Moody's Investors Service Aa2 S&P Global Ratings AA Fitch Ratings AA+

The Water System monitors Debt Service Coverage as a requirement under its master bond resolution.

Under the resolution, net revenues available for debt service must be at least 1.25x the annual debt service on all outstanding bonds. Within financial policy, the Board targets a range of 2.0x - 2.5x for debt service coverage.

Net Revenue Available Annual Debt Service Debt Year for Debt Service Service (000s) (000s) Coverage 2021 $20,040 $4,927 4.1x 2020 $8,240 $3,821 2.2x 2019 $17,522 $4,451 3.9x 19

Eugene Water & Electric Board Management's Discussion and Analysis Currently known facts, decisions, or conditions expected to have a significant effect on financial position or results of operations.

Current capital projects expected to have significant effects on financial position are storage tank projects noted in the capital asset section: East 40 th , College Hill, and Hawkins Hill.

Eugene is the largest metro area in the Pacific Northwest with a single source of water. The Board owns property along the Willamette River and has been planning to build a second source filtration plant to create additional resiliency to the water supply. Construction is tentative to start in 2025.

Retirement Benefits Trust The Eugene Water & Electric Board Retirement Benefits Trust (the Trust) was created in 2007 to fund other post-employment benefits (OPEB). The plan provides $5,000 life insurance coverage for all retirees and subsidies toward health insurance coverage under either the EWEB group plan or the Oregon PERS Health Insurance Program (Oregon PHIP) Medicare plans for retirees meeting eligibility criteria. Plan changes in 2016 and 2017 removed the health care subsidies available to employees upon retirement if they were hired after 2002.

Financial statements for the Trust, including accompanying notes, are a set of two statements. The statement of fiduciary net position reports the assets, liabilities, and net position held in trust on the day of December 31 for the years presented. The statement of changes 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.

Significant totals from the financial statements are below.

2021 2020 2019 Total assets $ 20,371 $ 20,059 $ 19,273 Total liabilities 17 28 23 Total net position $ 20,353 $ 20,031 $ "19,250 Contributions $ 859 $ 1,202 $ 1,854 Net investment income 2,233 2,527 3,228 Total additions 3,092 3,729 5,082 Total deductions 2,787 2,948 3,003 Net increase (decrease) in net position $ 306 $ 781 $ 2,079 20

Eugene Water & Electric Board Management's Discussion and Analysis Analysis Assets are primarily 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 benefit payments pending at the end of each year.

Total assets and net position as of December 31, increased each year from 2019 through 2021. This was primarily because of investment income, which was high each of those years. The money-weighted average return was 12.0% for 2021, 14.0% for 2020 and 19.8% for 2019. See Note 17 for further information on the portfolio's composition and investment returns. Employer contributions also boosted assets. This was significant in 2019, where employer contributions were $1.1 million. The Board makes contributions to the Trust based on the most recent actuarially determined contribution (ADC) for the plan.

As the net position of the trust improved from 2019 to 2021, the ADC decreased. As of the August 31, 2021, actuarial valuation, the ADC was zero. The Board ceased contributions to the Trust in 2021 after receiving that report. Contributions from the Board in 2021 were $176,000 and $462,000 in 2020.

Contributions include payments from retirees, which are applied to their monthly health care insurance premiums. Retirees contributed $684,000 in 2021, $740,000 in 2020, and $717,000 in 2019. These contributions varied primarily for changes in premiums and an increasing proportion of retirees participating in the Medicare plans of Oregon PHIP. Premiums for Medicare plans increased in 2020 and decreased below the 2019 level, by 2%, in 2021. The overall number of retirees participating in medical benefits was stable from 2019 to 2021, declining approximately 4%.

Deductions are primarily benefit expenses. Administrative costs are also included. Benefit expenses declined each year as retirees aged out of the EWES group medical plan, which is the most expensive insurance available to participants. The number of retirees participating in the EWES group medical plan decreased 25% or 30 persons from August 31, 2019, to August 31, 2021. Upon becoming Medicare eligible, retirees continued their OPES benefit by choosing a Medicare plan through Oregon PHIP, or they dropped off the OPES plan. Both outcomes reduced benefit expenses. These savings were enhanced by the premium decreases for the PHIP plans in 2021. As of August 31, 2021, 78% or 311 of the plan's 401 retirees participating in medical coverage were Medicare retirees, 71 % in 2019.

As of December 31, 2021, the plan's financial position was the highest it has been since inception of the Trust. Benefit expenses are expected to continue to decrease in the future as health care benefits are closed to employees hired after 2002 and as more participants become Medicare eligible.

21

This page intentionally left blank, Eugene Water & Electric Board Statements of Net Position December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 ASSETS Capital assets Utility plant in service $ 833,289,354 $ 803,732,684 $ 339,584,612 $ 320,683,728 $ 1,172,873,966 $ 1,124,416,412 Less accumulated depreciation 469,310,376 451,027,186 142,306,939 135,864,192 611,617,315 586,891,378 Net utility plant in service 363,978,978 352,705,498 197,277,673 184,819,536 561,256,651 537,525,034 Property held for future use 38,335,395 37,049,750 2,320,699 1,999,288 40,656,094 39,049,038 Construction work in progress 42,040,231 39,401,817 9,905,618 9,496,706 51,945,849 48,898,523 Net utility plant 444,354,604 429,157,065 209,503,990 196,315,530 653,858,594 625,472,595 Current assets Cash and cash equivalents 16,417,613 21,241,755 7,888,023 11,473,557 24,305,636 32,715,312 Short-term investments 11,192,566 9,148,677 3,197,125 3,613,615 14,389,691 12,762,292 Restricted cash and investments 23,984,812 38,676,438 4,575,504 10,863,810 28,560,316 49,540,248 Designated cash and investments 42,514,187 42,087,850 17,830,552 11,872,031 60,344,739 53,959,881 Receivables, less allowances 33,399,835 29,135,704 4,148,754 3,577,626 37,548,589 32,713,330 Due from Water System 383,331 375,128 Materials and supplies 8,302,145 4,676,862 1,310,842 1,079,149 9,612,987 5,756,011 Prepaids 941,848 915,451 127,258 130,609 1,069,106 1,046,060 Option premiums short-term 1,223,066 1,198,458 1,223,066 1,198,458 Total current assets 138,359,403 147,456,323 39,078,058 42,610,397 177,054,130 189,691,592 Non-current assets Investments - designated 32,241,661 30,112,526 13,522,230 8,494,062 45,763,891 38,606,588 Investments - unrestricted 15,314,315 11,144,265 4,374,491 4,457,346 19,688,806 15,601,611 Investments - restricted 19,290,845 27,328,703 3,853,994 8,067,197 23,144,839 35,395,900 Receivables, conservation, and other 2,887,762 3,103,002 159,522 133,830 3,047,284 3,236,832 Due from Water System 6,049,708 6,419,950 Investment in WGA 11,770 3,026,788 11,770 3,026,788 Investment in Harvest Wind 17,688,387 18,943,625 17,688,387 18,943,625 Preliminary investigations 262,199 128,497 1,302,816 1,302,816 1,565,015 1,431,313 Other assets 23,528,317 25,787,737 10,975,676 11,638,794 34,503,993 37,426,531 Total non-current assets 117,274,964 125,995,093 34,188,729 34,094,045 145,413,985 153,669,188 DEFERRED OUTFLOWS OF RESOURCES 35,655,368 43,937,752 10,736,278 13,201,421 46,391,646 57,139,173 Total assets and deferred outflows of resources $ 735,644,339 $ 746,546,233 $ 293,507,055 $ 286,221,393 $ 1,022,718,355 $ 1,025,972,548 Note: Inter-system obligations and payments are eliminated in the total systems columns.

22 See accompanying notes.

Eugene Water & Electric Board Statements of Net Position December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 LIABILITIES Current liabilities Payables $ 20,924,463 $ 21,897,140 $ 2,190,092 $ 1,343,138 $ 23,114,555 $ 23,240,278 Accrued payroll and benefits 4,989,239 4,267,939 1,510,950 1,322,644 6,500,189 5,590,583 Due to Electric System 383,331 375,128 Payable from restricted assets Accrued interest on long-term debt 3,508,017 3,581,186 945,691 988,388 4,453,708 4,569,574 Long-term debt due within one year 8,260,000 6,745,000 2,660,000 2,555,000 10,920,000 9,300,000 Total current liabilities 37,681,719 36,491,265 7,690,064 6,584,298 44,988,452 42,700,435 Non-current liabilities Long-term debt 217,864,002 228,371,384 65,898,766 69,007,546 283,762,768 297,378,930 Due to Electric System 6,049,708 6,419,950 Net pension liability 30,359,133 57,307,318 9,587,094 18,097,048 39,946,227 75,404,366 Net OPEB liability 9,256,616 10,307,702 2,923,142 3,255,064 12,179,758 13,562,766 Other liabilities 2,030,381 2,511,424 302,168 315,199 2,332,549 2,826,623 Total liabilities 297,191,851 334,989,093 92,450,942 103,679,105 383,209,754 431,873,120 DEFERRED INFLOWS OF RESOURCES 43,046,317 24,017,684 13,296,528 7,329,896 56,342,845 31,347,580 NET POSITION Net investment in capital assets 254,288,224 251,253,583 138,941,911 131,358,176 393,230, 135 382,611,759 Restricted 4,791,132 6,434,467 4,047,985 6,483,739 8,839,117 12,918,206 Unrestricted 136,326,815 129,851,406 44,769,689 37,370,477 181,096,504 167,221,883 Total net position 395,406,171 387,539,456 187,759,585 175,212,392 583,165,756 562,751,848 Total liabilities, deferred inflows of resources, and net position $ 735,644,339 $ 746,546,233 $ 293,507,055 $ 286,221,393 $ 1,022,718,355 $ 1,025,972,548 Note: Inter-system obligations and payments are eliminated in the total systems columns.

See accompanying notes. 23

Eugene Water & Electric Board Statements of Revenues, Expenses, and Changes in Net Position Years Ended December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 Residential $ 102,528,959 $ 99,374,113 $ 21,408,604 $ 20,508,148 $ 123,937,563 $ 119,882,261 Commercial and industrial 93,496,715 92,940,923 15,166,776 14,052,620 108,663,491 106,993,543 Sales for resale and other 61,719,367 51,584,582 5,542,505 4,319,880 67,261,872 55,904,463 Operating revenues 257,745,041 243,899,618 42,117,885 38,880,648 299,862,926 282,780,267 Purchased power 141,720,706 134,594,268 141,720,706 134,594,268 System control 4,287,467 4,637,338 4,287,467 4,637,338 Wheeling 12,052,379 11,247,747 12,052,379 11,247,747 Steam and hydraulic generation 13,481,492 12,141,792 13,481,492 12,141,792 Transmission and distribution 24,507,045 24,509,483 6,632,413 7,268,794 31,139,458 31,778,280 Source of supply, pumping, and purification 9,735,907 7,671,364 9,735,907 7,671,365 Customer accounting 8,054,473 8,242,160 1,781,613 1,975,022 9,836,086 10,217,179 Conservation expenses 4,175,787 4,013,788 545,056 520,141 4,720,843 4,533,929 Administrative and general 22,879,062 20,750,800 4,504,107 5,110,689 27,383,169 25,861,490 Depreciation on utility plant 24,491,728 21,594,275 7,262,502 6,805,228 31,754,230 28,399,503 Operating expenses 255,650,139 241,731,651 30,461,598 29,351,238 286,111,737 271,082,891 Net operating income 2,094,902 2,167,967 11,656,287 9,529,410 13,751,189 11,697,378 Investment earnings (losses) (46,699) 1,546,093 (13,899) 499,832 (60,598) 2,045,925 Interest earnings, Water 161,133 169,874 Other revenue 9,974,990 10,243,786 1,045,124 262,097 11,020,114 10,505,883 Non-operating revenues 10,089,424 11,959,753 1,031,225 761,929 10,959,516 12,551,808 Note: Inter-system obligations and payments are eliminated in the total systems columns.

24 See accompanying notes.

Eugene Water & Electric Board Statements of Revenues, Expenses, and Changes in Net Position Years Ended December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 Other revenue deductions $ 428,976 $ 476,259 $ 199,778 $ 60,490 $ 628,754 $ 536,749 Interest expense and related amortization 7,351,923 7,161,122 2,133,670 2,077,082 9,485,593 9,238,204 Interest expense, Electric 161,133 169,874 Non-operating expenses 7,780,899 7,637,381 2,494,581 2,307,446 10,114,347 9,774,953 Income before capital contributions and special items 4,403,427 6,490,339 10,192,931 7,983,894 14,596,358 14,474,233 Contributions in aid of construction 2,680,049 2,389,691 977,695 713,122 3,657,744 3,102,813 Contributed plant assets 783,239 416,521 217,897 524,179 1,001,136 940,700 System development charges 1,158,670 1,116,533 1,158,670 1,116,533 Capital contributions 3,463,288 2,806,212 2,354,262 2,353,834 5,817,550 5,160,046 lntersystem transfer (195,792) 195,792 Change in net position 7,866,715 9,100,759 12,547,193 10,533,520 20,413,908 19,634,279 Total net position at beginning of year 387,539,456 378,438,697 175,212,392 164,678,872 562,751,848 543,117,569 Total net position at end of year $ 395,406,171 $ 387,539,456 $ 187,759,585 $ 175,212,392 $ 583,165,756 $ 562,751,848 Note: Inter-system obligations and payments are eliminated in the total systems columns.

