NTUA officials defend rate hikes
By Kathy Helms, Diné Bureau

Related story: Public vents over rate increases

WINDOW ROCK—Scheduling only one public meeting three days before Navajo Tribal Utility Authority plans to implement a 7.2 percent "temporary surcharge" on electricity if approved by the board, was just one of many concerns raised during Wednesday's public hearing at the Adult Education Center.

In a letter Tuesday to Council Speaker Lawrence T. Morgan and delegates, Navajo Nation President Joe Shirley Jr. said he had talked to Ken Craig and Rex Kontz of NTUA about the possibilities of alleviating the surcharge.

"It does not sound very good. Either the 7.2 percent surcharge will be effected, beginning April 1, 2006, or action outside of NTUA needs to happen to help alleviate it, if not altogether do away with the surcharge," the president said.

"I have suggested possibly giving financial help to NTUA because I know we have done it with our other enterprises."

Shirley said he has suggested the Council earmark at least $1 million from the approximately $3 million in the Unreserved Undesignated Fund to help NTUA. He said the $1 million would help the enterprise through the end of June, when "possibly by then other opportunities to help NTUA might avail itself."

The president said NTUA needs at least $2.9 million to stay afloat for the rest of the year.

"If we can help NTUA, I know this will go a long way towards helping our people who have to pay for electricity, water, and sewage each month and at the same time help one of our enterprises stay afloat," he said.

"I'd like to see you share this proposal with all of our legislators to see if one or two can introduce legislation to make it happen. The legislation should be put before the Nation's Council sitting in their spring session as an emergency measure," the president said.

Going up ...

Derrick Watchman of NTUA told the crowd, "We all know that gasoline prices are going up. The electricity that we buy, that we resell to our customers is going up. A lot of electricity is produced by natural gas, coal those prices are going up. The cost of transferring the electricity through the wire is going up."

As a management board, he said, they need to make sure "that we don't have an enterprise that goes bankrupt, we don't have an enterprise that doesn't have enough capacity to meet its load."

Watchman said they constantly examine their bills to ensure they don't have an inflated cost structure. "We try to make sure that we buy the services as cheaply as possible. But like you have to purchase gasoline, we have to purchase gasoline; and when it goes up, it affects our cost.

"Today's proposal, and the board will make a decision soon, is to increase the electricity (rate) by 7.2 percent. I did see some concern a couple months ago when we raised the utility bills then. ... We had to increase the natural gas bill because the price of natural gas has gone up," Watchman said.

NTUA General Manager Kenneth Craig told the audience, "It's not fun when you raise and increase rates. In this particular case, it's partly because of the closure of Mohave Generating Station and with that, about 20 percent of the load that NTUA serves on the Navajo Nation. So it has a very great impact on NTUA."

He said the purpose of the meeting was to seek the approval of the temporary electric surcharge "so the revenues will equal or exceed operating expenses."

Any business course teaches, he said, "If you're going to have a business and it's going to succeed, your revenues need to exceed your expenses."

"We'll have a presentation by management recommending to the board that rates be adjusted by 7.2 percent to compensate NTUA for the lost revenue of the mining load and the pipeline load going away," Craig said.

Comments received Wednesday will be considered in the board's final decision. "A decision to go ahead with the rate adjustment has not been made," he assured the audience. "Management has recommended to the board; management has demonstrated to the public the need for this, and the board will have to make the decision sometime later."

April fools?

Craig said the staff's recommendation is that NTUA implement the surcharge starting the first day of April, which would appear on customers' bills in May.

"NTUA has not gone into the idea that all we have to do when we get short of money is raise our rates," he said. "Since 1992 we have not raised electrical rates. And there's many reasons why that has been possible. Part of it is NTUA has been able to market itself to other large industrial customers, postponing the need for a rate increase."

NTUA also bought Continental Divide Electric where it resides on the reservation. This has brought in more revenue and extended the time for another rate adjustment, he said. NTUA also has reduced staff, including cutting the number of managers at headquarters from eight to four.

"That's where the staff reduction started. In 1997 NTUA had 123 customers for each employee. If we had maintained that ratio, NTUA would have about 800 employees right now to serve the requirements. We have 511 employees," according to Craig.

All managers use their own automobiles and are paid mileage. As it was set up originally, they were paid mileage for using their own vehicle, plus a stipend each month for fixed costs on the vehicle. Even with the stipend, he said, that saved NTUA about $30,000 a year in vehicle costs.

"Managers gave up their stipends voluntarily at the last meeting. That saved another $36,000 a year," Craig said. "So existing managers, out of their pocket, are trying to do what they can to set the example for other NTUA employees.

"There are many things like that we have done over the past six to eight years that has reduced the costs of doing business and forestalled the need for a rate adjustment," he said, adding that the 7.2 percent proposed adjustment is actually 3 percent to 4 percent less than NTUA initially thought it was going to be.

"So NTUA has done some things budgetwise to try to address part of the needed revenue in ways other than raising your rates," he said.

The closure of Black Mesa Mine requires NTUA to implement measures necessary to maintain the financial integrity of the electric utility, according to presenters.

"In order to mitigate this risk, it is crucial to implement a temporary electric surcharge to recover the financial loss. The Black Mesa Mine was the sole provider of coal for the Mohave Generating Station. The closure of the mine has brought with it tremendous impact," presenters said.

NTUA said the closure will result in a $2.8 million financial shortfall annually. "The temporary surcharge will pay for the electric financial shortfall until the mine resumes operation," Craig said.