PUD executives give back wage increases; board approves 9-percent surcharge

Chelan County PUD (CCPUD) -  At Monday’s Chelan PUD board meeting,  management offered a wage reduction and salary freeze for the executive management team, and the PUD Board of Commissioners voted 4-1 to approve a temporary 9-percent electric rate surcharge effective May 1 for up to 12 months.

The cost-savings measure and rate surcharge are aimed at reducing a projected 2009 deficit of $19 million. These actions follow several previous rounds of PUD cost-saving, amounting to $27 million in budget savings, which were not enough to offset a steep decline in revenues from the wholesale sales of the PUD’s hydropower.
All together, the PUD is cutting $2.5 million in wages.

The majority of the projected $19 million loss is because of lower prices for energy sold in the wholesale market and low snowpack. Lower interest rates on the PUD’s cash reserves also contributed to the deficit.

“We’re a part of this community, and we understand the concerns,” said PUD General Manager Rich Riazzi. “That’s why we decided to give back the wage increase, and freeze these current upper management salaries for a total of two years.”

Riazzi and the five other senior managers at the PUD will take a 2009 pay cut to erase the raise received in February. The management team will give back their wage increase by taking enough days off without pay to equal the amount of the raises.

Riazzi opened the meeting with the executive team’s proposal, and said the current salaries of top managers will be frozen until Feb. 1, 2011. And, if the PUD faces similar economic conditions next year, he said the PUD will consider additional actions in the future, including another hard look at management wages.

The PUD will also freeze non-union employees’ salaries until Aug. 1, 2010.  Merit increases then will be awarded if financial conditions permit, Riazzi said. Both non-union and union employees have already agreed to a week without pay this year. Riazzi said the PUD will continue to bargain in good faith with the union on wages in light of current economic conditions, budget constraints, and the desire to maintain harmony in the workforce as a whole.

“I am proud of the way our employees have stepped up over the past two years as we have asked them to do more. I know their families feel the pinch of these tough economic times just like the rest of the community does,” Riazzi said. “The surcharge proposal was a last resort for management, but one we felt necessary to maintain the financial strength of the utility.”

The commission vote came after board members listened to comments from about a dozen customers, all opposed to the surcharge. Each commissioner said they had heard from many more customers, all opposed, since the recommendation was made April 13. The vote for the 9-percent temporary surcharge was 4-1, with Commissioner Norm Gutzwiler opposed.

Gutzwiler worried that trimming the amount of the surcharge this year might lead to the need for an even higher surcharge next year. The PUD expects bottom line deficits through 2011 to total $51 million.

The surcharge is effective May 1 and will be applied across the board to residential, commercial and industrial customers. The average residential customer will pay about an additional $4.50 a month.  The board also delayed by up to a year putting a new rate design into effect that was approved last year. It also increased the discount for low-income disabled and low-income senior customers by 9 percent to help offset the impact of the surcharge.

Commission President Ann Congdon said the board faced a dilemma in setting the ultimate amount of the surcharge, but offered the hope that customers and the PUD will continue the conversation started over the surcharge and work together for community benefit.

Here is a summary of the wage actions presented to commissioners Monday by General Manager Rich Riazzi:

  ·         A total wage and salary reduction, including the executive management team’s salary give back, of $2.5 million for 2009.

·         A voluntarily wage increase give back by the executive team of their 2009 increase given in February. They will reduce their pay by each taking 10 to 17 days without pay. The reduction is equal to an average 4.25 percent pay reduction per person.

·         The executive team’s salaries will be frozen until Feb. 1, 2011. If the PUD faces similar economic conditions next year, he will consider additional actions in the future, including another hard look at management wages.

·         A freeze of non-union employees’ salaries until Aug. 1, 2010.  Merit increases then will be awarded if financial conditions permit.

·         A commitment to bargain in good faith with the union on wages in light of current economic conditions, budget constraints, and the desire to maintain harmony in the workforce as a whole.

·         Continued restrictions in hiring with every new or replacement position requiring the general manager’s approval.

·         During the annual budget process when the board approves the salary budget for non-union employees, the Board will review and approve any changes to the district’s compensation program.

·         Recognition that union joined management in supporting a week without pay this year.

“We appreciate and recognize that our employees are stepping up and making sacrifices to help us try to weather a difficult time,” Riazzi said.

In other business, commissioners:

Approved three resolutions related to bond financing that will enable the PUD to take advantage of improved funding provisions contained in federal stimulus measures and to meet requirements of IRS rules for certain bonds issued by the PUD.