See accompanying notes. 25

Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $269,318,471 $ 262,065,995 $ 41,506,287 $ 38,994,488 $ 310,824,758 $ 301,060,483 Other receipts 3,432,409 7,109,214 427,975 639,558 3,860,384 7,748,772 Power purchases (142,708,469) (134,654,889) (142,708,469) (134,654,889)

Payments to employees, employer paid benefits (48,674,097) (48,306,478) (15,096,101) (14,963,817) (63,770,198) (63,270,295)

Payments to suppliers (42,819,767) (35,489,293) (7,254,459) (7,013,593) (50,074,226) (42,502,886)

Contributions in lieu of taxes (12,967,399) (12,855,478) (12,967,399) (12,855,478)

Net cash from operating activities 25,581,148 37,869,071 19,583,702 17,656,636 45,164,850 55,525,707 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investment securities (72,695,106) (157,570,099) (19,340,204) (43,185,717) (92,035,310) (200,755,816)

Proceeds from sale and maturities of investments 79,834,554 98,155,000 19,457,639 25,089,971 99,292,193 123,244,971 Interest on investments 1,844,603 1,237,264 457,389 317,954 2,301,992 1,555,218 Distributions from equity investments 7,454,005 4,935,271 7,454,005 4,935,271 Net cash from investing activities 16,438,056 (53,242,564) 574,824 (17,777,792) 17,012,880 (71,020,356)

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES lntersystem obligations paid to Electric from Water 361,303 352,580 (361,303) (352,580)

Interest receipts/(payments) to Electric from Water 161,870 170,593 (161,870) (170,593)

Net cash from non-capital financing activities 523,173 523,173 (523,173) (523,173)

Note: lntersystem obligations and payments are eliminated in the total systems columns.

26 See accompanying notes.

Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments $ (6,745,000) $ (8,540,000) $ (2,555,000) $ (1,855,000) $ (9,300,000) $ (10,395,000)

Proceeds from issuance of bonds 63,149,007 35,124,291 98,273,298 Payments to refund debt (17,147,475) (15,114,186) (32,261,661)

Additions to plant and non-utility property, net (40,182,879) (44,131,710) (20,036,112) (17,674,127) (60,218,991) (61,805,837)

Interest payments (8,594,849) (7,571,523) (2,372,132) (1,966,194) (10,966,981) (9,537,717)

Additions to preliminary surveys and other (79,922) 8,006,090 (79,922) 8,006,090 Capital contributions 3,463,288 2,806,212 2,354,262 2,353,833 5,817,550 5,160,045 Net cash from capital and related financing activities (52,139,362) (3,429,399) (22,608,982) 868,617 (74,748,344) <2,sso,1s2i CHANGE IN CASH AND CASH EQUIVALENTS (9,596,985) (18,279,719) (2,973,629) 244,288 (12,570,614) (18,055,431)

CASH AND CASH EQUIVALENTS, beginning of year 54,850,733 73,130,452 20,568,183 20,343,895 75,418,916 93,474,347 CASH AND CASH EQUIVALENTS, end of year Including cash and cash equivalents restricted and designated: $28,836,134 and $9,706,529

($33,608,979 and $9,094,622 in 2020) for Electric and Water, respectively $ 45,253,748 $ 54,850,733 $ 17,594,554 $ 20,588,183 $ 62,848,302 $ 75,418,916 NON-CASH CAPITAL ACTIVITY In 2021, plant assets contributed by developers were $783,239 for the electric system and $217,897 for the water system ($416,251 for the electric system and $524,179 for the water system in 2020).

Note: Inter-system obligations and payments are eliminated in the total systems columns.

See accompanying notes. 27

Eugene Water & Electric Board Statements of Cash Flows Years Ended December 31, 2021 and 2020 Electric System Water System Total System 2021 2020 2021 2020 2021 2020 RECONCILIATION OF NET OPERATING INCOME TO NET CASH FROM OPERATING ACTIVITIES Net operating income $ 2,094,902 $ 2,167,967 $ 11,656,285 $ 9,529,411 $ 13,751,187 $ 11,697,378 Adjustments to reconcile net operating income to net cash from operating activities Depreciation, including allocated 25,740,056 22,806,896 7,262,502 6,805,228 33,002,558 29,612,124 Other revenue 5,924,048 7,359,981 417,074 709,202 6,341,122 8,069,183 Other revenue deductions (355,561) (321,642) (44,316) (24,066) (399,877) (345,708)

(Increase) decrease in assets Receivables (4,362,396) 4,231,076 (571,129) 68,260 (4,933,525) 4,299,336 Materials and supplies (3,625,283) 375,984 (231,693) 216,737 (3,856,976) 592,721 Prepayments and special deposits (26,397) 103,471 3,351 26,755 (23,046) 130,226 Conservation loans, net 313,506 1,050,834 313,506 1,050,834 Other assets 146,362 294,968 146,362 294,968 (Increase) decrease in deferred outflows Fair value of hedging derivatives 176,947 80,094 176,947 80,094 Increase (decrease) in liabilities Accounts payable, accrued payroll, and benefits (98,294) (68,657) 1,091,628 325,107 993,334 256,450 Other liabilities (481,043) 2,971 (481,043) 2,971 Increase in deferred inflows of resources 134,301 (214,874) 134,301 (214,874)

Net cash from operating activities $ 25,581,148 $ 37,869,069 $ 19,583,702 $ 17,656,634 $ 45,164,850 $ 55,525,703 28 See accompanying notes.

Eugene Water & Electric Board Statements of Fiduciary Net Position - OPEB December 31, 2021 and 2020 Retirement Benefits Trust 2021 2020 ASSETS Money market investments $ 133,293 $ 187,085 Interest and dividends receivable 2 5,138 Prepaid expenses 1,300 2,201 Investments, at fair value Corporate bonds Domestic 303,294 Mutual funds and exchange traded funds Fixed income 7,590,426 7,415,912 International 4,420,157 3,871,565 Domestic 7,189,272 7,296,886 Real estate 1,036,432 977,309 Total investments 20,236,287 19,864,966 Total assets $ 20,370,882 $ 20,059,390 LIABILITIES Administrative costs payable $ 17,423 $27,920 Benefits payable 16,120 Total liabilities 33,543 27,920 Net position restricted for postemployment benefits other than pensions $ 20,337,339 $ 20,031,470 See accompanying notes. 29

Eugene Water & Electric Board Statements of Changes in Fiduciary Net Position - OPEB Years Ended December 31, 2021 and 2020 Retirement Benefits Trust 2021 2020 ADDITIONS Contributions Employer $ 175,500 $ 462,000 Members - EWEB group plan, only 683,609 740,292 Total contributions 859,109 1,202,292 Investment income Net increase in fair value of investments 1,586,541 2,088,008 Interest 3,696 15,308 Dividends 460,139 373,766 Capital gain distributions 238,241 101,704 2,288,617 2,578,787 Less investment expense 55,290 51,703 Net investment income 2,233,327 2,527,084 Total additions $ 3,092,436 $ 3,729,376 DEDUCTIONS Benefits $ 2,022,858 $ 2,118,257 Benefits funded by retirees - EWEB group plan 683,609 740,292 Administrative expenses 80,101 89,779 Total deductions 2,786,568 2,948,328 Net increase in net position 305,868 781,048 NET POSITION RESTRICTED FOR POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS Beginning of year 20,031,471 19,250,423 End of year $ 20,337,339 $ 20,031,471 30 See accompanying notes.

Eugene Water & Electric Board Notes to Financial Statements Note 1 - Summary of Significant Accounting Policies Reporting entity The Eugene Water & Electric Board (Board or EWEB) is an administrative unit of the City of Eugene, Oregon. However, as established by the Governmental Accounting Standards Board (GASB) definition of a reporting entity, the Board is a primary government and is not a component unit of another 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 provides energy and water service to residential, commercial, and industrial customers located in a 236 square mile area, including the City of Eugene and adjacent 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 ownership in various generation facilities, which are joint ventures or separate entities 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.

The Board is subject to various forms of regulation under federal, state and local laws and is subject to various Federal Energy Regulatory Commission (FERC) regulations. Laws and regulations are subject to change and may have a direct impact on the operations of the Board.

Eliminations Amounts receivable 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 records 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 of economic resources measurement focus to determine financial position and the change in financial position. The accounting principles used are similar to those applicable to businesses in the private sector and are maintained on the accrual basis of accounting. Revenues are recognized when earned, and expenses are recognized when incurred.

31

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

In June 2018, GASS issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period, which was effective for the Board in 2020. The objective of this Statement is (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. The Board previously used provisions of regulatory accounting to discontinue the capitalized interest process prior to issuance of this Statement. Therefore, Statement 89 had no impact on the Board's reporting.

In January 2020, GASS issued Statement No. 92, Omnibus 2020. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. The Statement was effective for periods beginning after June 15, 2020 and the Board adopted the provisions for the year ended December 31, 2021, resulting in no current year impact.

In March 2020, GASS issued Statement No. 93, Replacement of Interbank Offered Rates (IBOR). The objective of this Statement is to address accounting and financial reporting implications that result from the replacement of an IBOR. The Statement was effective for periods beginning after June 15, 2020, and the Board adopted the provisions for the year ended December 31, 2021, resulting in no current year impact.

In May 2020, GASB issued Statement No. 95, Postponement of the Effective Dates of Certain Authoritative Guidance. The objective of this Statement is to provide temporary relief from certain new accounting and financial reporting requirements in light of the COVID-19 pandemic. The Statement was effective immediately and the Board adopted the provisions for the year ended December 31, 2020.

In June 2020, GASS issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans-An Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No. 32.

The statement exempted primary governments from treating the absence of a governing board the same as the appointment of a voting majority of a governing board in determining whether they are financially accountable for defined contribution benefit plans, and it established accounting and financial reporting requirements for Section 457 plans that meet the definition of a pension plan. The exemption portion of the statement was effective immediately. The Board applied this statement for the year ended December 31, 2020.

Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the

• United States of America requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

32

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

Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. Such reclassifications have no effect on previous net revenue or net position.

Utility plant in service and depreciation Utility plant is stated at original cost. Costs include labor, materials, and related indirect costs, such as engineering and transportation. 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.

Estimated Depreciable Lives Asset Class in Years Electric Water System System Land n/a n/a Intangible assets n/a n/a Distribution plant 20-50 Hydraulic production 15-50 Steam production 15-50 Other production 15-50 Telecommunications 10 Transmission 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 original maturities of three months or less meet this definition. The Board considers money market accounts and government investment pool holdings to be cash equivalents.

Fair value of financial instruments .

The carrying amounts of current assets, including unrestricted, designated and restricted cash and investments, and current liabilities approximate fair value due to the short-term maturity of those instruments. The fair value of the Board's investments and debt are estimated based on the quoted market prices for the same or similar issues.

33

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

Restricted assets Cash and investments restricted by provisions of bond resolutions and agreements 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 unrestricted resources as needed.

Materials and supplies Materials and supplies provide for additions and repairs to utility plant and are stated at weighted average cost.

Preliminary investigations Preliminary investigations consist of costs for projects the Board believes will be 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 included for rate-making purposes.

• Conservation assets - Conservation assets for the Electric System represent installations of energy saving measures at customer properties. The conservation asset balance is reduced as costs are recovered, which for the most part represent debt service payments included in rates for related borrowing.

• Unamortized bond issue costs- Unamortized bond issue costs represent the remaining expense related to various debt issuances. The asset is 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 accounting is used to recognize pension expense in accordance with the required employer contribution rates set by the Oregon Public Employees Retirement System.

• Other Post-employment Benefits (OPEB) debits - 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 OPEB expense in accordance with employer contributions made by the Board.

Debt refundings For current and advance refundings resulting in defeasance of debt, the difference between the reacquisition price and the net carrying amount of the old debt (gain or loss) is deferred and amortized as a component of interest expense over the remaining 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.

34

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

Compensated absences Employees accrue vacation leave in varying amounts according to their years of service. The maximum vacation accrual an employee can carry over is 240 hours0.00278 days <br />0.0667 hours <br />3.968254e-4 weeks <br />9.132e-5 months <br />. At the end of each calendar year, employees with over 240 hours0.00278 days <br />0.0667 hours <br />3.968254e-4 weeks <br />9.132e-5 months <br />, who have used at least 80 hours9.259259e-4 days <br />0.0222 hours <br />1.322751e-4 weeks <br />3.044e-5 months <br /> of vacation within the calendar year, will receive a lump sum payout for unused vacation above the 240 hour0.00278 days <br />0.0667 hours <br />3.968254e-4 weeks <br />9.132e-5 months <br /> maximum. If an employee has not used 80 hours9.259259e-4 days <br />0.0222 hours <br />1.322751e-4 weeks <br />3.044e-5 months <br /> or more of vacation, then vacation accruals above 240 hours0.00278 days <br />0.0667 hours <br />3.968254e-4 weeks <br />9.132e-5 months <br /> at the end of the year are forfeited.

Employees terminating for any reason are eligible to receive payment for unused vacation leave balances. Accrued liabilities for vacation leave were $4.1 million and $3.8 million at December 31, 2021 and 2020, respectively, and presented as part of the accrued payroll and benefits liability.

Sick leave accrues bi-weekly, at a rate of 3.69 hours7.986111e-4 days <br />0.0192 hours <br />1.140873e-4 weeks <br />2.62545e-5 months <br /> per pay period (pro-rated for part-time employees).

There is no limit to the amount of sick leave an employee can accrue. Retiring employees have cash out options depending on their PERS Tier. Employees terminating prior to retirement forfeit unused sick leave. Sick leave liabilities are estimated based on sick leave accumulated as of December 31 by those employees who currently are eligible to receive termination payments, as well as other employees who are expected to become eligible in the future to receive such payments. Accrual for those employees who are expected to become eligible in the future are based on assumptions concerning the probability an individual employee will become eligible to receive termination benefits at retirement. Accrued liabilities for sick leave were $1.1 million and $1.1 million at December 31, 2021 and 2020, respectively, and presented as part of the other liabilities.

Net position Net position 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 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), contributors, 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 "restricted" 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 expenses not meeting this definition are reported as non-operating revenues and expenses.

Revenues are derived 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.

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

At the discretion of management, a deposit may be obtained from the customer. Concentrations of credit risk with 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 Board continually evaluates its wholesale power customers (sales for resale revenue) 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 examination of write off experience in the preceding five years, and consideration of other influences as appropriate.

