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HomeMy WebLinkAbout1976-10-19 Min - Board -7/ OCTOBER 19, 1976 The re§ul ar meeting of the Board of Directors was called to order by the Chairman at 7:35 P.M. ROLL CALL: Waters, present; Sutton, present; Craig, present; Christensen, present; Anderson, present; EMPLOYEES PRESENT: Morey and Reed. OTHERS PRESENT: See attached list for audience attendance. BILLS FOR BOARD APPROVAL Director Christensen moved that the Bills be paid. Seconded by Director Sutton. ALL AYE BY VOICE VOTE. SO ORDERED. MANAGER'S REPORT - DISMISSAL OF DOCKET NO. ER76-871 SIERRA PACIFIC POWER COMPANY, AGAINST TDPUD The Board discussed Mr. McDonough's letter to Mr. Morey dated October 13, 1976, regarding the proposed settlement agreement with Sierra Pacific Power Co. over Sierra Pacific s current, third rate increase, Docket ER76-87. Mr. Craig asked that the record show "that I think it is unfortunate that Mr. McDonough could not make it tonight. I think that it would be helpful if he was here and I appreciate the-work he has done on this. Although he is still waiting for a copy from Sierra Pacific of the agreement we are going to sign. . . . . " Director Sutton moved that Martin McDonough be authorized to -proceed with the settlement with Sierra Pacific Power Co. as outlined in his letter of October 13th. Seconded by Director Christensen. ROLL CALL: Waters , aye; Sutton, aye; Craig, aye; Christensen , aye; Ande rs orb, .. aye; SO ORDERED. LEASE AGREEMENT - WELLS A & B Director Sutton moved that this matter be placed on the agenda for the October 28th meeting as the second item. Seconded by Director Craig. ALL AYE BY VOICE VOTE. SO ORDERED. UINTANA WATER SERVICE ON WEST RIVER STREET Folowing discussion Director Sutton moved that Mr. Cook and Mr. Morey review the matter and present a plan which would be considered by the Board by December lst. Seconded by Director Christensen. MAJORITY AYE BY VOICE VOTE. SO ORDERED. Mrs. Sutton asked that the record show her summation of the problem: "Right now his service is through the County Maintenance Building that was done under rather strange circumstances a year ago last summer and in September, 1975, the District allowed the temporary service to continue. " Director Waters asked that the record show his opposition to the motion: "I think we made an agreement with Mr. Quintana last year that if he would put the hydrant in that we would furnish water to him . . . across the road." Following discussion with Mr. Cook, Director Craig moved that Mr. Anderson, Mr. Christensen, Dan Cook and Mr. Morey meet with an airport committee as soon as possible to work out the problem regarding the integration of the Airport Well source into the basic community water system. Seconded by Director Waters. ROLL CALL: Waters, aye; Sutton, no; Craig, aye; Christensen, abstain, Anderson, no; MOTION FAILED. Director Sutton asked that the record show her "no" vote was because, "Mr. Anderson, Mr. Christensen and Mr. Morey-are not familiar with the previous negotiations with the committee from the Airport District and I Page 1 , October 19, 1976 believe that the two directors, Mrs. Sutton and Mr. Craig, who were on the Dart committee, should be the ones to pursue this." Director Craig moved that Director Sutton, Mr. Anderson, Mr. Cook and Mr. Morey meet with an Airport committee as soon. as possible to work out the problem. Seconded by Director Christensen. ALL AYE BY VOICE VOTE. SO ORDERED. MISCELLANEOUS MANAGER'S REPORT `�"' Mr. Morey discussed with the Board the bookkeeper's desire to transfer $157.23 to the General fund .from the WRSAD account. Director Sutton moved that the payment from the WRSAD in the amount of $157.23 to the General Fund be authorized. Seconded by Director Craig. ALL AYE. BY VOICE VOTE. SO ORDERED. WESTINGHOUSE TRANSFORMER MATTER Director Christensen moved that items 3 and 4 be tabled indefinitely. Motion died for lack of a second. Director Sutton asked that the record show "the matter that is being discussed has to do wi th a purchase order in August, 1973, for seven transformers from Westinghouse signed by Mr. Krajewski , the superintendent of power and water. " Director Sutton moved that this matter be referred to Mr. Grumer and Mr. Morey for review and a report back to the Board. Seconded by Director Craig. MAJORITY AYE BY VOICE VOTE. SO ORDERED. POLICY CONSIDERATIONS RELATED TO POLITICAL ACTIVITIES OF DISTRICT EMPLOYEES Director Christensen moved that this matter be tabled indefinitely. Seconded by Director Waters. ROLL CALL: Waters, aye; Sutton, no; Craig, no; Christensen, aye; Anderson, aye; SO ORDERED. CORRESPONDENCE LOG Mrs. Sutton asked that the- record show that this item has been on the agenda since September 21st and refused to be discussed by the Board, and that the Board majority has refused to discuss political activities of employees of the District, Directors of the District, Managers of the District, since September 21 st. No action was taken on this matter. ROBERT BUTLER - SIERRA MEADOWS TANK ROAD EASEMENT Mr. Butler appeared before the Board regarding his agreement with the District dated September 29, 1970. A copy of Mr. Butler's letter to the Board is attached to these minutes. Also attached to these minutes is Mr. Butler's letter to the Board dated October 5, 1976. Mrs. Sutton moved that Mr. Grumer, Mr. Morey and Mr. Cook review this matter and report back to the Board at the next meeting. Seconded by Director Christensen. ALL AYE BY VOICE 'VOTE. SO ORDERED. NRECA MANAGEMENT AUDIT Director Christensen moved that the Management Audit Report become-- a part of t-he record and for public release Seconded by Director Sutton. ALL AYE BY VOICE VOTE. SO ORDERED. Director Christensen read into the record the letter from NRECA dated October 12, 1976. A copy of that letter is attached to these minutes. Director Christensen also read into the minutes the following recommendations as set forth in the Management Audit Report: Page 2, October 19, 1976 V. RECOMMENDATIONS OF THE CONSULTANT 1 . It is obvious to the Consultant thatthi s public utility district can improve its management system. In order to develop an effective management system it must develop the district's viewpoints (philosophy) as they apply to the PUD's operation. 