EES gets clean FY 2003 audit

By Thomas Wilson
STAR STAFF
twilson@starhq.com
The Elizabethton Electric System received a clean financial audit of their fiscal year 2003 books, but auditors advised the system to build reserves and examine their policy of customer deposits for electricity service.
Melissa Steagall-Jones of the Blackburn, Childers & Steagall firm who presented the audit at the EES Board of Directors meeting on Tuesday afternoon, recommended the board improve its unrestricted asset amount. She said the system presently retained roughly $1.9 million in unrestricted reserve assets and told the board the system needed to have two months of operating revenue in reserve -- or $5.5 million.
Steagall-Jones also briefed the board about the changing policy of many power providers regarding the use of customer deposits made to the system when electrical power was established. The board's customer deposit account totaled better than $1.3 million of essentially restricted funds, she said.
"It is money that really shouldn't be spent because it doesn't belong to the electric system; it belongs to your customers," said Steagall-Jones. She advised the board some neighboring electric systems had made a policy to keep deposits for one year. Customers then could request the return of their deposits, which they were entitled to receive. EES Director of Finance Andi Talbert said system records tracked service deposits for customers.
The audit was the first performed for EES by BC&S, which was selected by the board earlier this year. Steagall-Jones, accompanied by her father and firm partner, Charles Steagall, said Talbert and the system had done a good job complying with new federal demands on accounting practices for public entities.
As has been the case in recent months, roughly 40 current and former EES employees packed the conference room where the board met. A former EES employee raised the issue of using system equipment and vehicles for personal use by system employees. Mike Frazier, who retired from EES in 1996 after 23 years, questioned the use of a "Bobcat" machine used by EES General Manager Phil Isaacs at the construction site of his new home. "Three people have come up to me and asked me if EES has started fixing driveways," Frazier told the board.
Isaacs pointed out EES employees had access and the option to use some system equipment for personal work under stipulated circumstances. He also told board member Shirley Hughes the use of EES vehicles did extend to sitting EES board members.
"A lot of other employees have used it," Isaacs said. "Barns have been built ... we just ask they have a competent operator on the equipment."
Grading equipment, trucks that plant telephone polls and other vehicles had been used by employees and former employees for personal use over the years, Isaacs said after the meeting. He also said he had no problem with the board writing a policy that prohibited personal use of EES equipment. "I've been here 23 years, and its been going on that long," he said.
Near the end of the meeting, Randy Jones, business manager for International Brotherhood of Electrical Workers Local 934, submitted an envelope to Isaacs he said contained 40 written questions on various topics regarding future negotiations between the union and the electric system. When Jones attempted to discuss the topics during the meeting, board member Ken Wandell cautioned that Jones should direct his statements through the board's attorney.
"This is a man who threatened us with litigation the last time he was here," said Wandell. Board attorney John Banks said if Jones intended to speak about matters pertaining to the contract, the proper forum for discussion was in negotiations not at a board meeting.
EES board members voted without dissent in August to decrease the amount the organization contributes to the employees' pension plan. EES employees previously earned 2.15 percent annually toward their retirement. 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. Board members also passed a resolution without dissent to raise retirement age eligibility from 57 to 60.
The local represents approximately 30 EES employees, primarily linemen. Jones said he wanted questions answered about possible changes in the system's retirement plan for union employees and had not received his answers. "There are several questions pertinent to the negotiations we're going into, and I have been waiting for answers for three months," said Jones after the meeting.
The system also voted 5-0 to approve the fiscal year 2004 budget. The budget had been held up as the board awaited a decision by the Tennessee Valley Authority to raise electrical rates to power providers. TVA's board of directors voted 3-0 to approve a 6.1-percent increase in electric revenues on Aug. 27.
The rate increase and restructuring will have the net result of an average 7.4 percent increase in wholesale residential and non-manufacturing rates and a 2 percent decrease in wholesale rates for large manufacturers, according to TVA. The rate hike translates to higher energy costs for residential and some commercial customers. Customers of EES will see an increase in their energy bills beginning on Oct. 1 when the energy charge will increase by 6.74 percent and the customer service charge will increase by $1.