Contributions in lieu of taxes In accordance with ORS 225.270, Use of surplus earnings, the Electric System makes contributions in lieu of tax (GILT) 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 within the boundaries of the City of Springfield.

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 remediation outlays, legal obligations to address existing pollution, do not qualify for capitalization and are accrued as liabilities and expenses according to the estimated remediation costs on a current cost basis (rather than present value of future costs).

Note 2 - Power Risk Management The Board's Power Risk Management Guidelines set forth policies, limits and control systems governing power purchase and sale activities for the Electric System. The objectives of such policies are to maximize benefits to the customers from wholesale activities while minimizing the risk wholesale activities will adversely affect retail prices. The Board does not enter into contracts for speculative 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.

36

Eugene Water & Electric Board Notes to Financial Statements Note 2 - Power Risk Management (continued)

Derivative financial instruments In accordance with policy guidelines, the Board utilizes derivative instruments to minimize its exposure to commodity price risk. Hedging derivatives are reported on the statement of net position at fair value. The fair value of options and swaptions are determined using the Black formula. The fair value of financial swaps is determined by comparing the contract prices with the forecasted market prices.

All potential hedging derivatives were evaluated for effectiveness using the consistent critical terms method. A derivative instrument is effective under criteria for consistent critical terms when the significant terms of the hedging instrument and the hedgeable item are alike. The significant terms for hedging derivatives are the time period, quantity, price index, and point of delivery.

As of December 31, 2021, hedging derivatives with a fair value of $899,000 were reported as other assets and deferred inflows. Hedging derivatives with a fair value of $1.2 million were 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 settlement. When hedging derivatives settle, revenue or expense is recorded as either purchased power or wholesale sales.

Investment derivatives Hedging derivatives found through testing to be ineffective are classified as investment derivatives. At that time, the fair value, including any fair value changes previously deferred on the balance sheet, are recorded as investment revenue and a deferred inflow or outflow. A loss of $35,000 was recognized in investment earnings from derivatives in 2021. As of December 31, 2021, investment derivatives with a fair value of $6,500 were recorded as deferred outflows of resources, and investment derivatives with a fair value of $41,000 were recorded as deferred inflows of resources. As of December 31, 2020, there were no investment derivatives or related investment revenue.

0 tions Hedging Derivatives Investment Derivatives 2021 2020 2021 2020 Notional value $ 2,081,646 $ 1,365,058 $ 41,420 $

Fair value - asset 899,228 806,347 6,465 Fair value - liability 1,181,646 1,365,058 41,420 Cash paid 1,915,046 1,365,058 41,420 Reference rates Mid-C index Mid-C index Mid-C index Dates entered into 10/20 - 9/21 8/19 -10/20 9/21 Dates of maturity 1/22 - 6/22 1/21 - 6/22 4/22 37

Eugene Water & Electric Board Notes to Financial Statements Note 2 - Power Risk Management (continued)

Credit risk The Board enters into forward purchase and sale contracts for electricity with other industry participants such as 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 possibility of non-performance by its counterparties. To limit the risk of counterparty default or non-performance, the Board uses an evaluation process assigning an internal measure of credit worthiness to the Board's counterparties and sets limits to the dollar value of business transacted with counterparties. On a case-by-case basis, the Board may require letters of credit, cash collateral, pre-payment or other forms of credit support to ensure counterparty performance. Other assurances may include accelerated invoicing or pre-payment. In addition, the Board generally establishes netting arrangements with counterparties.

As of December 31, 2021, all derivative instrument assets were with four counterparties and the aggregate fair value was $906,000. This represents the maximum loss that would be recognized if the counterparties to the derivative instrument assets failed to perform as contracted. Counterparty credit ratings ranged from Baa2 to A+. This maximum exposure is reduced by $691,000 of liabilities included in a netting arrangement.

Termination risk Hedging derivative 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-payment, non-delivery, deterioration of creditworthiness, or other material adverse changes. During the years 2021 and 2020, there were no terminations.

38

Eugene Water & Electric Board Notes to Financial Statements Note 3 - Utility Plant The major classifications of utility plant in service are as follows:

Electric Utility Plant Balance Balance December 31, December 31, 2020 Increases Decreases 2021 Plant in service not subject to depreciation Land $ 9,612,734 $ 207,269 $ $ 9,820,003 Intangible assets 231,716 231,716 Plant in service subject to depreciation Intangible assets 23,531,393 154,029 23,685,422 Steam production 10,367,544 251,644 10,619,188 Hydro production 122,850,376 11,795,945 (5,502) 134,640,819 Transmission 84,290,110 5,644,520 (632,642) 89,301,988 Distribution 337,195,650 20,781,466 (2,757,378) 355,219,738 Telecommunications 19,792,206 2,216,775 22,008,981 General plant 163,031,899 19,871,525 (5,579,815) 177,323,609 Completed construction, not yet classified 32,829,055 10,437,889 (32,829,055) 10,437,889 Total utility plant in service 803,732,684 71,361,062 (41,804,392) 833,289,354 Accumulated depreciation (451,027,186) (25,740,055) 7,456,865 (469,310,376)

Plant not subject to depreciation Property held for future use 37,049,750 1,285,645 38,335,395 Construction work in progress 39,401,817 34,487,762 (31,849,348) 42,040,231 Net utility plant $ 429,157,065 $ 81,394,414 $ (66,196,875) $ 444,354,604 39

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

Electric Utilit:i Plant Balance Balance December 31, December 31, 2019 Increases Decreases 2020 Plant in service not subject to depreciation Land $ 9,337,835 $ 274,899 $ - $ 9,612,734 Intangible assets 231,716 231,716 Plant in service subject to depreciation Intangible assets 23,526,562 4,831 23,531,393 Steam production 10,363,488 4,056 10,367,544 Hydro production 170,605,261 4,459,015 (52,213,900) 122,850,376 Transmission 84,207,010 309,113 (226,013) 84,290,110 Distribution 325,638,748 15,789,710 (4,232,808) 337,195,650 Telecommunications 19,753,703 38,503 19,792,206 General plant 161,186,720 1,850,591 (5,412) 163,031,899 Completed construction, not yet classified 11,466,539 32,829,054 {11,466,538) 32,829,055 Total utility plant in service 816,317,582 55,559,772 (68,144,671) 803,732,684 Accumulated depreciation (446,919,036) (22,806,896) 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 Construction work in progress 37,056,305 39,283,956 {36,938,445) 39,401,817 Net utility 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)

Water Utility Plant Balance Balance December 31, December 31, 2020 Increases Decreases 2021 Plant in service not subject to depreciation Land $1,294,957 $ - $ $ 1,294,957 Intangible assets 58,188 58,188 Plant in service subject to depreciation Source of supply 25,452,336 67,623 25,519,959 Pumping 14,251,074 176,906 14,427,980 Water treatment 38,918,359 8,535,883 (165,819) 47,288,423 Transmission & distribution 189,273,114 12,333,015 (142,323) 201,463,806 General plant 39,562,931 4,847,979 (986,693) 43,424,217 Completed construction, not yet classified 11,872,769 6,107,082 {11,872,769) 6,107,082 Total utility plant in service 320,683,728 32,068,488 (13,167,604) 339,584,612 Accumulated depreciation (135,864,192) (7,614,080) 1,171,333 (142,306,939)

Plant not subject to depreciation Property held for future use 1,999,288 321,411 2,320,699 Construction work in progress 9,496,706 17,605,738 {17,196,827) 9,905,618 Net utility plant $ 196,315,530 $ 42,381,557 $ {29,193,098) $ 209,503,990 41

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

Water Utilit:t Plant Balance Balance December 31, December 31, 2019 Increases Decreases 2020 Plant in service not subject to depreciation Land $ 1,258,733 $ 36,224 $ - $ 1,294,957 Intangible assets 58,188 58,188 Plant in service subject to depreciation 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 & distribution 180,193,856 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 {2,759,123} 11,872,769 Total utility plant in service 300,821,753 23,358,283 (3,496,309) 320,683,727 Accumulated depreciation (129,025,071) (7,124,019) 284,898 (135,864,192)

Plant not subject to depreciation Property held for future use 2,396,812 (397,523) 1,999,289 Construction work in progress 11,498,352 15,414,652 {17,416,297} 9,496,707 Net utility plant $ 185,691,846 $ 31,648,916 $ {21,025,231} $ 196,315,531 Capital contributions Contributions in Aid of Construction and System Development Charges are paid by developers and customers to cover the cost of new electric and water infrastructure (capital assets). When developers install and cover the costs of the infrastructure directly, those assets are referred to as Contributed Plant Assets.

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

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

Terrestrial wildlife habitat fund- Used to account for funds required to be held in reserve for the creation and management of terrestrial wildlife habitat, including early seral habitat, during the term of the Carmen Smith operating license.

42

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

Harvest Wind escrow accounts - Funds include amounts held in escrow related to EWEB's investment in the Harvest Wind Project, consisting of funds deposited to escrow from the receipt of federal energy grant funds in 2010, and a deposit in lieu of a letter of credit regarding the Project's transmission contract with Klickitat PUD. The funds related to the federal energy grant were released from escrow in 2021.

Construction funds - Used to account for legally restricted cash and investments for the purpose of construction of capital projects. Funds include proceeds from the issuance of bonds and notes.

System development charge reserves- Used to account for charges assessed and collected in conjunction with installation of new water services in the Water System and are restricted by State of Oregon Statutes 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 and interest- Used to account for cash and investments restricted by Bond Indentures of Trust for future payment of principal and interest on debt.

Detailed amounts for restricted cash and investments were as follows:

2021 2020 Electric Water Electric Water S}'.stem S}'.stem S}'.stem S}'.stem Debt service reserves $ 6,694,970 $ 1,491,743 $ 6,696,693 $ 1,492,130 Customer deposit and other 1,525,925 1,809,957 Terrestrial wildlife habitat fund 48,947 Harvest Wind escrow accounts 549,012 1,952,824 Construction funds 34,456,786 3,401,675 55,545,654 11,405,384 System development charge reserves 3,536,074 6,033,489 Investments for bond principal and interest 17 6 13 4 Total restricted cash and investments $ 43,275,657 $ 8,429,498 $ 66,005,141 $ 18,931,007 Designated cash and investments Rate stabilization fund - Used to account 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 designated to reserve for capital improvements.

43

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

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

Operating reserves - Used to account for cash and investments the Board has designated for payments of emergency operating costs and self-insured claims.

Pension and medical reserves - Used to account for cash and investments the Board has designated for pension and post-retirement medical costs.

Detailed amounts for designated cash and investments were as follows:

2021 2020 Electric Water Electric Water System System System System Rate stabilization fund $ 24,468,927 $ 10,000,000 $ 24,468,927 $ 1,000,000 Power reserve 17,000,000 17,000,000 Capital improvement reserve 26,424,242 14,345,616 23,900,770 12,148,754 Second source fund 5,253,796 5,449,521 Operating reserve 5,856,679 1,358,370 5,856,679 1,374,818 Pension and medical reserve 1,006,000 395,000 974,000 393,000 Total designated cash and investments $ 74,755,848 $ 31,352,782 $ 72,200,376 $ 20,366,093 Deposits with financial institutions are comprised of bank demand deposits, certificates of deposit, and money market accounts. The total bank balances, as recorded in bank records at December 31, 2021, were $22.1 million. Of the bank balances, $3.8 million were covered by federal depository insurance and

$18.3 million were collateralized with securities.

Custodial credit risk for deposits is in the event of failure of a depository financial institution 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 depository insurance are exposed to custodial credit risk when collateral for deposits is held by the pledging institution or its trust department or agency, but not in the name of the depositor. Within the Public Funds Collateralization Program (PFCP) in Oregon, securities pledged by financial institutions are required to be held in the name of the pool, and, therefore, cannot be in the Board's name. However, provided an entity is recognized by the PFCP administrator as an entity covered by the pool, balances in excess of FDIC are covered by the collateral 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.

44

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

The LGIP is included in the Oregon Short Term Fund (OSTF), which was established by the State Treasurer. The OSTF is not subject to SEC regulation. The OSTF is subject to requirements established in Oregon Revised Statutes, investment policies adopted by the Oregon Investment 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 in 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 website.

As of December 31, 2021, the Board held the following investments (Electric and Water Systems combined):

Weighted Average Investment Tl'.ee Credit Rating Car!}'.ing Value Maturi!Y {Years} % of Portfolio Local Government Investment Pool Unrated $ 50,515,399 0.00 23.5%

U.S. Agency Securities FHLB 13,718,000 3.4%

FNMA 7,978,980 6.3%

FHLMC 9,953,040 9.9%

FFCB 20,534,880 11.5%

FAMCA 3,297,300 3.8%

Other Agency 2,019,900 1.9%

Subtotal U.S. Agency AA 57,502,100 1.32 36.8%

U.S. Treasury Securities AAA 77,072,236 1.20 30.7%

Municipal Bonds AA 3,630,480 1.32 1.4%

Corporate Bonds AA 15,144,800 1.51 7.6%

Subtotal all securities 153,349,616 1.28 76.5%

Total $ 203,865,015 0.96 100.0%

45

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

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

Weighted Average Investment T:;i:ee Credit Rating Car!}'.ing Value Maturit:;i: (Years} % of Portfolio Local Government Investment Pool Unrated $ 50,222,850 0.00 23.5%

U.S. Agency Securities FHLB 7,150,970 3.4%

FNMA 13,402,909 6.3%

FHLMC 21,056,860 9.9%

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 36.8%

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

Municipal Bonds AA 3,031,884 1.52 1.4%

Corporate Bonds AA 16,290,420 1.53 7.6%

Subtotal all securities 163,162,919 1.19 76.5%

Total $ 213,385,769 0.91 100.0%

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 U.S. 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 backed by the full faith and credit 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 $52.7 million as of December 31, 2021.

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

46

Eugene Water & Electric Board Notes to Financial Statements Note 4 - Cash and 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 its investment portfolio to maturities of less than 180 days.