2. The district must develop a set of bylaws to guide it in its operation. 3. The district must develop its objectives in order that it will have a clear idea of what it is trying to accomplish through its operation of the PUD. i 4. The utility must develop sets of policies which permit it to function without having to decide on each individual aspect ofthe operation each time it occurs. 'It is impossible for a board to function effectively under these conditions. 5. The board must develop its own rules and regulations concerning the way it operates. This includes but is not limited to the development of its agenda, the manner in which issues will be discussed, the manner in which 1 decisions will be reached, the manner in which minutes will be written, follow-up procedures, etc. It is obvious that this may not be possible under the present wide differences of.phi 1 osophy and_objectives that exist upon the board at the present time. . However, the board should start planning to implement these recommendations and it's apparent that the board needs some outside management assistance. The board should also agree that it will let the general manager serve as its chief of staff as concerns its outside consultants and to coordinate and implement the use of these consultants on behalf of the board. Again, it is probably impossible for the board. to accomplish this under the present system of circumstances which exist. However, it is imperative that this type of management system be developed in order that the Truckee Donner PUbl i c Utilities District may function effectively and efficiently in these very difficult times. It should be remembered that many small consumer owned utilities have pretty much run themselves over the last 40-50 years. However, in the economic environment which exists today, this is no longer possible. Since the registered voters of the district are the owners and have the ultimate control and receive the services it is incumbent upon them to see that the board is constituted to be responsive to their needs which will function efficiently, which will provide -decisive action and in the long run which will create an organization that will be permanent and give service to the district at the lowest possible cost in the ensuing years. 6. The district should have a statistical analysis of its historical operations made and presented to the board in such a way that it can use it to review its history and to project its future. The data exists for this to be done; it would require a few days of consulting time to furnish this type of an analysis. 7. It is the consensus of most peDpl a that were. interviewed that one of the objectives of the minority on the board is to effect a sellout of this property to the Sierra Pacific Power Company. This may or may not be an objective of these board members. However, the consultant feels that it is within his province to make a, recommendation to the voters of this community concerning this matter. With a background.of 25 years in the utility business, I have never seen a. situation where it was to the t benefit of the recipients of service of a consumer owned utility to sell it out to a profit oriented company. Many times a profit oriented company is in a position where it can take losses in one section .of its service territory.and make them up in another which is an option which is not open to a small utility operation. This is a technique which has been used many times for a profit oriented utility to buy out the faci 1 i ti es Page 3, October 19, 1976 of a consumer owned utility. While it is true that many consumer owned utilities today are so small in the scope of their operations that it is difficult to operate economi ncal ly in the opinion of the consultant this is not true in the case of Truckee Donner Public Utility District. This is a valuable property to all the people in the community and partic- ularly to the consumers. It would be far more beneficial in the long run for the voters who have control of this utility to correct the problems that exist i n .its management than to sell it out to an investor owned utility who will have to add the cost into its rate base and consequently pass that cost along to the consumers ultimately. There is no justifica- tion for a public utility district which does not fulfill a function. However, those functions can only be fulfilled with a background of competent management and this can be developed in the situation that in- volves the Truckee Donner Public Utility District,, " Di rectorChristensen also read for the record "Special Summary of Current Crisis" as set forth in the Management Audit: "VI. SPECIAL SUMMARY OF CURRENT CRISES Even though TD PUD has some management problems the present crises are more of a political , personality and psychological nature and that is where the short term solutions must be found. i The long-standing stability of the Board has been disturbed by the election of Mrs. Sutton. During the time when she and her supporters were in the majority the Board stability remained basically intact because the minority accepted the decisions of the majority even though they did not agree with them. It is significant that during this time whenMrs. Sutton was a member of the majority on the Board that she had.a confrontation with the General Manager over a relatively minor administrative matter. She reportedly advised him at that time that she would oppose everything that he advocated in the future. She has certainly fulfilled that commitment. i When one of Mrs. Sutton's supporters was replaced on the Board and she became a member of the Board minority she refused to accept the decisions of the present majority. Rather than confine her opposition to formal Board meetings and accept the principle of majority decisions she has resorted to carrying .her opposition to the publ i-c through the media and j any other vehicle she can muster. She has also used harrassment and other obstructionist tactics with the Board and staff to try to achieve her ends. She, apparently, refuses to accept the standard practices and procedures for operating businesses , both private and public. This attitude extends to refusal to accept majority decisions and accepted parl imentary