In Our Other Voices for Saturday — November 05, 2005

• KIUC’s Gardiner, Achenbach, present the ‘real problem’ behind Kaua’i’s high utility bills


KIUC’s Gardiner, Achenbach, present the ‘real problem’ behind Kaua’i’s high utility bills

The Garden Island’s November 1 self-congratulatory editorial about its reporting on KIUC once again contains the kind of misunderstanding that has made KIUC officials like us wary of cooperating with the newspaper.

The editorial noted that The Garden Island has missed many board meetings and suggested that if they’d only been there, perhaps they’d have asked better questions about board travel, the cost of the CEO’s house, and so forth.

Actually, they might have gotten a much different story.

Correcting all of the distortion, half-truths, misinterpretations, misunderstanding, or out-of-context reporting in The Garden Island would fill several pages, but through them all one very large distortion has emerged.

The Garden Island has created a false impression that wasteful spending on board travel, a gas grill, and pickup trucks and so forth are chiefly responsible for high electric bills.

The fact is that for every dollar in your electric bill:

42 cents paid for fuel

13 cents goes for construction of new facilities and lines, or replacement of aging equipment

11.3 cents goes to member equity accounts (that is allocated and paid to members)

8 cents goes to state, county and local taxing authorities

8 cents goes to our lender to pay interest on longterm debt

7 cents paid for the cost of operating the power plant

3.8 cents goes for health insurance and retirement

2 cents paid for the cost of operating the high voltage transmission lines and substations

2 cents paid for the cost of operating the distribution lines to homes and businesses

2 cents goes for the cost of administration: billing, accounting, customer service, communications, and so forth.

0.6 cents — less than a penny — goes for the salaries of our top executives.

0.3 cents — less than a penny — goes for the cost of the board of directors, including all travel, stipends, training, etc.

In October, 2002, KE charged 22.9 cents per kilowatt hour of electricity. In October, 2005, KIUC charged 32.2 cents. The entire 9.3-cent difference, every single bit of it, is due to the rising cost of fuel.

The Garden Island can write all the stories it wants about the cost of the board, the cost of travel, or the cost of a gas grill so employees can cook food during a hurricane, but it distorts reality and misleads people about the real problems.

In so doing, The Garden Island’s coverage has distracted attention from the real problems that need to be solved — no matter who is running this co-op!

Here it is: we generate 90 percent of our electricity by burning petroleum fuel.

The Garden Island has missed the big story about why electric bills are so high. The real problem is the cost of fuel.

The plain fact is that monthly electric bills on this island will not change materially until we, collectively, as an island cooperative owned by the members we serve, do something about the cost of fuel or find new ways to generate electricity using alternative energy sources.

If The Garden Island had been covering our board meetings regularly, perhaps its readers would know that we have been working tirelessly to develop renewable energy sources so we can reduce our need for expensive fossil fuel and take better care of the environment at the same time.

Kaua’i is probably one of the few places in the world where alternative energy makes economic sense.

The details of our alternative energy study are on our Web site, www.kiuc.coop.

If you go there, you’ll see that one of the first things we can do to save money and improve reliability is to develop energy-storage (battery) capability. That plan is already in motion.

Before investing several million dollars in that, we thought it wise to send people out to look at existing installations, like Alaska, to make sure it works as advertised.

The Garden Island attacked us for the cost of that trip, but didn’t do a fair job of explaining how the information gained in that trip will translate into saving money on your monthly bill.

We could probably make another dent in our fuel bill by bringing in wind power, but so far no one has volunteered their part of the island to put up the wind-turbine towers that would be required to make a significant difference.

While focusing attention on $700 for a gas grill so employees can cook food during a hurricane, The Garden Island missed yet another big story:

In just three short years, KIUC has gone from having zero net worth to having a net worth of nearly $30 million. Every penny of that net worth is owned by the members, not by the board, not by any outside special interest, not by anyone off the island.

Why is that net worth so important? Well, for one thing, it gives us the financial ability to invest in alternative energy sources.

That’s not the only story The Garden Island missed.

Since 2002, KIUC has returned $8.9 million in cash to members, our customers. We believe we will get approval to return another $3.8 million in December. In March 2006 we forecast being able to return yet another $3 million in capital credit refunds, for a total of $15.7 million.

That amounts to a 4.3 percent reduction in the basic rate we charge.

We are well aware that members would prefer that we lower our rates instead of collecting the money every month and then returning it. We’re working on that, too.

For example, this year we applied for and received permission to cut something called “lost gross margin” from our rates and your monthly bill, thanks to our demand-side management. That’s a $1.4 million rate savings every year.

We will continue to look for ways to lower the basic rate, but remain convinced that our first priority must be to make the investments necessary to reduce fuel costs so that Kaua’i will never again be such a large victim of worldwide oil-price hikes.

With a set of challenges like that, the cost of training directors and staff is not a luxury. It is not a frill. It is a necessity. Tens of millions of dollars of your money ride on the outcome in the years to come. We need the most skilled and knowledgeable employees, managers, and directors we can get if we are going to measure up to that challenge.

We will publish on our Web site all the training classes that your directors have taken and have been tested on so they will have the knowledge to be able to serve you effectively.

Pickup trucks (which The Garden Island consistently calls “vehicles,” perhaps because it makes them sound more like luxury sedans) are a normal expense in this business. We have 897 miles of lines in the great out-doors, and four of those full-size, crew-cab work trucks were for supervisors on call 24/7 so they can haul people and material to the job sites. Yes, the managers get to take the trucks home. That way it won’t take them as long to get to a problem in the middle of the night.

The manager’s house? That was not a gift to him. It is an asset owned by the members that increases in value. We did it to help attract a top-level, experienced manager, because we have big challenges and need strong leadership. When all is said and done, the members will make money on that deal. This home is a KIUC asset, and does not affect our rates in any way.

While we certainly agree that it is good to economize wherever possible, if you want to fix the big problems that will make a difference on monthly bills, you need to focus on the big picture: the cost of fuel.

Focus on what we must do to develop renewable energy. We must build the financial resources and we must build the human resources to do something no other utility in the U.S. has ever done.

That’s the real story. It deserves better coverage than it has received.

We will attempt to work with The Garden Island to tell that story, and we will also be communicating directly with our members in other ways as well, to make sure they get both sides of the story fairly and accurately.

  • Gregg Gardiner, chairman of the Board, on behalf of the KIUC Board of Directors.

  • Dutch Achenbach, president and CEO, on behalf of KIUC management and employees
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