RE: March 20, 2002 Agenda Item IX. B.
Collective Bargaining Unit Contract Extensions

Dear Board:

We are extremely concerned to see a three year labor contract extension (from 6/30/2003 to 6/30/2006) passed unanimously by the Finance Committee and recommended for adoption by the full Chugach Board.

There has been no opportunity for the membership to learn of the costs and benefits of this very major proposed action of the Board because no discussion of it has occurred in any open session.

The cost associated with the labor contracts are probably the largest expense category that the board has the ability to influence. The other large items (debt service and fuel) are dictated by outside market forces and are largely outside the ability of the Board to change in a major way.

Chugach Electric has extremely high IBEW Union labor costs (both in terms of compensation levels as well as restrictive and archaic work rules embedded in the three labor contracts).

HOURLY WAGE LEVELS — The average hourly wage of all Chugach employees (union and non-union) in 1992 was 68% higher than the average of all 861 electric distribution coops. That was 68% higher even after cost of living differences were adjusted for (see Attachment A¹)! Chugach wages are not just  at the high end of the national continuum of hundreds of co-ops; Chugach was an extreme outlier near the top of a high wage pinnacle on this graph. Other Chugach benchmarking revealed similar variations from national cost efficiency norms. This information needs to be updated for the Board to make an informed decision.

[see: http://www.chugachconsumers.org/Lib/Cicbench.7.htm]

LABOR INEFFICIENCY — If labor inefficiencies (excessive salaries & benefits, featherbedding, overtime, over staffing) were to be reduced for both non-represented and union employees to at least the national average, between x.x and $11.6 million is estimated to be saved annually.² This would just meet national average co-operative labor cost (after cost of living adjustment); if we were to exceed national average labor productivity, the savings would be even higher.

QUESTIONS

A number of questions and issues immediately arise. Chugach Consumers presents the following as a beginning:

1) OPEN MEETINGS – Chugach Consumers asks that discussion of this labor contract extension be done in open session in both the regular board meetings as well as committee meetings (such as the Finance Committee and the Operations Committee) except for very narrowly defined legal matters. Please start the open sessions with Tuesday’s Operations Committee.

2) ALTERNATIVE SAVINGS – What are the other savings that could be achieved with a long overdue full negotiation and modernizing of these three contracts³? They were first negotiated in 1985-87 and since 8/8/90 binding interest arbitration has prevented Chugach from any effective way of changing them. This is the first time in 13 years that the Board has the unencumbered opportunity to get a fairer deal for our ratepayers.

3) UPDATE OF 1996 STAFF ESTIMATES OF POTENTIAL SAVINGS – Has the general manager provided the Board with a 2002 update of his 1996 savings estimate from full negotiation of these contracts? Then, the savings identified were x.x million annually and that did not include any savings from operation of the Full and Open Competitive Bidding Bylaw. It would be irresponsible for the Board to extend these contracts without a complete update of that study.

4) FULL OPEN AND COMPETITIVE BIDDING BYLAW – The Board is not legally empowered to nullify this bylaw which is to become fully effective on 7/1/2003 when the current contract terms end. In addition, the Board is morally bound to faithfully execute the obvious will of the membership which overwhelmingly passed the bidding bylaw by an 80% yes vote in 1996. In fact, the bylaw itself directs the Board to “fully implement” its provisions. What is the effect of extending these contracts under the proposal from IBEW on the ability of the bylaw to fully kick in and bring cost savings on 7/1/2003?

It is of paramount importance that the Board not extend these contracts for another three years without very thorough consideration of all the alternatives and all the financial impacts. We feel that the Board must also communicate the key information to the membership and give it a reasonable amount of time to become informed and make meaningful comment to the Board before decision on this or any other contract extension is made.

To that end we suggest, as a minimum, one to three articles in the Chugach Outlet about the issues and cost savings opportunities from a full contract negotiation that are intended to make it possible for Chugach to achieve the agreed Association goals of being in the top 10% of utilities nationwide in efficiency and value delivered to customers. There should also be extensive information posted on the website to assist in this communication with the members. Press releases, polling and focus groups are also appropriate for this most important of all issues addressed by the Association in the last decade.

Indications are that our community and state have some hard times ahead. Already Alaska has made a stunning fall from having the highest per capita income in the country to now below average. Chugach Electric Association as a member owned cooperative and provider of a basic service that affects everyone’s cost of living and the competitiveness of our state has an important obligation and the membership’s trust to do everything it can to be as efficient as possible.

There is plenty of time to properly consider these labor contracts. There is absolutely no reason to rush through their extension almost a year and a half before they even expire on 7/1/2003.

Sincerely,

CHUGACH CONSUMERS  www.chugachconsumers.org

Ray Kreig  
ray@kreig.com

Ed Granger

cc: General Manager

END NOTES

 ¹Figure 1 from Preliminary Benchmarking Study, Chugach Electric Association Compared to 860 Other U.S. Electric Distribution Cooperatives. Citizens for an Independent Chugach Electric. April 3, 1995. [see: http://www.chugachconsumers.org/Lib/Cicbench.7.htm]

²XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX. Tab 3 -- List of Potential Cost Savings Based on Past Studies and Initiatives.

³Generation Plant Personnel (7/1/1985); Outside Plant Personnel (5/14/87); and Office and Engineering Personnel (5/14/87).