procedures. One must describe Mrs. Sutton as -having a psychological make-up which j cannot consider or accept any opinion or view which is in conflict with j her own. The options available to the voters of� the PUD are obvious : A. They must replace- Mrs. Sutton and-her supporters with Board members who have common views with the board majority and can work with it for the long term stability of the District. Comments: This would bring the quickest solution to the present crisis and with proper attention to management principles create long term efficiency and stability to the District. B. They must replace the majority with Board members who support Mrs. Sutton's views. Comments: Both short and long term stability would be questionable since many radical changes in management and personnel would be made. C. They can replace the entire Board with Board members who are responsive to the requirements of the PUD. Comments: This would not create short-term stability but with proper management would create long-term stability. Experience is very valuable to utility operations. Page 4, October 19, 1976 The consultant recommends Option A to the voters of Truckee-Donner PUD." Mrs. Sutton asked that the record show "that I just don't think that he really recognized the complexity of the problems that the District, the Manager and the Board are involved in. " Mrs. Sutton asked that her rebuttal to the Management Audit dated October 18, 1976, be attached to the minutes of this meeting. Mrs. Sutton-stated that she would like to review for the record "some of the things that the long standing stability produced and that have been confirmed since I have served on the Board:" hiring and sustaining poorly qualified management level employees ; management ineptness and Board apathy which allowed manipulation by developers and their agents ; contracts which were not in the best interests of the District which resulted from the Board not requiring adequate advice from qualified professionals; contracts which were not honored by the District in some cases or by the other party, usually resulting in financial losses, utility system deficiencies, or legal liabilities• use of money from the sale of District capital assets to pay operating expenses; y poor bookkeeping and accounting practices not in compliance with Federal Power Commission requirements and which could not indicate the District's financial condition; 4 poor fiscal management, lack of financial planning; no attempt at budgetary control ; poor or non-existent record-keeping; I inept engineering practices, including the construction of a sub-station with REA loan funds which does not. coordinate with the rest of the system; unqualified inspection of 75 miles of water lines in a major subdivision resulting in financia_ l- -liability; ill-advised attempt to construct el ectri-c lines in major subdivision with district maintenance and operation personnel resultingin major financial liability for the District until resolved J through renegotiated contract with developer in 19 74; violations of State code requirements to bid for materials and work; ill-advised policy allowing retroactive sick-leave payoffs to three ' F former management employees at a cost of $13,000 or more; Financial audits of doubtful validity; State Attorney-General ' s suit against the District resulti-ng from illegal { constructs on. of Donner Lake Intake allowed by the District; She also asked that the record note "that the incident that is referred to on page 18 having to do with a confrontation with 9 the General Manager must have been totally represented to the consultant." r Mrs. Sutton further commented on the Managements udit report. POSSIBLE ACTIO N ON TWO YEAR WORK PLAN BY R.W. BECK AND ASSOCIATES Director Craig moved that the Board have R.W. Beck and Associates prepare a two year work plan as outlined in the letter dated September 241, 1976, from R.W. Beck and Associates. Seconded by Mrs. Sutton. ALL AYE BY VOICE VOTE. SO ORDERED. APPROVAL OF AGREEMENT WITH MANAGEMENT CONSULTANT FOR INTERIM SERVICES The Board discussed the final form of the District's agreement with } Mr. Morey for interim services. Mrs. Sutton moved that the President of the Board and Steve Grumer be authorized to sign this agreement which is a contract for consulting services with Daven Morey. Seconded by Director Christensen. ALL AYE BY VOICE VOTE. SO ORDERED. s Page 5, October 19, 1976 i i i ry , t 1 MISCELLANEOUS OLD BUSINESS Director SUtton requested a report as to whether or not the relocation of the main line involved with the Donner Pines West Condominiums is in fact in the District's easement. DISPOSITION OF RECORDS OVER TEN YEARS OLD Mr. Grumer requested more information on specifically what records the District would like to dispose of and indicated he would report back to the Board on November 16th. MISCELLANEOUS NEW BUSINESS Director Craig requested that an item entitled "Possible Action on Recall Election" be placed on the Special Meeting agenda of October 28, 1976. LETTER DATED SPETEMBER 21 19769 FROM BUREAU OF RECLAMATION RE STAMPEDE DAM This letter is attached to the minutes of this meeting-. 7-11 STORE WATER This matter was tabled to the next regular Board meeting. VAN WETTER WATER AGREEMENT Mr. Grumer reported to the' Board on his progress in this matter todate. No action was taken. RALPHS LAND EXCHANGE AND REPORT ON SURPLUS LAND Following discussion of these matters, Director, Craig moved that the Board disengage Noble Murray and that Mr. Morey locate another MIA appraiser. Seconded by Director Sutton. ALL AYE BY VOICE VOTE. SO ORDERED. DELINQUENT BOND MATTER Mr. Grumer briefly discussed with the Soar.d. a form demand letter which would be uti 1 i zi ed in delinquent bond matters before foreclosure proceedings are instituted pursuant to Resolution 7617. EXPLANATION OF DISTRICT COUNSEL'S BILL RE WRIT OF MANDATE HEARING ON SUTTON RECALL A copy of Mr. Grumer's September 30th letter is attached to these minutes. MISCELLANEOUS DISTRICT COUNSEL Mr. Grumer discussed with the Board a proposed Hold Harmless Agreement from R.W. Beck. This matter was placed on the agenda for the next regular Board meeting. Director Christensen moved that the Board direct R.W. Beck to revise �.., the General Rules and Regulations as a part of the rate study. Seconded by Director Waters. ALL AYE BY VOICE VOTE. SO ORDERED. .