Why doesn’t KIUC petition to lower rates?

Leaders of the Kaua‘i Island Utility Cooperative (KIUC) did not fully answer e-mailed questions asking why they have not approached their lenders, the U.S. Department of Agriculture Rural Utilities Service (RUS) and National Rural Utilities Cooperative Finance Corporation (CFC, a nonprofit entity) seeking permission to apply for rate decreases with state authorities.

Kaua‘i’s electric rates are the highest in the state, and among the highest in the nation, in terms of per-kilowatt-hour charges (a kilowatt-hour is the amount of electrical energy consumed when 1,0000 watts are used for one hour).

Nor did they explain whether the purchase of nine cars for more than $239,000 (or over $26,500 per vehicle) was for KIUC managers.

Also left unanswered is whether or not members of the KIUC board are getting into operational issues, when according to the co-op bylaws they are supposed to limit their involvement to general governance issues.

According to e-mailed replies sent by KIUC leaders through KIUC Director of Communications Anne Barnes yesterday, these lenders (RUS and CFC) lent KIUC founders the money to purchase Kauai Electric from Citizens Communications Company (CCC, formerly Citizens Utilities) in November 2002, and additionally, more money to purchase the Kapaia Power Station from Kauai Power Partners in December 2003.

According to KIUC replies, likely crafted by either or both President and CEO Harry A. “Dutch” Achenbach and board Chairman Gregg Gardiner, any adjustment to the rates established in 1995 by officials at Kauai Electric (KE) and approved by members of the state Public Utilities Commission (PUC), and inherited by KIUC leaders, including raising or lowering base rates, changes to the Energy Rate Adjustment Clause (ERAC) formula, or other “surcharge-formula” adjustments, have to be approved by PUC members.

KIUC leaders thoroughly explained the mechanics behind the capital-patronage rebates.

They said such approval (for a rate decrease) would require opening an appropriate docket (case) with the PUC, the possible opportunity for interested parties to become intervenors and, if allowed to intervene, to provide input in the process, exchanging of information for the record through the Information Request (IR) process, a hearing from the PUC, and, eventually a ruling on the matter from the PUC.

As for KIUC’s purchases, Barnes said Achenbach pays rent to KIUC leaders for the $777,617.24 home KIUC officials purchased with cash as the Lihu‘e home for the CEO.

“One of the biggest problems in recruiting the appropriate person for CEO was the issue of housing. After a diligent search, no appropriate rental property could be located close to our offices.”

Barnes said the price paid for the house was $50,000 below appraisal, and “it has appreciated since the purchase, all to the financial benefit of KIUC and its members,” Barnes reported.

As for the $11,432 for new furniture for the Achenbach home, and $739.57 for a barbecue for the house, Barnes said Achenbach’s contract provided him with a moving allowance to move his furniture from his home in Casper, Wyo., to Kaua‘i. Rather than move, he used less than the amount authorized, and purchased furniture, rather than ship his belongings.

Barnes said this actually saved the cooperative money.

Barnes said KIUC officials did not purchase a grill for Achenbach. He bought a grill locally with his own money. KIUC leaders did purchase a grill for its company headquarters, for $739, and occasionally bring employees together for barbecues, she said.

“The grill will also be used in times of emergency, such as hurricanes, to cook food for its employees,” Barnes said.

KIUC officials said the original $215 million purchase price was not an overpayment. They also denied there was a $5 million finder’s fee, or transaction fee, paid to Gardiner and others who facilitated the purchase.

Instead, their “out-of-pocket expenses” were reimbursed, she said. These were not itemized.

Here was KIUC leaders’ response to allegations from members and KIUC insiders that co-op officials are stockpiling cash:

“By the end of 2005 KIUC members will have approximately 10 percent equity in the utility. Equity is developed by reducing debt, paying for capital improvements, and accumulating cash reserves.

“Initially, of course, cash is what is used to accomplish all of the above. One of the largest concerns at the time of the closing (of the sale) was the fact that KIUC had no cash on hand, and no equity. Most cooperatives have between 45 to 55 percent equity in their system with the balance in loans. The board does not consider its cash reserves excessive,” according to an e-mailed response.

Barnes said KIUC’s Public Relations Department budget is $322,900 this year.

She was unable to reveal how much money was spent on food at board of directors meetings, responding to a question sent to The Garden Island about alleged extravagant meals offered to board members on meeting days.

The next meeting of the KIUC board is tomorrow, Wednesday, Oct. 26, at 1:30 p.m., in the KIUC headquarters conference room on Pahe‘e Street in Kukui Grove Village West. The meeting is open to the public. There is always provided on the agenda time for member and public comments.

Despite information provided from within KIUC, Barnes denied that vice-president positions are being eliminated. Reportedly, Darney Proudfoot, vice president of Human Resources, is retiring because other HR department leaders told her they would be losing their jobs in January.

“Most vice-president positions are not being eliminated, rather the position titles have been changed,” said Barnes.

“In the view of management, the old vice-president titles did not accurately reflect how co-ops do business. Thus, those positions have, for the most part, been re-titled department-manager positions. Mike Yamane was reassigned in a lateral move to an important position utilizing his engineering degree to the best benefit of the company and membership. Mike is in charge of electrical-project management,” she said.

There had been unconfirmed reports that Yamane was, like Proudfoot, on his way out.

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