Electric system cuts employee benefits

Photo By Dave Boyd
The Elizabethton Electric System Board on Tuesday voted to raise the amount of money employees pay for health insurance, reduce the percentage the system contributes to employee pension plans, and raise the retirement age from 57 to 60.

Health insurance cost raised; pension contribution lowered

By Abby Morris
Star Staff
Employees of the Elizabethton Electric System will see a reduction of benefits while customers may see an increase in the amount they pay for energy, following a meeting of the EES Board Tuesday.
Approximately 40 current and former employees of the system as well as some community members attended the meeting to show their opposition to cutting employee benefits, including the reduction of funds contributed to the employee pension fund.
Members of the board voted without dissent to decrease the amount the organization contributes to the existing pension plan. Previously, employees of the system earned 2.15 percent annually toward their retirement. For example, an employee retiring from the system after 30 years of employment received an annual pension equaling 65 percent of the salary the employee earned during the last year of full time employment.
The board lowered the system's contribution from 2.15 percent to 1.5 percent. Under the new plan, that same employee after 30 years of employment would receive an annual pension equaling 45 percent of the salary he or she earned during their last year of full time employment.
In addition to lowering pension contribution, EES Board members also passed a resolution without dissent to raise retirement age eligibility from 57 to 60.
Some in attendance questioned why the board was making what they believe are hasty decisions without negotiating with the labor union that represents EES employees, local 934 of the International Brotherhood of Electrical Workers.
"This is not the first time we've looked at these issues," said EES Board Chairman Gary Nave. "We've been putting these issues off for three years, and we've got to a point where we cannot put this off any longer.
"The board is making some hard decisions, but I think in the long run it will be better for the Elizabethton Electric System."
Randy Jones, business manager for local 934 of the IBEW, attended the meeting and asked why EES General Manager Phil Isaacs had not responded to two letters he had sent him regarding these issues which were meant to facilitate a discussion between the system and union to find a more mutually beneficial solution to the retirement issue. "We've been trying to work with people to try to get some input to see what we can do about the retirement issue," Jones said.
Isaacs replied that he was busy putting information together about the pending rate restructuring by the Tennessee Valley Authority, which, he said, has been moved "to the front burner" due to the fact that it was more urgent than pending issues with the retirement plan.
Jones disagreed with Isaacs about the importance of the pension benefits. "It is an urgent matter," he said. "It's urgent to all of the people sitting in this room. This is a public utility, and all of these questions need to be answered. This is a non-profit organization, which, to me, means it's like a church; you're here to help people."
Nave told members of the public that the new retirement age and pension plan contributions are "prospective", meaning that they did not reverse decisions already made and that employees who had vested pension benefits would not lose those benefits.
"No one is taking anything away from anyone," Nave said. "We'll just be contributing less to the retirement."
In addition to changes in the retirement plan for employees, the board also unanimously passed a resolution to increase the cost of the employee health insurance package. Employees of the system will be required to pay 20 percent of the total cost of the package for themselves and for dependents covered in the package.
"There has been an extreme increase in the cost of health insurance," Isaacs said. "We are at a point where the increase is so large we either have to decrease the benefits or pass the cost on to the employees."
Members of the audience then questioned items such as the salaries of EES management and bonuses they receive.
One man in the crowd questioned Isaacs about a $24,000 bonus he received last year. Isaacs replied that he had received such a bonus.
"What I'm saying is you claim to be in such a bind, but you give a $24,000 bonus, but you can't afford to pay another $200 for insurance?" the man in the crowd asked.
Isaacs told the man that he was given the bonus because he had not received a raise in three years and would not receive a raise this year either.
"But you're cheating me out of $80 a month for the rest of my life," the man said.
After the vote, Jones addressed the board again and advised them that the resolutions would be challenged in court.
"Any decision you make today will be challenged in court. You are affecting the lives of people you are not even considering. I am challenging this because I believe you are wrong," Jones said. "You need to read (the EES Charter) because some of the board members are on this board illegally due to a clear conflict of interest."
After the meeting, Jones told the Star he believes some members of the board are in conflict of interest due to jobs they hold in the public sector. He pointed to two members of the board who work with two local banks, banks that EES patronizes, and to one board member who owns a contracting business which, according to Jones, often performs work for EES.
"The law states that anyone who has been appointed to this committee, whoever they work for cannot get any benefits from the decisions they make," Jones said. "No one who sits on this board can make decisions that affect, either directly or indirectly, their business." Jones stated that Tennessee Code Annotated as well as the EES Charter prohibit such activity.
After dealing with controversial topics regarding employee benefits, the board discussed the pending rate increase by the TVA and strategies that EES could take to lessen the impact of the hike on customers of the system. According to Isaacs, the rate changes proposed by TVA, which include a 7.4 percent rate increase on wholesale energy as well as the discontinuance of some credits offered by the authority, would raise the cost of operation of the EES by $1.7 million dollars a year.
Officials with the TVA have stated that the rate restructuring is necessary to offset the mounting costs of complying with federal clean air regulations. The TVA Board will vote today on whether or not to approve the rate restructuring.
Members of the EES Board voted to increase the customer charge by $1, meaning that customers will now be charged $7.25 to have a meter at their location and to cover service and maintenance to that meter.
The board also voted to approve an increase of 6.74 percent on the energy charge.
"Basically, at this point in our operating budget we do not see how we can absorb the wholesale rate increase without passing on the cost to the retail side," Isaacs said. "This is an increase pending the approval of the rate adjustment by the TVA which I do not foresee them not passing."
According to Isaacs, the rate increase proposed by the EES would increase the cost of the average customer who uses 1,000 kilowatts of electricity a month by less than $5 from $65.17 a month to $69.56.