� An executive session was called for 10/21/76 at 7:00 P.M. for review of District Counsel . TAHOE NATIONAL BANK ACCOUNT CHANGE Following discussion Director Waters moved that the District keep their present accounts at the Bank of America. Seconded by Director Christensen. ROLL CALL: Waters, aye; Sutton, aye; Craig, abstain; Christensen,, aye; Anderson, abstain; SO ORDERED. Mrs. Sutton asked that the record show "that I believe that a bank is not an individual but an institution and that policy decisions by the I Page 6, October 19, 1976 ,y. Board ought to be basedon that. Mr. Morey explained to the Board that the bookkeeper would like to have the General Fund account and the payroll account as two separate accounts. It was agreed that Mr. Morey would determine whether or not this was possible. Mr. Morey also briefly discussed with the Board taking proposals for the 1976 Audit Report. No action was taken at this time. Director Craig moved that the meeting adjourn. Seconded by Director Christensen. ALL AYE BY VOICE VOTE. SO ORDERED. The Chairman adjourned the meeting at 11 :07 P.M. TRUCKEE-DONNER PUBLIC UTILITY DISTRICT By M. Rex An a on, President of the Board I f ane 0. Reed, Secretary i i i I t I I i i 't { I i I I I Page 7, October 19, 1976 i i I i TRUCKEE DONNER PUBLIC UTILITY DISTRICT - STATEMENT OF GENERAL FUND OCTOBER 159 1976 Bank Balance $501,408.94 Truckee Electric Revenue 529408.27 Truckee Water Revenue 45304.05 Donner Lake Electric 249841 .00 Tahoe Donner Water Revenue 29054.50 Miscellaneous Billings Revenue 6,203.95 Miscellaneous Revenue 31423.65 $143 9644.36 Approved Bi 11 i ngs $50 9363.11 Department of Benefit Payments - State Disability & Unemployment Insurance 927.07 Social Security - Quarterly deposit 69641 .78 State Comp. Insurance Fund - Quarterly deposit 1 9570.45 State Board of Equalization - Franchise Tax Quarterly deposit 347.82 U.S. Post Office - poastage 400.00 Pam Farrell - refund of credit balance on closed account 5.48 A & N Construction - refund of overpayment 3.00 ($60,258.71 ) i _ } Bank Balance October 15, 1976 $832385.65 i Bills for Board Approval : American Computer Supplies Office Supplies $ 6.21 Arnett Testing Lab Blanket testing 10.57 j Steven Grumer Legal Services 1 9203.88 Daven Morey Management Consulting fees th ru 10/15/76 2,750.00 NCR Standby cards punched 708.00 O'Hair Supply Water parts 580.03 Sierra Pacific Power Co. Donner Lake note reduc- tion 95213.00 Sept. El ectri c usage- balance $32,500.00 659704.60 George Wahn Transformers 1 ,518.00 Whcoff Company Crossarms 19305.00 ($829999.29) Bank Balance after payment of above $ 386.36 I 1 1 I t 15 10r - 76 i / / ! i I t F i e REPORT OF A MANAGEMENT AUDIT . FOR TRUCKEE--DONNER •PUD r TRUCKEE, CALIFORNIA BY ERVIN R. BAKER SENIOR MANAGEMENT CONSULTANT NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION 2000 FLORIDA AVENUE, N. W. WASHINGTON, D. C. 20009 OCTOBER, .1976 h l 1 I. BACKGROUND The Truckee Donner Public Utility District has retained' the National Rural Electric -Cooperative Association to perform a management study for the PUD to assist it in working out many presently nearly insolvable management problems. While TD.-PUD is not a member of NRECA, NRECA's policy is to assist small consumer owned .public utilities in solving their management problems and any other problems which fall within the providence of NRECA. NRECA is a national association of electric cooperatives which encompasses about 95% of all the REA borrowers in the United States. NRECA furnishes a wide variety of services to its members including legislative assistance, publications information, group insurance, and management services. It is under the latter that NRECA has assigned a management consultant to TD PUD to perform the management services necessary and to provide a brief report to assist the PUD in solving its management problems. TD PUD is a public utility district incorporated under the laws of the state of California located in Truckee, California, and has operated for 50 years since its organization in 1927. The utility furnishes electric power and water services to approximately 3,000 consumers who are located in the Truckee-Donner Public Utility District, a district which comprises approximately 44 square miles, lying -approximately east and west along an area north of Lake Tahoe, commonly called the Truckee Meadows. The so called "management" of TD PUD is comprised of a board of directors numbering five members who are elected by the registered voters in the PUD, and a professional general manager who is retained by the board of directors to administer the system. e • -2 t s II. THE MANAGEMENT AUDIT The purpose of a management audit is to examine the operation of a business from the standpoint of generally accepted management practices and principles. A management audit has some similiarities to the financial audit which publicly.held businesses regularly conduct. The financial audit examines the financial operations and practices of the business in light of accepted accounting principles. These principles have been developed to protect the interests of the owners of the business. The audit provides for an objective outside examination of the financial practices and for the recom- mendation of changes which should be made in accounting and operational practices to protect the financial interests of the owners. The management audit has a much broader focus than the financial audit. It is an accepted fact that a business can be well run from the standpoint of financial practices and can still be poorly managed from. the standpoint of overall objectives of the business. The management audit, then, attempts to examine the management practices through which the work of the business is conducted. The analysis of these practices is made in relation to the purpose or objective of the business. Recommendations are made, if needed, which can help improve the effectiveness of the operation of the business. An increasing number of American businesses have found that having a manage- ment audit of their operations is good business. - The people who are closely tied to the business are rarely in a position to take