Investment maturities are limited as follows:

Maturity Minimum Investment Less than 180 days 25%

Less 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 securities in the possession 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 in the LGIP, which are not evidenced by securities, 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 and investments consisted of the following:

Cash and Cash Equivalents and Total Carrying Total Carrying Restricted Cash Short-Term Designated Amount Amount and Investments Investments Funds 2021 2020 ELECTRIC SYSTEM Cash on hand $ $13,560 $ $13,560 $ 13,560 Cash in bank 1,007,231 5,995,101 7,002,332 16,264,531 Investments in the State of Oregon local government investment pool 8,878,743 10,408,953 18,950,160 38,237,856 38,572,643 Investments - U.S. Agencies, Treasuries, and Corp. 33,389,683 26,506,880 55,805,688 115,702,251 124,889,480 Total electric system 43,275,657 42,924,494 74,755,848 160,955,999 179,740,214 WATER SYSTEM Cash in bank 110 5,316,901 5,317,011 8,917,972 Investments in the State of Oregon local government investment pool 1,758,678 2,571,123 7,947,742 12,277,543 11,650,207 Investments - U.S. Agencies, Treasuries, and Corp. 6,670,710 7,571,615 23,405,040 37,647,365 38,273,439 Total water system 8,429,498 15,459,639 31,352,782 55,241,919 58,841,618

$51,705,155 $58,384,133 $106,108,630 $216,197,918 $238,581,832 47

Eugene Water & Electric Board Notes to Financial 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 are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs 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, 2021:

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs 2021 (Level 1) (Level 2) (Level 3)

Investments by fair value level Debt securities U.S. treasury securities $ 77,072,236 $ 77,072,236 $ $

U.S. agencies 57,502,100 57,502,100 Corporate bonds 15,144,800 15,144,800 Municipal bonds 3,630,480 3,630,480 Total debt securities $ 153,349,616 $ 77,072,236 $ 76,277,380 $

Derivative instruments Investment derivative-asset $ 6,465 $ $ 6,465 $

Investment derivative-liability (41,420) $ (41,420) $

Effective hedge-asset 899,228 899,228 Effective hedge-liability (1,181,646) (1,181,646)

Total derivatives $ (317,373) $ $ (317,373) $

48

Eugene Water & Electric Board Notes to Financial Statements Note 5 - Fair Value Measurement (continued)

As of December 31, 2020:

Fair Value Measurements Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs 2020 (Level 1) (Level 2) (Level 3)

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

U.S. 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 $ 161,162,919 $ 65,534,556 $ 97,628,363 $

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

Effective hedge-liability (1,365,058) (1,365,058)

Total derivatives $ (558,711) =*$====== $ (558,711) =$======

Debt securities classified in Level 1 of the fair value hierarchy are valLJed using prices quoted in active markets for those securities.

Debt securities classified 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 considering contract prices with forecast market prices.

49

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

2021 2020 Electric Water Electric Water S~stem S~stem S~stem S~stem Current receivables Accounts receivable $ 27,447,276 $ 3,960,152 $ 25,372,317 $ 3,336,638 Allowance for doubtful accounts (326,389) (35,584) (367,405) (30,230)

Net accounts receivable 27,120,887 3,924,568 25,004,912 3,306,408 Loans to customers 1,719,738 78,579 1,914,952 110,833 Receivable from FEMA 3,455,921 844,519 Interest receivable 466,534 145,607 543,601 160,385 Miscellaneous receivables 636,755 827,720 Receivables, less allowance $33,399,835 $ 4,148,754 $ 29,135,704 $ 3,577,626 Long-term receivables Loans to customers $ 2,887,762 $ 159,522 $ 3,103,002 $ 133,830 Total amounts written off for the year ended December 31, 2021 were $530,000 ($512,000 for 2020) for the Electric System and $55,000 ($63,000 for 2020) for the Water System.

Note 7 - Payables Current payables were as follows:

2021 2020 Electric Water Electric Water S~stem S~stem S~stem S~stem Accounts payable $ 6,353,881 $ 955,781 $ 6,118,488 $ 813,744 Accrued purchased power 11,637,857 12,767,611 Construction payables 982,156 1,229,018 1,137,288 515,198 Contributions in lieu of taxes 1,284,507 1,232,085 Customer deposits 519,721 443,834 Equipment purchases 50,579 102,309 Miscellaneous payables 41,982 5,293 Preliminary investigations payables 53,780 95,524 14,196 Total payables $ 20,924,463 $ 2,190,092 $ 21,897,139 $ 1,343,138 50

Eugene Water & Electric Board Notes to Financial Statements Note 8 - Other Assets and Other Liabilities Other assets and other liabilities were as follows:

2021 2020 Electric Water Electric Water System System System System Other assets Non-utility property $ 61,587 $ 579,162 $ 61,587 $ 579,162 Derivatives at fair value 899,228 806,347 Option premiums long-term 166,600 Prepaid transmission expense -

Harvest Wind 672,657 769,908 Regulatory assets Pension debits 12,655,975 7,090,229 15,994,929 8,144,637 OPEB debits 6,903,859 2,704,910 5,514,092 2,266,036 Conservation assets 993,554 1,007,348 Unamortized bond issue costs 1,341,457 601,375 1,466,926 648,957 Other assets $ 23,528,317 $ 10,975,676 $ 25,787,737 $ 11,638,792 Other liabilities Derivatives at fair value $ 1,181,646 $ $ 1,365,058 $

Environmental clean up 317,640 Sick leave - upon retirement 848,735 268,022 828,726 261,703 System development charge 34,146 53,496 Other liabilities $ 2,030,381 $ 302,168 $ 2,511,424 $ 315,199 51

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

2021 2020 Electric Water Electric Water Ststem Ststem Ststem Ststem Deferred outflows of resources Accumulated decrease in fair value of hedging derivatives $ 1,181,646 $ $ 1,365,058 $

Accumulated increase in fair value of investment derivatives 6,465 Unamortized losses on bond refunding 5,712,078 1,655,693 6,661,764 1,861,126 Pension - differences between expected and actual experience 2,841,814 897,415 2,522,215 796,489 Pension - net difference between projected and actual earnings on investments 6,738,596 2,127,978 Pension - changes of assumptions 7,599,805 2,399,938 3,075,502 971,212 Pension - differences between Board contributions and proportionate share of contributions 13,463,234 4,251,549 18,050,112 5,700,035 Pension contributions subsequent to measurement date 2,971,136 938,254 2,720,112 858,982 OPES - changes of assumptions 1,879,190 593,429 2,804,393 885,599 Deferred outflows of resources $ 35,655,368 $ 10,736,278 $ 43,937,752 $ 13,201,421 Deferred inflows of resources Accumulated increase in fair value of hedging derivatives $ 899,228 $ $ 806,347 $

Accumulated decrease in fair value of investment derivatives 41,420 Pension - net difference between projected and actual earnings on investments 22,474,630 7,097,252 Pension - changes of assumptions 79,898 25,231 107,759 34,029 Pension - changes in proportion 14,574,364 4,602,431 19,642,451 6,202,879 OPES - net difference between expected and actual experience 3,381,017 1,067,691 2,116,711 668,435 OPES - net difference between projected and actual earnings on investments 1,595,760 503,923 1,344,416 424,553 Deferred inflows of resources $ 43,046,317 $ 13,296,528 $ 24,017,684 $ 7,329,896 52

Eugene Water & Electric Board Notes to Financial Statements Note 10 - Investment in Western Generation Agency The Board is a party to an Intergovernmental Agency, Western Generation Agency (WGA), which is governed equally by the Board and Clatskanie PUD.

On April 6, 2021, WGA ceased operations when it sold its 36 MW nameplate cogeneration project (the Project) located in Wauna, Oregon to Georgia Pacific. A condition of the sale requires WGA to continue to exist for 18 months after the sale or until all pending claims for performance by WGA have been satisfied.

It is the intention of WGA to dissolve after the covenant of existence is no longer in effect.

The investment in WGA consists of 50% of net income and losses, and distributions from excess cash.

During 2021, $5.6 million in distributions was received ($3.2 million in 2020), including $1.7 million from sale proceeds of the Project. The balance of the investment as of December 31, 2021, was $12,000 ($3.0 million at December 31, 2020 including estimated income of $2.4 million). Income is reported with investment earnings.

The Board and Clatskanie PUD each purchased 50% of the Project's output until the date of its sale.

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 MW 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 operations began on December 15, 2009.

During 2009, the joint owners of Harvest Wind elected to classify the project as an association taxable as a corporation. At the time of the election, all project assets were treated as contributed 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 their 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 distributions. At December 31, 2021 the balance of the Board's investment in Harvest Wind was $17.7 million ($18.9 million at December 31, 2020) including estimated income of $645,000 ($745,000 in 2020) and distributions of $1.9 million ($1.8 million in 2020).

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. Additionally, the Board is committed, through a transmission service agreement and a transmission payment agreement, to subsidize the construction and replacement of transmission lines, deposit funds to ensure contract performance, and purchase transmission from the owner of the transmission lines through the year 2029.

53

Eugene Water & Electric Board Notes to Financial Statements Note 11 - Investment in Harvest Wind (continued)

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.

The funds were released from escrow during 2021.

Under the terms of a transmission agreement, the Board has $549,000 as of December 31, 2021

($577,000 at December 31, 2020) on deposit in an escrow account to ensure the payment of monthly transmission interconnection expenses.

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

Note 12- Long-Term Debt On June 4, 2020, the Water System issued $18.5 million in revenue bonds for the purpose of capital improvements and $14.9 million in revenue refunding bonds. Proceeds from the refunding bonds of $14.9 million plus $932,000 released from debt service funds were used to refund the Series 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 through year 2038 by $2.7 million. The economic gain was $2.5 million.

The Board has defeased bonds by placing proceeds and other sources of cash in irrevocable trust or escrow accounts to provide for all future debt service payments on the old bonds. Accordingly, those assets and the liability for the defeased bonds are not included in the Board's financial statements. At December 31, 2021, $28 million of Electric System bonds are considered defeased ($85.1 million of Electric System bonds and $14.3 million of Water System bonds at December 31, 2020).

The resolutions authorizing the issuance of revenue bonds contain various covenants, sinking fund requirements and obligations with which the Board must comply. The principal and interest requirements are reflected in the supplementary schedule "Long-Term 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 31, 2021 and 2020, no assets were pledged as security for the outstanding bonds of the Electric and Water Systems.

54

Eugene Water & Electric Board Notes to Financial Statements Note 12 - Long-Term Debt (continued)

Bonds and notes payable were as follows:

2021 2020 Electric Utility System Revenue and Refunding Bonds 2011 Series B, 6-08-11 issue Serial bonds 1.00%-4.35%, due 2013-2023 $ 1,930,000 $ 2,845,000 2012 Series, 8-1-12 issue Serial bonds 2.00%-5.00%, due 2013-2032 8,885,000 9,370,000 Term bonds, 3.75%, due 2039-2042 8,475,000 8,475,000 2016 Series A, 9-7-16 issue Serial bonds 2.00%-5.00%, due 2017-2036 79,450,000 80,665,000 Term bonds 4.00%, due 2037-2040 8,065,000 8,065,000 2016 Series B, 9-7-16 issue Serial bonds .835%-1.840%, due 2017-2022 4,455,000 8,585,000 2017 Series, 9-21-17 issue Serial bonds 5.003/4;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%-4.00%, due 2027-2040 19,840,000 19,840,000 Term bonds 4.00%, due 2041-2045 9,910,000 9,910,000 Term bonds 4.00%, due 2046-2049 9,450,000 9,450,000 2020 Series B, 6-11-20 issue Serial bonds 1.341 %-2.827%, due 2024-2038 16,790,000 16,790,000 201,045,000 207,790,000 Add unamortized premium 25,079,002 27,326,384 Electric System bonds payable 226,124,002 235,116,384 Less current portion 8,260,000 6,745,000 Electric System bonds payable, net of current portion 217,864,002 228,371,384 55

Eugene Water & Electric Board Notes to Financial Statements Note 12- Long-Term Debt (continued) 2021 2020 Water Utility System Revenue and Refunding Bonds 2016 Series, 5-19-16 issue Serial bonds, 2.00%-5.00%, due 2017-2037 $ 23,635,000 25,570,000 Term bonds, 4.00%, due 2038-2045 6,860,000 6,860,000 2020 Series A, 6-04-20 issue Serial bonds, 3.00%-4.00%, due 2023-2040 10,490,000 10,490,000 Term bonds, 3.00%, due 2041-2044 3,290,000 3,290,000 Term bonds, 3.00%, due 2045-2049 4,690,000 4,690,000 2020 Series B, 6-04-20 issue Serial bonds, .923%-2.631%, due 2021-2035 9,855,000 10,475,000 Term bonds, 3.123%, due 2036-2040 4,430,000 4,430,000 63,250,000 65,805,000 Add unamortized premium 5,308,766 5,757,546 Water System bonds payable 68,558,766 71,562,546 Less current portion 2,660,000 2,555,000 Water System bonds payable, net of current portion 65,898,766 69,007,546 Total System long-term debt, net of current portion $ 283,762,768 $ 297,378,930 The schedule of maturities for principal and interest on bonded debt is as follows:

Electric S:istem Water S:istem Princieal Interest Princieal Interest 2022 $ 8,260,000 $ 8,419,242 $ 2,660,000 $ 2,269,659 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 8,095,000 7,006,032 2,660,000 1,899,646 2027-2031 51,360,000 28,802,287 14,195,000 7,790,341 2032-2036 39,640,000 18,312,411 13,490,000 5,282,292 2037-2041 35,200,000 11,410,961 12,345,000 2,872,642 2042-2046 23,405,000 5,108,063 7,550,000 1,160,150 2047-2049 9,735,000 711,100 2,895,000 175,200

$ 201,045,000 $ 103,065, 197 $ 63,250,000 $ 27,668,294 56

Eugene Water & Electric Board Notes to Financial Statements Note 12 - Long-Term Debt (continued)

Long-term debt activity for the year ended December 31, 2021 was as follows:

Outstanding Outstanding December 31, Due Within Janua!l'. 1, 2021 Additions Reductions 2021 One Year Electric revenue bonds $ 207,790,000 $ - $ (6,745,000) $ 201,045,000 $ 8,260,000 Water revenue bonds 65,805,000 {2,555,000) $ 63,250,000 2,660,000 Total bonded debt $ 273,595,000 $ - $ (9,300,000) $ 264,295,000 $ 10,920,000 Long-term debt activity for the year ended December 31, 2020 was as follows:

Outstanding Outstanding December 31, Due Within Janua!l'. 1, 2020 Additions Reductions 2020 One Year Electric revenue bonds $ 175,175,000 $ 55,990,000 $ (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 bonded debt $ 224,185,000 $ 89,365,000 $ {39,955,000) $ 273,595,000 $ 9,300,000 Note 13 - lntersystem Items

1. Obligations 2021 Electric Water Total System System Systems Due from Water, (Due to) Electric Current Interest $ 13,089 $ (13,089) $

Roosevelt Operations Center 370,242 (370,242) 383,331 (383,331)

Non-current Roosevelt Operations Center 6,049,708 (6,049,708)

Totals $ 6,433,039 $ (6,433,039) $

57

Eugene Water & Electric Board Notes to Financial Statements Note 13 - lntersystem Items (continued) 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-current Roosevelt Operations Center 6,419,950 {6,419,950)

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

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 Electric and Water Systems occupy the property. A payment schedule was established in November 2010 whereby the Water System will repay the Electric System for its estimated share of the fair value of the property and the associated financing costs incurred 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 for the Water System, along with depreciation expense and a receivable for the Electric System.