the objective look at the operation of the business that is necessary to keep from developing patterns of conformity to old practices. The use of an outside consultant who can take an objective view about operational practices helps those people inside the organization examine their own activities more objectively. The old adage of "not being able to see the forest for the trees' often has great relevency for the people who are concerned with the day to day operation _3_ of a cooperative. Hence, it can be very good business to provi de de for a periodic outside analysis of the operational practices and management activities of the cooperative. A management audit focuses quite heavily on the people aspects of the operation of the business and the internal and external relationships which exist to make the operation of the business successful. t I i -4- .A. The Purpose(s) of the Board of Directors 1. Survival. It is incumbent upon the members of the board to assure the survival of the PUD, since it is inherent in their offering themselves for election and being so elected by the voting public, that survival is one of the principal purposes of this position. 2. Direction. The Board of Directors determines the direction in which the PUD should move, and provides the necessary resources and overall support to furnish this direction. 3. Balance. The Board of Directors provides the balance which is inherent in the PUD. In this respect, it balances the interests .of the owner vs. consumer relationship of the persons in the PUD, the public responsibility that -is inherent in the organization; the responsibility to employees and so forth. B. The purposes of having a rofessional general manager 1. To serve as chief administrative officer to manage the day-to-day operations of the district. 2. To serve as a chief of staff to the board of directors, and in this capacity to coordinate the activities of outside consultants, to advise and assist the board in the selection and use of consultants, and other activities which are incumbent upon a chief of staff type of operation. -5- IV. MANAGEMENT ANALYSIS' The management systems of the small consumer owned utilities lend themselves for analysis according to the functions of management. The functions of management have been widely used for management analysis by Koontz and O'Donnell some 25 years ago and various other authorities throughout the succeeding years. A. Board of Directors In a consumer owned utility management system, the NRECA management system has developed five functions for Boards of Directors. The functions are those of: (1) planning, (2) legal function, (3) trustee function, (4) requirements and resource functions, and (5) control functions. The consultant will analyze the management system of Truckee Donner public utility according to the above listed functions. 1. Planning r Planning is a function jointly shared by professional managers in the management system. It is apparent that the board of TD PUD has never really addressed itself to planning on a long range basis. The Board has more or less responded to circumstances which have developed and opportunities which have been presented. Planning is the most valuable and the most important of all the functions. All of the functions of management are dependent upon planning, The board should analyze its planning function in view of a recent statement by Donald Cook, recently retired chief executive officer of the American Electric Power System, that anybody who is not planning 20 years in advance is not in the utility business. While the consultant does not agree that all boards have to be planning 20 years in advance, this Board must plan more than a year or two in advance in order to exercise control over its purposes, its existence. The Board should remember that planning is a joint venture with its professional management and should- operate within this context. 2. Legal Function The board is responsible for the legal aspects of the PUD. This includes, but is not limited to, retaining the legal integrity of the district, defending all lawsuits brought against the district, initiating lawsuits, and is responsible for all legal activities within the context of this function. Generally, the legal function is not considered to be a responsibility of the professional manager unless it is within his responsibility as chief of staff to the board, or if he has some personal responsibility involved. I. Trustee Function The board is the trustee on behalf of the owners of the PUD which include all registered voters within the PUD. Under this function L i the board serves as a fiduciary of the assets of the PUD for its owners and any other types of trusteeships that arise. It is incumbent upon the members of the board to perform this function on behalf of the owners, that is, the registered voters of the PUD. 4. Requirements and Resources Function The board is responsible for providing the resources to conduct- the business and objectives of the PUD. Generally, these take the form of revenues or borrowed funds- in order to perform the various functions which require time, men, equipment, materials and so forth. It is the board's responsibility to provide these resources and to see that they are adequate for the objectives of the PUD. S. Control Function This is the review function of the actions and operations of the PUD, the measurement of results obtained against objectives set s --7- i forth in the beginning, and the necessary allocation of resources or realignment_ of activities which may be necessary in order to achieve the objective which the board has set. Following is an analysis of the performance of the TD PUD board against the above definitions of the functions 1. Planning It is apparent that the board of TD PUD has never really addressed itself to planning on a long range basis. The board has more or less responded to circumstances which have developed and opportunities which have been presented. 2. Legal Function It is the opinion of the consultant that the board is generally performing the legal functions well. The board has retained an outstanding legal counsel who is in a.position to advise the board on ' legal responsibilities and the techniques whit P q which .must be followed in order for the legal function to be fulfilled. It is suggested that the board request the legal counsel to make a legal audit of the PUD and to point out to the board the areas in which corrective action should be taken. 3. Trustee Function It is doubtful that the board has fulfilled its trustee function completely. One of the requirements of the trustee function is to utilize the resources of the district in order to fulfill its obli- gations. There is some reason to believe that these resources have not been utilized in this fashion. However, it is not implied that the board could be accused of dissipating the resources of the district. 4. Requirements and Resources Function The board-of TD PUD has failed to adequately invest the revenues from its two utility operations to provide all the requirements of the district.* The district operated at a deficit in 1975 due to ' failure by the board to apply a recapture of the fuel adjustment charge made to Sierra Pacific at that time. This has since been corrected. However, such actions as this should not recur, and the board should make every effort to provide all the resources which the district requires to reach its objectives. 5. Control Function The board is getting into details of control which are not necessary in this type of a utility management .system. This is due in part to a belief of some board members that separate individuals must exercise the control functions. Generally, this is not considered to be the best way to fulfill that function.. However, it will be impossible for the board to improve its performance of the control function as long as the planning function is not improved. The consultant feels that it would be of value to .the PUD to analyze its operations in a few Key Performance Areas. The term, Key Per- formance Areas, refers to a system of management analysis developed in the early 1950`s by Peter F. Drucker, one of the most prominent management consultants of the century, the General Electric Company and various management analysts. The Key Performance Areas as they apply to a consumer owned utility system are as follows: a. Financial Condition has at least four basic elements: (1) cash flow (ability to meet financial obligations on a timely basis; (2) the capital requirements and the sources of this capital; (3) the development of equity and treatment of equity; and (4) the return on liquid assets. _9- TD PUD should develop a comprehensive financial plan, something which has never been done in its history. There is no evidence that *the financial aspects of cash flow have been properly addressed until very recently. There is no plan for raising future capital. The levels of equity and the treatment of ,equity have not been adequately analyzed. It is not certain whether the district is obtaining maximum return on liquid assets which. should be integrated into the cash flow system,, b. Wholesale Power Supply has three elements: (1) availability; (2) cost; and (3) quality as measured by addage and voltage- regulation This PUD, since the beginning, has been at the mercy of the power supplier of an investor owned utility. While this was probably the best that could be achieved in the early days, the district has passed up several opportunities to take advantage of less expensive, more dependable power supply. It has only been within the last year or so that there is any evidence that the district has addressed itself to investigation of alternate power suppliers. The present situation with the wholesale power supplier places the PUD in a position of buying wholesale power from the same -utility with which it is competing at retail. In the present day electric utility industry there is no way to win in this situation. c. Utility Services. The district appears to be doing a respectable job in this key performance area, that is, providing electric and water services to its consumers on a reliable bpsis. Within the last .few years, costs have increased substantially but this is common in the utility business, particularly when the supply of electricity and water is in the relative position of TD PUD. -10- d. Utility. Marketing (Load Management. This is primarily directed at the electric side of the PUD. Most electric systems are going to types of load management to improve their annual load factor and essentially save money on demand costs. It is imperative that the district start investigating this type of marketing and management activity. It could probably be adapted to water operation as well, and this should be discussed with the water system engineering group. e. Employee Relations Training and Development. The district seems to have a good relationship with its employees, and the employees seem to receive adequate training in order to perform their jobs. However, this is a continuing program and should be incumbent upon the management of the district to see that training and j development of employees, with the resultant improvement in relationships within the district be a continuing program. f. Public-Community-Consumer Relations. The district does not have a continuing program of Public----Community-Consumer relations. t is +imperative_that the district tell-ifs story to the public, the _ community and its consumers. :"-Almost everyone interviewed by the _ consultant was of the^ opinion that* one of the principal problems --_._f acing the district is the high cost of electric -and water service. This is partly due to _lack of.explanation^and communications with those concerned. It is also necessary that the district fulfill its obligations to the general public and to the community in t order to enhance its image in this respect. g. Internal Board'.Operation and Development. It is within this key performance area that the district has perhaps the most difficult problem. The board has been divided on a 3-2 basis T t k for some time with a switch in the 3-2 relationship occuring at the last election. While the board has an understanding that it will -operate by Robert's Rules of Order, the present minority of the board refuses to abide by the majority decision and takes its case to the public in various ways. It is interesting to note that this did not occur with the previous minority. The general consensus of all