Payments are revised for refinancing of underlying debt incurred by the Electric System. The obligation is also revised for capitalized improvements at the facility if they are financed by the Electric System.

Monthly payments were approximately $44,000 as of December 31, 2021 and December 31, 2020 on a capitalized value of $17.6 million for the Water System.

Annual totals for payments (including interest) as of December 31, 2021 were as follows:

2022 $ 523,173 2023 523,173 2024 523,173 2025 523,173 2026 523,173 2027-2031 2,615,863 2032-2036 2,409,944

$ 7,641,672 58

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

2. lntersystem Transfer-The Electric System transferred approximately $196,000 to the Water System in 2020 for cumulative rental income received by the Electric System pertaining to property of the Water System.

Note 14- Net Position Components of net position as of December 31, 2021 and 2020 are as follows:

2021 2020 Electric Water Electric Water System System System System Net investment in capital assets $ 254,288,224 $ 138,941,911 $ 251,253,583 $ 131,358,176 Restricted for:

Customer care program 1,006,203 1,366,122 Harvest Wind escrow 549,012 1,952,824 Terrestrial wildlife habitat 48,947 System development changes 3,501,928 5,979,993 Debt service 3,186,970 546,057 3,115,521 503,746 4,791,132 4,047,985 6,434,467 6,483,739 Unrestricted 136,326,815 44,769,689 129,851,406 37,370,477

$ 395,406,171 $ 187,759,585 $ 387,539,456 $ 175,212,392 Note 15- Power Supply Resources Bonneville Power Administration Bonneville Power Administration Contracts -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 products 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 products, BPA implemented new policies on how it sells 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.

59

Eugene Water & Electric Board Notes to Financial Statements Note 15- 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 percentage share of BPA's costs. Slice output, in combination with the Block and other EWES resources, may be more or less than what is needed to serve EWEB's hourly retail loads. In the spring months, available must-run water in the Columbia system is typically high due to the runoff from snow melting, and 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 conditions 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 its 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 product 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. The current contract term extends through September 30, 2028 and regional discussions about the next BPA contract have begun. The Board will have a priority right to BPA power products available under the next contract.

BPATransmission Contract- In 2001, the Board signed the Network Integration Transmission Service contract with BPA to provide transmission 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 - EWES owns and operates the Carmen-Smith Hydroelectric Project (Carmen-Smith Project) within the McKenzie 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 Bridge re-regulating facility, with an additional generating unit with a nameplate capacity of 10 MW.

60

Eugene Water & Electric Board Notes to Financial Statements Note 15 - Power Supply Resources (continued)

A new 40-year federal operating license for the Carmen-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-Smith Project for fish passage at Trail Bridge Dam. When complete, the Trail Bridge Powerhouse will transition from a re-regulating generation facility to the low-level outlet from Trail Bridge Reservoir. In addition, the Board is refurbishing the power plant to perform over the life of the new license.

International Paper Industrial Energy 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 unit are shared equally by the parties.

Leaburg Waltervil/e Hydroelectric Project- The Board owns and operates the Leaburg Walterville Hydroelectric Project (L-W Project) on the McKenzie River in Lane County, Oregon. The L-W Project is comprised of two run-of-river facilities 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 of 15.9 MW. See note 20 - Temporary Impairment for additional information. The Walterville facility includes a canal diverting water from the McKenzie River and one generating unit with a nameplate capacity of 8 MW In April 2000, FERG granted the Board a new hydroelectric license for the L-W Project. The license is for a term of 40 years.

Stone Creek Hydroelectric Project- The Stone Creek Project has one turbine with a peak capacity of 12 MW. The facility is on 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 Portland General Electric (PGE). The Stone Creek facility is operated and maintained for EWEB by Energy Northwest and is licensed through August 2039.

Jointly owned resources Harvest Wind Project- The Board, Cowlitz PUD, Lakeview Light and Power, and Peninsula 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 in Klickitat County, Washington.

All project assets are held by a corporation formed by the owners. The Board and other owners have committed to purchase power from the corporation in proportion to their ownership shares through December 2029.

Western Generation Agency- The Board and Clatskanie People's Utility District (CPUD) equally governed 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. EWEB and CPUD each purchased 50% of the output until the project was sold to Georgia Pacific on April 6, 2021.

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Eugene Water & Electric Board Notes to Financial Statements Note 15 - Power Supply Resources (continued)

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 power 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 Sherman County, 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 Sustainable Energy LLC to purchase the total output of the biomass 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 hydroelectric developments on the Columbia River in Washington owned by Public Utility District No. 2 of Grant County, Washington (Grant 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.

Energy Northwest- Energy Northwest is a Washington municipal corporation, engaged in the construction of five nuclear generation facilities (Projects Nos. 1,2,3,4 and 5), of which EWEB purchased a 0.061 percent share of Project No 1. The Board is not a member of Energy Northwest. EWEB, Energy Northwest, and Bonneville entered into a separate Net Billing Agreement, under which EWEB purchased from Energy Northwest, and in turn, 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 EWEB's percentage share of the total annual cost of Project 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 EWEB 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 obligations of the Net Billing Agreements would resume. Bonneville has always met all of its obligations to Energy Northwest.

Solar PV Purchases - EWEB supports the development of Solar PV generation in Eugene through the provision of net metering rates to those 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 installed capacity of slightly over 6.8 MW and 0.85 aMW of energy and direct generation contracts with a total capacity of just over 2.8 MW and 0.36 aMW of energy.

62

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits

1. Pension Plan Plan description - Board employees are provided with pensions through OPERS. It is a cost sharing multiple employer defined benefit pension plan. 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 Benefit Terms-All benefits of the OPERS are established by the legislature pursuant to ORS Chapters 238 and 238A.

• Tier One/Tier Two Retirement Benefit (Chapter 238) Tier One/Tier Two Retirement Benefit plan is closed to new members hired on or after August 29, 2003.

Pension benefits - The PERS retirement allowance is payable monthly for life. It may be selected from 13 retirement benefit options. These options include survivorship benefits and lump-sum refunds. Retirement benefits are determined as 1.67 percent of the employee's final average salary times the employee's years of retirement credit. Benefits may also be calculated under either a formula plus annuity (for members who were contributing before August 21, 1981) or a money match computation ifa greater benefit results.

A member is considered vested and will be eligible at minimum retirement age for a service retirement allowance if he or she has had a contribution in each of five 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 reduced if retirement occurs prior to age 58 with fewer than 30 years of service. Tier Two members are eligible for full benefits at age 60 or 30 years of service.

Death benefits - Upon the death of a non-retired member, the beneficiary receives a lump-sum refund of the member's account 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 absence from a PERS-covered job at the time of death.

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Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

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 injury or illness qualifies a member (including PERS judge members) for disability benefits regardless of the length of PERS-covered service. Upon qualifying for either a non-duty or duty disability, service time is computed to age 58 (55 for police and fire members) when determining the monthly benefit.

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-of-living adjustments (COLA). Under current law, the COLA is a blended rate capped at 2 percent for service on or before October 1, 2013, 1.25 percent for service credits subsequent to that date 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.

This portion of OPSRP provides a life pension funded by employer contributions. Benefits are calculated with the following formula for members who attain normal retirement age: General service: 1.5 percent is multiplied by the number of years of service and the final average salary.

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

A member of the OPSRP Pension Program 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, the date the member reaches normal retirement age, and, if the pension program is terminated, the date on which termination becomes effective.

Death benefits - Upon the death of a non-retired member, the spouse or other person who is constitutionally required to be treated in the same manner as the spouse, receives for life 50 percent of the pension that would otherwise have been paid to the deceased 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 disability occurred.

Benefit changes after retirement- Under ORS 238A.210 monthly benefits are adjusted annually through cost-of-living adjustments. Under current law, the COLA is a blended rate capped at 2 percent for service on or before October 1, 2013, 1.25 percent for service credits subsequent to that date and 0.15 percent on annual benefits above $60,000.

64

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

Contributions PERS funding policy provides for monthly employer contributions at actuarially determined 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 Benefit Plans.

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 needed to achieve rate equity with other members of the pool. During 2019, the Board made a lump-sum contribution to a side account of $22 million to qualify for a matching contribution from the Oregon Employer Incentive Fund of $5.5 million. The Board's employer contribution rates were reduced, effective November 1, 2019, as a result of these contributions.

Employer contribution rates are based on a percentage of payroll and are established each biennium of odd-numbered years. The Board's rates during July 1, 2021, through December 31, 2021, were based on the December 31, 2019 actuarial valuation. Rates during this period were 19.16% for Tier Oneffier Two members and 15.94% for OPSRP. The Board's rates during January 1, 2020, through June 30, 2021 were 19.35% for Tier Oneffier Two members and 13.79% for OPSRP based on the December 31, 2017 actuarial valuation and the effects of the side account deposit made in 2019. Employer contributions based on payroll for the year ended December 31, 2021, were $7.4 million ($6.9 million in 2020).

The state of Oregon and certain schools, community colleges, and political subdivisions have made lump sum payments to establish side accounts, and their rates have been reduced. In addition to the side account deposit the Board made in 2019, the Board elected to make lump-sum payments to OPERS during 2007 and 2001, which has had the effect of lowering the employer contribution rates.

Pension liability, pension expense, deferred outflows of resources, and deferred inflows of resources related to pensions At December 31, 2021, the Board reported a net pension liability of $37 million for its proportionate share of the OPERS net pension liability ($75.4 million in 2020). The net pension liability was measured as of June 30, 2021 (as of June 30, 2020, for December 31, 2020) and the total pension liability for each plan used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2019, rolled forward to June 30, 2020, and June 30, 2021 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 contributions for all participating employers, actuarially determined. The Board's proportionate share of the net pension liability as of June 30, 2021 was 0.33381769% (0.345520080% as of June 30, 2020).

65

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

For the year ended December 31, 2021, the Board's proportionate share of system pension expense was

$5.8 million ($17.2 million in 2020). The Board has elected to use regulatory accounting to recognize pension expense in conjunction with the required employer contribution rates. Accordingly, the Board recognized pension expense related to Tier OnefTier Two and OPSRP of $7.4 million ($6.9 million in 2020).

The Board reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

December 31, 2021 Deferred Deferred Outflows of Inflows of Resources Resources Net difference between projected and actual earnings on plan investments $ $ 29,571,882 Differences between expected and actual experience 3,739,229 Changes in assumptions 9,999,743 105,129 Changes in employer proportion 19,176,795 Differences between employer contributions and proportionate share of contributions 17,714,783 Pension contributions subsequent to measurement date 3,909,390

$ 35,363,145 $ 48,853,806 December 31, 2020 Deferred Deferred Outflows of Inflows of Resources Resources Net difference between projected and actual earnings on 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 contributions 23,750,147 Pension contributions subsequent to measurement date 3,579,094

$ 43,561,233 $ 25,987,118

$3.9 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, 2022 ($3.6 million as of December 31, 2021).

66

Eugene Water & Electric Board Notes to Financial Statements Note 16 - 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 debits and pension credits as follows:

Difference Between Net Difference Differences Employer Between Between Changes of Changes of Contributions Projected and Expected and Assumptions Assumptions and Proportionate Actual Earnings Actual (Deferred Inflows (Deferred Outflows Changes in Share of Fiscal Year on Investments Exeerience of Resources) of Resources) Proportion Contributions 2022 $ (7,265,455) $ 1,316,700 $ (32,974) $ 3,841,113 $ (7,489,885) $ 5,773,339 2023 (5,325,869) 1,163,217 (32,974) 1,799,667 (6,578,639) 5,488,640 2024 (6,921,926) 668,082 (32,974) 1,789,498 (3,768,926) 4,981,739 2025 (10,058,632) 435,941 (6,207) 1,843,973 (1,190,539) 1,466,999 2026 155,288 725,492 !148,806) 4,067

$ (29,571,882) $ 3,739,228 $ (105,129) $ 9,999,743 $ (19,176,795) $ 17,714,784 Actuarial methods and assumptions used in developing the total pension liability The total pension liability was determined using the following actuarial assumptions.

Valuation date December 31, 2019 December 31, 20H Measurement date June 30, 2021 June 30, 2020 Actuarial cost method Entry age normal Entry age normal Actuarial assumptions:

Discount rate 6.90% 7.20%

Inflation 2.40% 2.50%

Payroll growth 3.40% 3.50%

Projected salary increase 3.40% 3.50%

Investment rate of return 6.90% 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 disabled retirees, mortality rates are based on the Pub-2010 generational disabled mortality sex-distinct table.