members of the board, and all other persons interviewed, is that board meetings of the public utility district are, in effect, a "shambles." Board meetings which should last approximately 2 or 3 hours go for 5 to S hours. (The board gets into detail with which it should never concern itself. There are charges, counter--charges and so forth.) In effect, this is the overriding problem of the management of _ this public utility district. As the consultant sees it, the . problem will not be resolved until one or. the other faction is removed by recall action, such as those which are pending. It is incumbent upon the registered voters of this public utility district to resolve this problem and to constitute a board which will be responsive to its needs, and which will operate' the'district in an efficient and. responsive manner. h. The Board-Manager Relationship. This is a very special and sensitive relationship in the management of consumer owned utilities. While the manager is not a voting member of the board, he is chief of staff to the board, and he is the chief adminis- trative. officer of the utility. These are very narrowly drawn relationships and must be understood by everyone concerned. In the case at TD PUD, these relationships, apparently, are not understood, and the relationships are affecting the efficient operation of the utility. The manager reports that he has had -1� difficulty with individual members of the board since he wa s hired. (The symptom of the breakdown in relationships is apparent in the request by certain board members for detailed information of the manager on a personal basis.) The manager should only furnish information to the board based upon p board action if it is outside his normal re porting routine. This key performance area is so closely associated with the internal board operation key performance area that they are impossible to separate. The consultant feels that as long as the present difference in philosophy and personal inter-relationships exist nothing constructive can take place to further the interests and objectives of the PUD. Only when the registered voters of the district resolve these conflicts can any relief be seen. However, through the development of and strict adherence to rules of operation of the board meeting some relief can' be obtained pending the recall election. The consultant recommends that the board address itself to this question with the assistance of its legal counsel and perhaps the help of an outside management consultant to bring the situation under control. The board meetings themselves and the relationship between the board and the general manager is one that makes it impossible for effective management and operation of the district. � i T -13-- B. The functions of the general manager are somewhat different than the functions of the board. They are generally considered to be planning, organizing, directing, coordinating and controlling. Following is a list and analysis of these functions as they apply to the general manager at TD PUD. ` 1. Planning The manager is providing a leadership role to the board in planning of power supply and financial condition. It is incumbent upon both the general manager and the board to work together and . . develop a work plan and budget and other types and techniques of planning in order to give the direction to the district required. 2. Organizing The manager has been extremely limited in the organizing function which -inrludes the structure and staffing and administration for matters which relate to employees of the District. While. an organization study was not a part of this management analysis, it is obvious that the manager requires some assistance at -this level. It is recommended that the board authorize an organization study of the district by a consultant when the board situation resolves itself and the district can settle down to its more important activities. 3. Directing This is a function of management where the chief administartive officer, as such, issues directives and assigns work on a day to day or week to week basis. The manager is doing this effectively even in the absence of an operating superintendent, which the District has had in prior years. -14- 4. Coordinating The Coordination function of the general manager is one in which he puts together in a time frame the personnel and materials, equipment and other elements which are required to accomplish a given task. In the opinion of the employees, this seems to be going well, doubt- less it could be improved with the addition of supervisory personnel. 5. Controlling The manager shares this with the board and develops a control system with reports to the board on the results of various activities which the board has authorized and he has supervised within the guidelines of board policy. Control may be also interpreted to include internal procedures which .,may* not be -a .concern of the. board in this type of an organization. i • �V. RECOMMENDATIONS OF THE CONSULTANT 1. It is obvious to the consultant that this public utility district can -improve its management system. In order to develop an effective manage- ment system it must develop the district's viewpoints (philosophy) as they apply to the PUD's operation. ` 2. The district must develop a set of bylaws to guide it in its operation, 3. The district must develop its objectives in order that it will have a clear idea of what it is trying to accomplish through its operation of the PUD. 4. The utility must develop sets of policies which permit it to function without having to decide on each individual aspect of the operation each time it occurs. It is impossible for a board to function effectively under these conditions. 