Actuarial valuations of an ongoing plan involve estimates of the value of projected benefits and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Experience studies are performed as of December 31 of even numbered years. 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.

67

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

Discount rate The discount rate used to measure the total pension liability was 6.90 percent for the Defined Benefit Pension Plan (7.20% for the June 30, 2020, measurement date). The projection of cash flows used to determine the discount rate assumed contributions from plan members and those of the contributing 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 rate of return on pension plan investments for the Defined Benefit Pension Plan was applied to all periods of projected benefit payments to determine the total pension liability.

Long-term expected rate of return To develop an analytical basis for the selection of the long-term expected rate of return assumption for June 30, 2021, and June 30, 2020, the PERS Board reviewed long-term assumptions developed by both Milliman's capital market assumptions team and the Oregon Investment Council's (OIC) investment advisors. The table below shows Milliman'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 asset classes shown below. Each asset class assumption is based on a consistent set of underlying assumptions and includes adjustment for the inflation assumption.

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

Assumptions for returns by asset class as of June 30, 2021:

Compound Annual Return Asset Class Target (Geometric)

Global Equity 30.62% 5.85%

Private Equity 25.50% 7.71%

Core Fixed Income 23.75% 2.73%

Real Estate 12.25% 5.66%

Master Limited Partnerships 0.75% 5.71%

Infrastructure 1.50% 6.26%

Commodities 0.63% 3.10%

Hedge Fund of Funds - Multistrategy 1.25% 5.11%

Hedge Fund Equity - Hedge 0.63% 5.31%

Hedge Fund - Macro 5.62% 5.06%

US Cash -2.50% 1.76%

Assumed Inflation - Mean 2.40%

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Eugene Water & Electric Board Notes to Financial Statements Note 16- Retirement Benefits (continued)

Assumptions for returns by asset class as of June 30, 2020:

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 1.20% 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 13.48% 6.91%

Emerging Market Equities 4.24% 7.69%

Non-US Small Cap Equities 1.93% 7.25%

Private Equity 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% 6.12%

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, 2021:

Current 1% Decrease Discount Rate 1% Increase Employers' Net Pension Liability (5.9%) (6.9%) (7.9%)

Defined Benefit Pension Plan $ 78,444,821 $ 39,946,227 $ 7,736,893 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 69

Eugene Water & Electric Board Notes to Financial Statements Note 16- Retirement Benefits (continued)

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, 2021.

Changes in plan provisions during the measurement period There were no changes in plan provisions during 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 - The IAP is an account-based program for all Tier One/Tier Two and OPS RP members who were in a qualifying position since January 1, 2004. An IAP member becomes vested on the date the employee account is established or on the date the rollover account was established. If the employer makes optional employer contributions 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, the date the member reaches normal retirement age, the date the IAP is terminated, the date the active member becomes disabled, or the date the active member dies.

Upon retirement, a member of the IAP may receive the amounts in his or her employee account, rollover account, and vested employer account 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 member's account balance, rollover account balance, and vested employer optional contribution account balance. If a retired member dies before the installment payments are completed, the beneficiary may receive the remaining installment payments or choose a lump-sum payment.

Recordkeeping- PERS contracts with VOYA Financial to maintain IAP participant records.

Contributions - Covered employees are required to contribute 6% of their salary to the plan. The Board has chosen to pay the employees' contributions to the plan. For 2021, the Board contributed $2.8 million for employees ($2.7 million for 2020).

Changes in plan provisions during 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 1/Tier 2 employees the contributions are now 3.5% IAP and 2.5% defined benefit. For OPSRP employees, the contributions are 5.25% IAP and .75% has been redirected to the defined benefit pension.

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Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

Changes in plan provisions subsequent to the measurement period There were no changes in plan provisions subsequent to the measurement period.

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

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

Investment values - 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 is administered by a board of trustees, acting solely on the authorization of EWES, as the Eugene Water & Electric Board Retirement Benefits Trust (The Trust). The board of trustees consists of 5 voting members and one commissioner of 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 benefits to retirees and their beneficiaries, and plan assets are legally protected from creditors of the Board and the plan's administrators.

The life insurance benefit is a fixed amount of $5,000 per retiree. Health care coverage is provided in the form of a subsidy toward insurance premiums. The subsidy varies with years of service and the benefits offered by the Board at the time of an employee's hire and retirement. Medicare eligible retirees choose from Medicare plans offered through the Oregon PERS Health Insurance Program (PHIP). The subsidy for Medicare coverage is established by the Board; however, the coverage is administered by OPE RS as a cost sharing plan. Eligible retirees under the age of 65 receive coverage under the group plan the Board offers to its active employees, until such time as retirees reach Medicare eligibility. Those group benefit provisions are established by the Board. Dental and/or vision benefits are offered in a retiree group plan for retirees with earlier hire and retirement dates.

During 2016 and 2017, the Board changed plan provisions for active employees hired on or after January 1, 2003. At retirement, those employees will not receive a subsidy toward health care coverage.

Employees retiring before age 65 continue to have access to EWES health care 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.

71

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

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.

The plan does not issue a stand-alone financial report.

Plan membership Enrolling in health care coverage is at the time of retirement. Therefore, there are no inactive plan members entitled to but not yet receiving benefits. Once a retiree opts out of coverage, there is no reinstatement. The plan's latest actuarial valuation dated August 31, 2021, rolled forward to December 31, 2021, included 537 retirees or surviving spouses of retired employees, of which 136 opted out of or were ineligible for health care coverage, and 495 active employees. The August 31, 2019 valuation, rolled forward to December 31, 2020, included 531 retirees or surviving spouses, 115 retirees without health care coverage, and 455 active employees.

Investments The Trust has a third-party investment manager who has discretionary 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, 2021 and 2020, the annual money-weighted rate of return on investments, net of investment expense, was 12.0% and 14.0%, respectively. The money-weighted rate of return expresses investment performance, net of investment expense, 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.

Below are the credit ratings and maturities at December 31, 2020. The Trust did not hold any investments at December 31, 2021 which were subject to this disclosure.

Maturit Credit 12 Months 13 to 24 25 to 36 37 to 60 More Than Investment T}:'.pe Rating 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 $ $ $

72

Eugene Water & Electric Board Notes to Financial Statements Note 16- Retirement Benefits (continued),

Custodial credit risk- Custodial credit risk for investments is 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. Investments 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 inputs, which is the last category, and doesn't apply to the investments held at December 31, 2021 and 2020 for the OPES Trust, would include valuation techniques which make use of unobservable inputs using the best information available under the circumstances.

73

Eugene Water & Electric Board Notes to Financial Statements Note 16- Retirement Benefits (continued)

Fair Value Measurements Using Quoted Prices in Significant Active Markets other for Identical Observable Assets Inputs 12/31/2021 (Level 1) (Level2)

Investments by fair value level Mutual funds Fixed income $ 7,590,426 $ 7,590,426 International 4,420,157 4,420,157 Domestic 7,189,272 7,189,272 Real estate 1,036,432 1,036,432 Total investments by fair value level $ 20,236,287 $ 20,236,287 $

Fair Value Measurements Using 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 investments by fair value level $ 19,864,966 $ 19,561,672 $ 303,294 Contributions Contributions toward health care premiums required 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 retirees. The cap is expressed as a percentage of the Board's share of premium increases each year compared to premiums beginning in a base year of 2003. The cap was 6% beginning in 2017 and is to remain that amount each year thereafter.

74

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

During 2021, the plan recognized $684,000 in contributions from retirees who had insurance coverage under the Board's group plan for active employees ($740,000 during 2020). The contributions are applied to insurance premiums. Retirees with Medicare coverage also pay a portion of their premiums; however, those contributions are recognized by the OPERS OPES plan.

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

The plan was considered fully funded as of December 31, 2021, based on cash flows expected to be paid from the Trust for explicit benefits. Accordingly, the ADC was $0 for 2021 ($214,000 for 2020). The Board contributed $176,000 in 2021 ($462,000 in 2020). Contributions were recognized in administrative and general expenses: $133,380 for the Electric System and $42,120 for the Water System in 2021 ($351,120 for the Electric System and $110,880 for the Water System in 2020). The expenses differ from the Board's OPES expense determined on an actuarial basis, which was $2.7 million for 2021 ($3.3 million for 2020). The Board has elected to apply regulatory accounting to recognize OPEB expense based on the timing and amount of contributions included in the rate making process.

Components of the actuarially determined OPES expense are shown below:

2021 2020 Service cost $ 373,844 $ 240,509 Interest cost 1,006,215 1,268,479 Expected earnings (1,247,739) (1,202,976)

Administrative expenses 135,390 141,482 Change in benefits 552,275 Recognition of deferred outflows 4,741,464 5,033,637 Recognition of deferred inflows (2,892,651) (2,192,929)

$ 2,668,798 $ 3,288,202 75

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

The Board reported deferred outflows of resources and deferred inflows of resources related to OPES from the following sources:

December 31, 2021 Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ $ 4,448,708 Changes of assumptions 2,472,619 Net difference between projected and actual earnings on OPES plan investments 2,099,683 Total $ 2,472,619 $ 6,548,391 December 31, 2020 Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ $ 2,785,146 Changes of assumptions 3,689,992 Net difference between projected and actual earnings on OPES plan investments 1,768,969 Total $ 3,689,992 $ 4,554,115 Amounts recorded as deferred inflows and outflows of resources will be subject to amortization and regulatory deferral in future years as follows:

Net Deferred Inflows Amortization 2022 $ (1,451,140) 2023 (1,796,910) 2024 (545,250) 2025 (270,089) 2026 (12,383)

$ (4,075,772) 76

Eugene Wat~r & Electric Board Notes to Financial Statements Note 16- Retirement Benefits (continued)

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

December 31, 2021 2020 Total OPES liability $ 32,517,097 $ 33,594,237 Plan fiduciary net position (20,337,339) (20,031,471)

EWEB's net OPES liability $12,179,758 $ 13,562,766 Plan fiduciary net position as a percentage of the total OPES liability 63% 60%

Changes in the net OPEB liability The Board's total net OPES liability of $12.2 million was measured as of December 31, 2021.

Total OPES Fiduciary Net Net OPES Liability Position Liability Beginning of year 1/1/2021 $ 33,594,237 $ (20,031,471) $ 13,562,766 Employer contributions (175,500) (175,500)

Retiree contributions (683,609) 683,609 Expected investment income (1,247,739) (1,247,739)

Difference between expected and actual investment income (1,040,878) (1,040,878)

Benefit payments - implicit (664,657) (664,657)

Benefit payments (1,339,250) 1,339,250 Administrative and trust expenses 135,390 135,390 Service cost 373,844 373,844 Interest on total OPES liability 1,006,215 1,006,215 Change in benefit terms 552,275 552,275 Changes of assumptions 2,234,085 2,234,085 Difference between expected and actual experience (2,556,043) (2,556,043)

End of year 12/31/21 $ '32,517,097 $ (20,337,339} $ 12,179,758 77

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

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 income (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) 1,377,965 Administrative and trust expenses 141,482 141,482 Service cost 240,509 240,509 Interest on total OPEB liability 1,268,479 1,268,479 Changes of assumptions Difference between expected and actual experience End of year 12/31 /20 $ 33,594,237 $ (20,031,471) $ 13,562,766 Actuarial assumptions The total OPEB liability as of December 31, 2021, and December 31, 2020, was determined using the following significant actuarial assumptions and inputs:

December 31, 2021 2020 Discount rate 3.12% 3.76%

Inflation rate 2.5% 2.5%

Salary increases 3.5% 3.5%

Health care cost trend rates 3%-6% 3%-7%

Mortality Pub-2010 Pub-2010 Withdrawal OPERS experience study Jul 2019 Experience study 2014 Retirement Experience study Nov 2020 Experience study 2014 Mortality rates are concurrent with those used for general service employees in the Oregon PERS Actuarial Valuations.

The discount rates of 3.12% (3.76% December 31, 2020) were based on an expected 6.53% long-term rate of return on plan assets. Employer contributions are not assumed to occur for years beyond 2021.

The fiduciary net position was projected to be available to make projected OPEB payments for plan participants through 2037 (2034 at December 31, 2020). Therefore, the expected long-term rates of return were blended with the December 31 rates from the 20-year General Obligation Municipal Bond Index as published by the Bond Buyer: 2.06% and 2.74% for 2021 and 2020, respectively.

78

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

The long-term expected rate of return on the Trust's investments was determined using a building-block method in which estimates of expected future real rates of return (expected returns, *net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future 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 class are summarized below:

December 31, 2021 Expected Long-Term

% of Total Real Rate Fund Type Portfolio of Return Domestic equity 35% 5.9%

Foreign equity 22% 6.3%

Fixed income 37% 1.5%

Real estate 5% 5.4%

3-month Treasury bills 1% -1.9%

100%

December 31, 2020 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% -0.5%

100%

79

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

The following table presents the sensitivity of the net OPEB liability to changes in the discount rate, assuming the current rate, and rates that are one percentage point lower, and one percentage point higher than the current rate as of December 31, 2021:

1% Decrease Current Rate 1% Increase (2.12%) (3.12%) (4.12%)

Total OPEB liability $ 36,816,706 $ 32,517,097 $ 28,974,219 Fiduciary net position (20,337,339) (20,337,339) (20,337,339)

Net OPEB liability $ 16,479,367 $ 12,179,758 $ 8,636,880 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 as of December 31, 2021:

1% Decrease Current Rates 1% Increase Total OPEB liability $ 28,948,395 $ 32,517,097 $ 36,813,207 Fiduciary net position (20,337,339) (20,337,339) (20,337,339)

Net OPEB liability $ 8,611,056 $ 12,179,758 $ 16,475,868 Sensitivity of the net OPEB liability to changes in the discount rate, assuming the current rate, and 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 OPEB 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 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 as of December 31, 2020:

1% Decrease Current Rates 1% Increase Total OPEB 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 80

Eugene Water & Electric Board Notes to Financial Statements Note 16 - Retirement Benefits (continued)

The actuarial funding method used to determine the plan cost is the entry age normal cost method. Under this method the actuarial present value of the projected benefits of each active employee included in the valuation is allocated on a level percentage of pay basis over the service life of the employee between entry age (date of hire) and assumed exit age.

Note 17 - Deferred Compensation The Board offers all employees a deferred compensation plan created in accordance with Internal Revenue Code (IRC) Section 457. The plan permits them to defer a portion of their salary until future 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 compensation 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, does not perform the investing function and does not make contributions to the plan. In accordance with GASB Statement 97, Certain Component Unit Criteria and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, the plan assets are not included in the accompanying Statements of Net Position.

Note 18 - 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 tenants in common. The Project ceased commercial operation in 1993 and is decommissioned. The Project is now classified as an Independent Spent Fuel Storage Installation. In accordance with GASB Statement 61, The Financial Reporting Entity, the Project is reported as a joint venture on the equity method of accounting.

In 1970, the Board assigned to BPA and other public agency participants its 30% share of the output of Trojan. Under the terms of a Direct Pay Agreement, BPA is obligated to pay the Board amounts sufficient to cover all of the Board's costs related to the Project. BPA pays those costs by payments in cash, but in some cases could make payments by issuing credits against the Board's purchases of electricity from BPA. The Board is required to transfer from its Electric System Fund to the Trojan Project Fund an amount equal to all payments received from BPA for Project related costs. The Board is then responsible for making payments from the Trojan Project Fund to the Trojan Project for the Board's share of costs.

81

Eugene Water & Electric Board Notes to Financial Statements Note 18 -Trojan Nuclear Plant (continued)

Since SPA is obligated to pay the Board's share of all 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 Project to have any adverse effect on the Board's Electric or Water Systems. As such, the equity interest in the Project is zero. However, if one of the tenants in common fails to perform their financial obligation, the other tenants may be liable. This obligation may not be covered under the Direct Pay Agreement mentioned previously. However, the Board believes this risk is minimal.

A summary of the balance sheets for EWEB's share of the Trojan Project as of September 30, 2021, and September 30, 2020, is as follows.

Unaudited Unaudited September 30, September 30, 2021 2020 ASSETS Current assets $ 2,650,464 $ 1,691,918 Long-term receivable, BPA, net 30,117,970 31,895,157 Total assets $ 32,768,434 $ 33,587,075 LIABILITIES Current liabilities $ 2,349,772 $ 2,004,000 Accumulated provision for decommissioning costs 30,418,662 31,583,075 Total liabilities $ 32,768,434 $ 33,587,075 The Trojan Nuclear Plant financial statements can be obtained from the Board.

Note 19- Commitments and Contingencies Electric Projects Carmen-Smith Project- Contractual commitments were $22.2 million at December 31, 2021 including design and construction primarily for powerhouse improvements, various relicensing requirements such as habitat preservation, and dam safety inspections. ($18.8 million for design and construction, primarily for powerhouse upgrades at December 31, 2020).

The Board has an arrangement with the U.S. Forest Service to provide for maintenance and enhancement measures on the National Forest Service land where the project is located. The Board expects to make annual payments of varying, prescheduled amounts to the Forest Service in accordance with settlement provisions. The payments are to total approximately $1.5 million before inflation indexing over the life of the license.

82

Eugene Water & Electric Board Notes to Financial Statements Note 19- Commitments and Contingencies (continued)

Distribution projects - Contractual commitments for a substation rebuild and seismic anchoring were

$602,000 as of December 31, 2021.

Generation projects- Commitments were $671,000 at December 31, 2021, for improvements to a dam hoist system and stormwater outlet and replacement of switchgear and relays.

Water projects Construction contracts primarily for storage tanks and main replacements were approximately $2.9 million at December 31, 2021 ($618,000 at December 31, 2020 for main replacements and an emergency water station).

Other projects Contractual commitments for vehicles were $1.2 million, and $1.4 million for advanced metering at December 31, 2021 ($121,000 for construction at Roosevelt Operations Center, $2.5 million for advanced metering at December 31, 2020).

Self-insurance The Board is exposed to various risks of loss because of the Board's self-insurance retention, up to the 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 by the Oregon State Court Administrator. The most recent limits are $128,400 for a single claimant and $641,800 to all claimants for property damage. For injury or death, the most recent limits are

$782,600 for a single claimant and $1,565,100 for multiple claimants. Consequently, except in extreme cases, the Board's exposure is mitigated by law. The limit is subject to change by State of Oregon legislation.

Claims 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 review 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, 2021 a total claims liability of approximately

$46,000 is reported in the financial statements. All prior and current-year claim liabilities were fully reserved and have not been discounted.

Current Year Liability Balance Claims and at Beginning Changes in Liability Balance of Year Estimates Claim Pa:tments at End of Year 2019 General Liability $ 206,855 $ 233,291 $ (340,856) $ 99,290 2020 General Liability $ 99,290 $ 160,738 $ (151,648) $ 108,380 2021 General Liability $ 108,380 $ 532,392 $ (594,645) $ 46,127 83

Eugene Water & Electric Board Notes to Financial Statements Note 19 - Commitments and Continger:icies (continued)

Claims and other legal proceedings EWEB was notified in September 2020 the US Attorney's Office was investigating the origin, cause, and consequences of the Holiday Farm Fire. EWEB has cooperated with the investigation including documentation requests and personnel interviews. EWEB has received tort claim notices and intends to vigorously contest them. EWEB has sent letters in response to each notice it has received, informing the potential claimants that EWEB's electric lines were de-energized at the time and location that the Holiday Farm Fire is alleged to have started. As of December 31, 2021 and 2020, no accrual was made in the financial statements for the Holiday Farm Fire.

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, 2021.

Note 20 - Temporary Impairment The service utility of the Leaburg hydroelectric project has significantly 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. Without 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, 2021. 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. Because the path forward is uncertain an impairment loss has not been recognized.

Carrying values for the project's assets were classified as property held for future use on the Statements of Net Position as of December 31, 2021, and 2020.

84

Required Supplementary Information Eugene Water & Electric Board Schedule of Proportionate Share of the Net Pension Liability As of June 30, 2021 Last Ten Years*

2014 2015 2016 2017 2018 2019 2020 2021 Proportion of the net pension asset/(liability) 0.86138989% 0.79250364% 0.70531024% 0.62730522% 0.59283304% 0.44533405% 0.34552008% 0.33381769%

Proportionate share of the net pension asset/(liability) $ 19,525,251 $ (45,501,290) $ (105,883,444) $ (84,560,981) $ (86,806,397) $ (77,032,126) $ (75,404,366) $ (39,946,227)

Covered-employee payroll $ 41,130,143 $ 45,250,685 $ 44,141,193 $ 44,353,971 $ 39,905,750 $ 43,024,470 $ 44,541,698 $ 48,590,235 Proportionate share of the net pension asset/(liability) as percentage of covered-employee payroll 47% 101% 240% 191% 225% 179% 169% 82%

Plan's fiduciary net position $ 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 $ 84,331,316,437 Plan's fiduciary net position as a percentage of the total pension liability 103.60% 91.90% 80.50% 83.10% 82.10% 80.20% 75.80% 87.60%

• 10 year trend information will be presented prospectively.

85

Eugene Water & Electric Board Schedule of Contributions Pension As of June 30, 2021 Last Ten Years*

2014 2015 2016 2017 2018 2019 2020 2021 Contractually required contribution (actuarially determined) $ 9,544,586 $ 9,734,173 $ 8,189,904 $ 8,256,069 $ 9,413,237 $ 7,660,562 $ 7,943,528 $ 7,215,306 Contributions in relation to the actuarially determined contribution $ 9,544,586 $ 9,734,173 $ 8,189,904 $ 8,256,069 $ 9,413,237 $ 10,662,356 $ 33,680,968 $ 7,270,193 Contributions deficiency (excess) $ $ $ $ $ $ (3,001,764) $ (25,737,440) $ (54,887)

Covered-employee payroll $ 41,130,143 $ 45,250,685 $ 44,141,193 $ 44,353,971 $ 39,905,750 $ 43,024,470 $ 44,541,698 $ 48,590,235 Contributions as a percentage of covered-employee payroll 23.21% 21.51% 18.55% 18.61% 23.59% 24.78% 75.62% 14.96%

Notes to Schedule Methods and assumptions used to determine contribution rates:

Single and agent employers Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal Entry age normal 2012, published 2012, published 2014, published 2014, published 2016, published 2016, published 2018, published 2018, published Experience study report September 18, 2013 September 18, 2013 September 23, 2015 September 23, 2015 July 26, 2017 July 26, 2017 24-Jul-19 24-Jul-19 Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Level percentage of Amortization method payroll, closed payroll, closed payroll, closed payroll, closed payroll, closed payroll, closed payroll, closed payroll, closed Remaining amortization period Tier one/tier two - Tier one/tier two - Tier one/tier two - Tier one/tier two - Tier one/tier two - Tier one/ti er two - Tier one/tier two - Tier one/tier two -

20 year; OPSRP - 20 year; OPS RP - 20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP - 20 year; OPSRP - 20 year, OPSRP -

16 years 16 years 16 years 16 years 16 years 16 years 16 years 16 years Asset valuation method Market value of assets Market value of assets Market value of assets Market value of assets Market value of assets Fair value Market value of assets Market value of assets Inflation 2.75% 2.75% 2.50% 2.50% 2.50% 2.50% 2.50% 2.40%

Salary increases 3.75% 3.75% 3.50% 3.50% 3.50% 3.50% 3.50% 3.40%

Investment rate of return 7.75% 7.75% 7.50% 7.50% 7.20% 7.20% 7.20% 6.90%

Retirement age 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 55 for Tier 1/Tier 2; 65forOPSRP 65forOPSRP 65for OPSRP 65forOPSRP 65forOPSRP 65forOPSRP 65 forOPSRP 65forOPSRP Mortality RP-2000 Sex-distinct RP-2000 Sex-distinct RP-2000 Sex-distinct RP-2000 Sex-distinct RP-2014 Sex-distinct RP-2014 Sex-distinct Pub-201 O Sex-distinct Pub-2010 Sex-distinct tables tables tables tables tables tables tables tables Discount rate 7.75% 7.75% 7.50% 7.50% 7.20% 7.20% 7.20% 6.90%

'1 O year trend information will be presented prospectively.

86

Eugene Water & Electric Board Schedule of Employer Contributions OPEB As of December 31, 2021 Last Ten Years*

2021 2020 2019 2018 2017 Actuarially determined contribution (ADC) $ $ 214,406 $ 501,342 $ 1,284,204 $ 1,348,797 Employer contributions in relation to the ADC/

Contributions recognized by the plan 175,500 462,000 1,137,500 3,348,797 980,298 Contribution excess (deficiency) $ 175,500 $ 247,594 $ 636,158 $ 2,064,593 $ (368,499)

Covered-employee payroll $ 51,259,823 $ 51,560,696 $47,799,139 $ 44,880,815 $ 44,343,971 Contributions as a percentage of covered-employee payroll 0.34% 0.90% 2.38% 7.46% 2.21%

• 10 year trend inform.alien will be presented prospectively.

Valuation dates: August 31, 2021, August 31, 2019, and December 31, 2017 Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry age normal Amortization method Level percentage of payroll, open Amortization period 10 years Asset valuation method Market value Inflation 2.5%

Healthcare cost trend increases PERS Health Insurance Program - Medicare 5%

Dental 5%

Vision 3%

EWEB group medical, December 31, 2019 valuation: 7%, decreasing to ultimate rate of 4% by 2027.

EWEB group medical, December 31, 2017 valuation: 10%, decreasing to ultimate rate of 4% by 2025.

Salary increases 3.5%

Retirement age:

55-58 7.5% 10% 10% 10% 10%

59--<i1 15%

59--<i4 15% 15% 15% 15%

62--<i4 30%

65 100% 100% 100% 100% 100%

Withdrawal age 18-29 6.3% 6.3% 6.3% 6.3%

30--49 4.7% 4.7% 4.7% 4.7%

50--<i4 3.7% 3.7% 3.7% 3.7%

Withdrawal assumptions beginning with 2021 Years of service Male Female 0 15.00% 15.00%

5 7.19% 7.23%

10 4.13% 4.77%

15 2.93% 3.43%

20 2.08% 2.47%

25 1.47% 1.78%

30 1.40% 1.40%

Experience study reports 11/3/2020 2014 2014 2014 2014 Mortality Pub-2010 Pub-2010 RP-2014 General Service Investment rate of return 3.12% 3.76% 4.32%

87

Eugene Water & Electric Board Schedule of Changes in Total OPEB Liability and Related Ratios OPEB As of December 31, 2021 Last Ten Years*

Total OPEB Liability 2021 2020 2019 2018 2017 Service cost $ 373,844 $ 240,509 $ 235,056 $ 279,685 $ 270,227 Interest 1,006,215 1,268,479 1,468,903 1,747,818 977,047 Changes in benefit terms 552,275 (263,950)

Differences between expected and actual experience (2,556,043) (6,148,762) 4,969,184 Changes in assumptions 2,234,085 1,723,170 15,538,406 Benefit payments (2,687,516) (2,820,747) (2,877,867) (3,402, 142) (3,280,201)

Net change in OPEB liability (1,077,140) (1,311,759) (5,599,500) (1,374,639) 18,210,713 Total OPEB liability- beginning 33,594,237 34,905,996 40,505,496 41,880,135 23,669,422 Total OPEB liability- ending $ 32,517,097 $ 33,594,237 $ 34,905,996 $ 40,505,496 $ 41,880,135 Plan Fiduciary Net Position 2021 2020 2019 2018 2017 Contributions $ (175,500) $ (462,000) $ (1,137,500) $ (3,348,797) $ (980,298)

Contributions from plan members - EWEB group insurance (683,609) (740,292) (716,560) (775,345) (740,089)

Net investment income (2,233,327) (2,527,084) (3,280,364) 952,424 (2,204,942)

Benefit payments 2,706,467 2,858,549 2,922,208 3,361,962 3,385,729 Administrative expense 80,101 89,779 132,931 88,919 81,076 Net change in plan fiduciary net position (305,868) (781,048) (2,079,285) 279,163 (458,524)

Plan fiduciary net position - beginning (20,031,471) (19,250,423) (17,171,138) (17,450,301) (16,991,777)

Plan fiduciary net position - ending $ (20,337,339) $ (20,031,471) $ (19,250,423) $ (17,171,138) $ (17,450,301)

Net OPEB liability $ 12,179,758 $ 13,562,766 $ 15,655,573 $ 23,334,358 $ 24,429,834 Plan fiduciary net position as a percentage of the total OPEB liability 62.5% 59.6% 55.1% 42.4% 41.7%

Covered-employee payroll $ 51,259,823 $ 51,560,696 $ 47,799,139 $ 44,880,815 $ 44,353,971 Net OPEB liability as a percentage of covered payroll 23.8% 26.3% 32.8% 52.0% 55.1%

• 10 year trend information will be presented prospectively.