5. The board must develop its own rules and regulations concerning. g the 'way . it operates. This includes but is not limited to the development of its agenda, the manner in which issues will be discussed, . the manner in which decisions will be reached, the manner in which minutes will be written, follow-up procedures, etc. It is obvious that this may not be possible under the present wide differences of philosophy and objectives that exist upon the board at the present time. However, the board should start planning to implement these recommendations and it's apparent that -the board needs some outside management assistance. The board should also agree that it will let the general manager serve as its chief of staff as concerns its outside consultants and to coordinate and implement the use of these consultants on behalf of the board. Again, it is probably impossible for the board to accomplish this under the present system of circumstances which exist. However, it is imperative that this type --16 a of management system be developed in order that the Truckee Donner Public Utilities District may function effectively and efficiently in these very difficult times. It should be remembered that many small .consumer owned utilities have pretty much run themselves over the last 40-50 years. However, in` the economic environment which exists today, this is no longer possible. Since the registered voters of the district are the owners and have the ultimate control and receive the services it is incumbent upon them to see that the board is constituted to be responsive to their needs which , will function efficiently, which will provide decisive action and in the long run which will create an organization that will be permanent and give service to the district at the lowest possible cost in the ensuing years. 6. The district should have a statistical analysis of its historical operations made and -presented to the board in such a way that it can use it to review its history and to project its future. The data exists for this to be done;it would require a few days of consulting time to furnish this type of an analysis. 7. It is the consensus of most people that were interviewed that one of the objectives of the minority on the board is to effect a sellout of this property to the Sierra Pacific Power Company. This may or may not be an objective of these board members. However, the consultant feels that it is within his province to make a recommendation to the voters of this community concerning this matter. With a background of 25 years in the utility business, I have never seen a situation where it was to the benefit of the recipients of service of a consumer owned utility to sell it out to a profit oriented company. Many times a profit oriented company is in a position where it can take losses in one section of its service N -17- 1 r 1 territory and make them up in another which is an option which is not open to a small utility operation. This is a technique which has been used many times for a profit oriented utility to buy out -the facilities of a consum er owned utility. While it is true that many consumer owned utilities today are so small in the scope of their operations that- it is difficult to operate economically in the opinion of the consultant this is not true in --the case of Truckee Donner Public Utility District. This is a valuable property to all the people in the community and particularly to the consumers. It would be far more beneficial in the long run for the voters who have control of this utility to correct the problems that g exist in its management than to sell it out to an investor - owned utility who will have to add the cost into its rate base and consequently pass t8 hat cost aloe to the consumers ultimately. There is no justification- for ap ub1ic utilitydistrict which does not" fulf ill a function. However, those functions can only be fulfilled with a background of competent management and this can be developed in the situation that involves the Truckee Donner Public Utility District. -18- VI. SPECIAL SUMMARY OF CURRENT CRISES Even though TD PUD has some management problems the present crises are -more of a political, personality and psychological nature and that is where the short term solutions must be found. The long-standing stability of the Board has been disturbed by the election of Mrs. Sutton. During the time when she and her supporters were in the majority the Board stability remained basically intact because the minority accepted the decisions of the majority even though they did not agree with them. It is significant that during this time when Mrs. Sutton was a member of the majority on the Board that she had a confrontation with the General Manager over a relatively minor administrative matter. She'reportedly advised him at that time that she would oppose everything that he advocated , in the future. ' She has certainly fulfilled that commitment. When one of Mrs. Sutton's supporters was replaced on the Board and she became • a member of the Board minority she refused to accept the decisions of the present majority. Rather than confine her opposition to formal Board meetings and accept the principle of majority decisions she has resorted to carrying r3' g her opposition to the public through the media and any other vehicle she can muster. She has also used harrassment and other obstructionist tactics with the Board and staff to try to achieve her ends. She, apparently, refuses to accept the standard practices and procedures for operating businesses, both private and public. This attitude extends to refusal to accept majority decisions and accepted parlimentary procedures. One must describe Mrs. Sutton as having a psychological make-up which cannot consider or accept any opinion or view which is in conflict with her own. i _19- i The options available to the voters of the PUD are obvious: A. They must replace Mrs. Sutton and her supporters with Board Members who have common views with the board majority and can work with it- for the long term stability of the District. Comments: This would bring the quickest solution to the present crisis and with proper attention to management principles create long term efficiency and stability to the District. B. They must replace the majority with Board Members who support Mrs. Sutton's views. Comments: Both short and long term stability would be questionable since many radical changes in management and personnel would be made. C. .-They can replace the entire Board with Board Members who are responsive to the requirements of the PUD. Comments: This would not create short-term stability but with proper management would create long-terra stability. Experience is very valuable to utility operations. , The consultant recommends option A to the voters of Truckee-Donner PUD.