Notes to schedule:

Benefit changes During 2016 and 2017, the subsidy for employees hired on or after January 1, 2003 was discontinued, and an incentive payment for opting out of health insurance subsidies at retirement was implemented. The incentive was recognized as a benefit change in the 2021 valuation.

Changes in assumptions 2017: The discount rate decreased from 6% to 4.32%. Health care cost trend increases for the Oregon PERS Medicare plans and EWEB supplemental Rx plans went up from 4% to 5%. The mortality table, RP-2000, projected to 2016 using Scale AA, was replaced with RP-2014.

2019: The expected long-term rate of return was decreased from 7% to 6.53%. Each December 31, that rate is blended with the 20-year General Obligation Municipal Bond Index rate to arrive at the investment and discount rate for the year.

2021: Retirement and withdrawal rates were updated based on a 2020 experience study.

88

Eugene Water & Electric Board Schedule of Investment Returns OPEB Trust As of December 31, 2021 Last Ten Years*

2021 2020 2019 2018 2017 Annual money-weighted rate of return, net of investment expense 12.0% 14.0% 19.8% -5.6% 14.1%

• 10 year trend information will be presented prospectively.

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Supplementary Information Eugene Water & Electric Board Electric System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2021 Revenue Refunding Revenue and Revenue Refunding Revenue Refunding Revenue and Revenue Refunding 2011 B Series 2012 Series 2016 A Series 2016 B Series 6-29-11 9-11-12 9-7-16 9-7-16 Principal Interest Princieal Interest Princieal Interest Principal Interest 2022 $ 945,000 $ 83,010 $ 515,000 $ 635,319 $ 2,345,000 $ 4,024,950 $ 4,455,000 $ 81,972 2023 985,000 42,848 1,810,000 609,569 6,300,000 3,931,150 2024 1,040,000 537,169 6,625,000 3,616,150 2025 495,569 6,875,000 3,284,900 2026 495,569 6,675,000 2,941,150 2027 495,569 6,000,000 2,607,400 2028 495,569 6,400,000 2,307,400 2029 1,315,000 495,569 6,615,000 1,987,400 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 1,017,800 2033 317,813 5,175,000 740,400 2034 317,813 1,685,000 533,400 2035 317,813 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 85,600 2041 2,155,000 164,625 2042 2,235,000 83,813 2043 2044 2045 2046 2047 2048 2049 1,930,000 125,858 17,360,000 8,205,180 87,515,000 31,642,350 4,455,000 81,972 Less current portion 945,000 515,000 2,345,000 4,455,000

$ 985,000 $ 125,858 $ 16,845,000 $ 8,205,180 $ 85,170,000 $ 31,642,350 $ $ 81,972 90

Eugene Water & Electric Board Electric System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2021 Revenue Revenue Revenue 2017 Series 2020 A Series 2020 B Series 9-12-17 6-11-20 6-11-20 Total Electric System Payments Principal Interest Principal Interest Principal Interest Principal Interest Totals 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 9,095,000 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 15,101,032 2027 945,000 1,689,750 1,085,000 1,516,250 1,445,000 338,945 9,475,000 6,647,914 16,122,914 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 3,336,768 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 9,746,484 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 7,553,763 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 2,140,000 463,600 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 2,505,000 100,200 2,505,000 100,200 2,605,200 33,795,000 30,006,000 39,200,000 28,268,300 16,790,000 4,735,537 201,045,000 103,065,197 304,110,197 Less current portion 8,260,000

$ 33,795,000 $ 30,006,000 $ 39,200,000 $ 28,268,300 $ 16,790,000 $ 4,735,537 $ 192,785,000 $ 103,065,197 $ 304,110,197 91

Eugene Water & Electric Board Water System Long-Term Bonded Debt and Interest Payment Requirements, Including Current Portion Year Ended December 31, 2021 Revenue and Revenue Refunding Revenue Revenue Refunding 2016 Series 2020 A Series 2020 B Series 5-9-16 6-4-20 6-4-20 Total Water System Pa:t'.ments Principal Interest Principal Interest Principal Interest Princieal Interest Totals 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 1,218,000 415,000 610,050 635,000 333,349 2,390,000 2,161,399 4,551,399 2024 1,415,000 1,151,000 430,000 593,450 645,000 325,602 2,490,000 2,070,052 4,560,052 2025 1,470,000 1,094,400 450,000 576,250 655,000 316,263 2,575,000 1,986,913 4,561,913 2026 1,530,000 1,035,600 465,000 558,250 665,000 305,796 2,660,000 1,899,646 4,559,646 2027 1,610,000 959,100 485,000 539,650 675,000 293,553 2,770,000 1,792,303 4,562,303 2028 1,690,000 878,600 505,000 520,250 685,000 280,451 2,880,000 1,679,301 4,559,301 2029 1,770,000 794,100 525,000 500,050 700,000 265,991 2,995,000 1,560,141 4,555,141 2030 1,860,000 705,600 545,000 479,050 715,000 250,724 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 3,753,222 2032 1,175,000 586,200 590,000 434,450 750,000 217,640 2,515,000 1,238,290 3,753,290 2033 1,225,000 539,200 615,000 410,850 770,000 199,407 2,610,000 1,149,457 3,759,457 2034 1,270,000 490,200 640,000 386,250 790,000 179,918 2,700,000 1,056,368 3,756,368 2035 1,320,000 439,400 660,000 367,050 805,000 159,528 2,785,000 965,978 3,750,978 2036 1,375,000 386,600 675,000 347,250 830,000 138,349 2,880,000 872,199 3,752,199 2037 1,430,000 331,600 700,000 327,000 860,000 112,428 2,990,000 771,028 3,761,028 2038 1,485,000 274,400 720,000 306,000 885,000 85,570 3,090,000 665,970 3,755,970 2039 680,000 215,000 740,000 284,400 910,000 57,932 2,330,000 557,332 2,887,332 2040 710,000 187,800 760,000 262,200 945,000 29,512 2,415,000 479,512 2,894,512 2041 735,000 159,400 785,000 239,400 1,520,000 398,800 1,918,800 2042 765,000 130,000 810,000 215,850 1,575,000 345,850 1,920,850 2043 795,000 99,400 835,000 191,550 1,630,000 290,950 1,920,950 2044 830,000 67,600 860,000 166,500 1,690,000 234,100 1,924,100 2045 860,000 34,400 885,000 140,700 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 1,019,700 30,495,000 13,728,300 18,470,000 9,813,100 14,285,000 4,126,894 63,250,000 27,668,294 90,918,294 Less current portion 2,030,000 630,000 2,660,000

$ 28,465,000 $ 13,728,300 $ 18,470,000 $ 9,813,100 $ 13,655,000 $ 4,126,894 $ 60,590,000 $ 27,668,294 $ 90,918,294 92

Eugene Water & Electric Board Electric System Analysis of Certain Restricted Cash and Investments for Bond Service Year Ended December 31, 2021 Investments for Customer & Terrestrial Bond Principal Debt Service Construction Escrow Deposit Wildlife Habitat Total

& Interest Reserve Funds Reserve Fund All Funds Ending balance - December 31, 2020 $ 13 $ 6,696,693 $ 55,545,654 $ 3,762,780 $ $66,005,140 Deposits from general fund 15,339,827 417,210 24,984 15,782,021 Investment earnings (losses) 23 (1,723) 4,058 2,097 (70) 4,385 Other transfers 24,033 24,033 Receipts 15,339,850 (1,723) 4,058 419,307 48,947 15,810,439 Principal payments 6,745,000 6,745,000 Interest payments 8,594,846 8,594,846 Transfers to general fund 21,068,893 2,107,150 23,176,043 Other transfers 24,033 24,033 Disbursements 15,339,846 21,092,926 2,107,150 38,539,922 U.S. securities, at market 6,694,355 25,003,891 1,655,918 35,519 33,389,683 Cash in bank 17 615 962,224 43,008 1,367 1,007,231 State of Oregon Local Government Investment Pool 8,490,671 376,011 12,061 8,878,743 Ending balance - December 31, 2021 $ 17 $ 6,694,970 $ 34,456,786 $ 2,074,937 $ 48,947 $ 43,275,657 93

Eugene Water & Electric Board Water System Analysis of Certain Restricted Cash and Investments for Bond Service Year Ended December 31, 2021 Investments for Bond Principal Debt Service Construction Total

& Interest Reserves SOC Reserves Funds All Funds Ending balance - December 31, 2020 $ 4 $ 1,492,130 $ 6,033,489 $ 11,405,384 $ 18,931,007 Deposits from general fund 4,927,127 1,077,319 6,004,446 Investment earnings (losses) 7 (387) 2,562 5,981 8,163 Receipts 4,927,134 (387) 1,079,881 5,981 6,012,609 Principal payments 2,555,000 2,555,000 Interest payments 2,372,132 2,372,132 Transfers to general fund 3,577,296 8,009,690 11,586,986 Disbursements 4,927,132 3,577,296 8,009,690 16,514,118 U.S. securities, at market 1,491,640 2,639,700 2,539,371 6,670,711 Cash in bank 6 103 109 State of Oregon Local Government Investment Pool 896,374 862,304 1,758,678 Ending balance - December 31, 2021 $ 6 $ 1,491,743 $ 3,536,074 $3,401,675 $8,429,498 94

Eugene Water & Electric Board Sustainability Accounting Standards Disclosures Years Ended December 31, 2021, 2020 and 2019 The following metrics are standardized disclosures recommended by the Sustainability Accounting Standards Board for electric and water utilities.

The disclosures are voluntary and are not meant to demonstrate compliance with laws or regulations.

Electric System Topic Metric 2021 2020 2019 Numoer or cuswmers servea in marKers suoJecr w renewao1e portfolio standards (RPS). 96,000 95,000 94,000 (All retail customers)

Greenhouse Gas Emissions & Energy RPS target before exemptions 473,884 MWh 465,707 MWh 361,808 MWh Resource Planning Percentage fulfillment of RPS target by market Greater than 100% Greater than 100% 100%

Number of incidents of non-compliance with water quality and/or Water Management None None None quantity permits, standards, and regulations Workforce Health & Total recordable injury rate 4.4 4.1 3.9 Safetv Fatalitv rate 0 0 0 Customer electricity savings from 10,624 MWh 15,053 MWh 10,958 MWh efficiency measures End-Use Efficiency 3.1 MW reduction in 3.7 MW reduction in 2.2 MW reduction in (In total across all customer types) peak demand peak demand peak demand System Average Interruption Duration Index (SAIDI), 46.21 minutes 41.49 minutes 69.37 minutes per customer Grid Resiliency System Average Interruption Frequency Index (SAIFI), 0.33 outages 0.32 outages 0.47 outages per customer Customer Average Interruption Duration Index (CAIDI), 138.98 minutes 130.15 minutes 146.91 minutes per outage RPS compliance information above is preliminary. Final 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 acquisitions.

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Eugene Water & Electric Board Sustainability Accounting Standards Disclosures Years Ended December 31, 2021, 2020 and 2019 Water System Topic Metric 2021 2020 2019 Total fresh water sourced from regions with high or extremely None None None high baseline water stress Water Scarcity Fresh water purchased from a third party None None None Volume of recycled water delivered None None None Number of acute health-based, non-acute health-based, and non-Drinking Water Quality None None None health-based drinking water violations Distribution Network .2% of 817 miles .2% of 816 miles .2% of 814 miles Water pipe replacement rate Efficiency or 1.8 miles or 1.8 miles or 1.9 miles Treatment plant is Treatment plant is Treatment plant is Water treatment capacity located in FEMA Special Flood outside flood zone, outside flood zone, outside flood zone, Network Resiliency & Hazard Areas intake is within intake is within intake is within Impacts of Climate 267 257 286 Change Number of service disruptions, population affected, and 1319 customers 1043 customers 1152 customers average duration 112 minutes 94 minutes 125 minutes Water pipe is distribution pipe for potable water measuring 2 inches to 60 inches in diameter. Replacements do not include new construction. Total miles for these pipelines is all pipe including new construction.

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Audit Comments MOSS~DAMS 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 Minimum Audit Standards Board of Commissioners Eugene Water & Electric Board We have audited the individual and combined financial statements of the Eugene Water & Electric Board (the "Board") as of and for the year ended December 31, 2021 and have issued our report thereon dated March 18, 2022. We conducted our audit in accordance with 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, including 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 on the determination of financial statement amounts:

• The accounting records and related internal control structure.

• The use of various depositories to secure the deposit of public funds.

• The requirements relating to insurance and fidelity bond coverage.

• The appropriate laws, 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 pertaining to the awarding of public contracts and the construction of public improvements.

However, providing an opinion on compliance with 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 of noncompliance that are required to be reported under Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the Secretary of State.

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v22-01 Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Board 's internal 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 deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions , to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies , in internal control such that there is a reasonable possibility that a material misstatement 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 material 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 with 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.

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Julie Desimone, Partner, for Moss Adams LLP Portland , Oregon March 18, 2022 98