Blog Archive

Monday, December 18, 2017

December 21, 2017 Board Meeting

DECEMBER 21, 2017 - 6:00 pm

TO:                       Members of Glasgow Electric Plant Board                 
FROM:                  William J. Ray, PE                 
DATE:                  12/15/2017  
SUBJECT:            Board Meeting Information                                          

We’ve reached the end of another year that has included many accomplishments, as well as a big helping of frustrations. Everyone on the EPB team is reflecting on a year in which we completed big projects on behalf of our customers, and tentatively looking forward to some years of great change rolling our way due to upcoming retirements, and continued turmoil in the electric power and broadband industries. None of us is likely to lament the passing of 2017, but we also have some fear of the ghost of Christmas future! 

We still have the controversial cable television issue of parting ways with our old friends – WSMV, WTVF, and WHAS on December 31, and none of us looks forward to that, even though it is a result of the greed of the broadcasters, which we have no way to blunt other than ending our relationship with them. These are the things that negatively impact the holiday spirit of my team, and I repeat my request that, if and when you get a chance to do so, please take a minute to tell any EPB team member that you see that you are proud of them. They could really use the encouragement right now.   

The meeting will be a bit long, so try to grab a snack before you arrive. Now, let’s move on to this month’s agenda!

January 1 FCA
As we enter the third year of our new retail rate designs, January 1 will bring us another small decrease in overall power cost due to a small decrease in the FCA. Since energy sales have been off slightly, compared to what TVA anticipated, and since hydro capacity has been higher than projected, fuel costs were lower, and that is the root cause of the smallish FCA decrease. The January 2017 FCA is going to decrease about 0.7% to 1.812 cents per kWh. As usual, I am attaching the narrative on the FCA from the TVA portal. On January 1, the energy component of our retail rates will be adjusted to reflect this decrease to the wholesale cost of energy.
Pole Bids

At the meeting, I will have a summary of the bids and a recommendation for purchases for your consideration.

Programming Committee Member Replacements/Actions/Rates
The terms of Terrell Alexander and Beverly Vance expire at the end of January. Terrell is finishing his first full term. Beverly was appointed to fill the unexpired term of Janice Crenshaw, so she hasn’t served two full terms yet. The board has been limiting these appointments to two full terms, so you have some options, and, of course, the two full terms limitation is one previous boards have created and can be modified. Both of these folks have been great members of the committee, but you should be pondering their replacement, or reappointment, between now and the board meeting in January.

Joint Pole Use Agreement with Kentucky Wired
Over the last five years we have had on-again and off-again conversations with the Commonwealth of Kentucky regarding former Governor Beshear’s plan to build a fiber network throughout the state. During those years, our state government threw tons of money at consultants to help them figure out how to design and construct a network capable of connecting all state agencies, schools, libraries, and local governments. The goal is to serve government with government-owned facilities so as to save money compared to the fees presently charged by AT&T, Windstream, and the like, for these connections.

It is not my place to critique this plan. It has been my place to negotiate an acceptable agreement with the Commonwealth to allow them to access their targeted locations in Glasgow by using the poles we own. It is that which brings this item to the agenda for the upcoming meeting. After countless hours of discussion among EPB, City of Glasgow, and the Commonwealth, we have finally produced a proposed agreement which will allow the construction of the Kentucky Wired network to proceed in our territory. A copy of that agreement is attached for your review. I will suggest that you approve this agreement at the meeting so we can get it executed by both parties and out of our hair.

Progress on Advisory Council Recommendations
Since you all have already been provided a summary of the findings and recommendations of the Council, I won’t repeat all here in their entirety, but will use shorter summary terms for each item. The information presented here will be repeated and expounded upon at the meeting for your consideration.

            1. Tiered Customer Charge Based Upon Usage. This is the toughest one of the recommendations for us to make progress on, but we did discuss it enough to target a $5 reduction in the customer charge for the lowest usage “tier,” as recommended by the Advisory Council. I’m afraid that this decision has been misinterpreted by some as a promise to lower all customer charges by $5. The Council asked for a tiered customer charge with reduction for the lower kWh usage customers. That is the job we are working on as directed to my team at the August Board meeting. Additionally, TVA is going to start charging us a new wholesale customer charge, and since our present rate architecture collects all of the money we need to operate the grid from the customer charge, the base customer charge will have to cover this new expense. That is not even recognizing the possible $400,000 annual cost increase that Kentucky Retirement might saddle us with. A $5 credit would soften those increases and provide the gradualism, as we slowly reduce that credit over the next few years, but that credit will have to be funded by an increase somewhere else. Please remember, the EPB is a non-profit corporation which does not have the financial resources to simply reduce any charge without offsetting that reduction with an increase to another charge to balance the ledger. Our team will continue to develop the specifics of this recommendation and update you monthly on our progress with the goal to accomplish same as quickly as possible. At this point, we have made no new progress on this pending the rate review discussed below.

            2. Revisions to Variable Rate. The requested revisions have already been implemented, effective August 1. The council asked us to limit our peak predictions to a maximum of 4 days per month. Accepting that recommendation causes us to move away from the technically elegant architecture of the former infotricity rate, wherein everyone pays their pro-rata share of the monthly peak hour, no matter when it occurs. The new limitations we accepted create risk of paying TVA for a peak hour which is not properly predicted and shared among all customers. That risk is monetary and we must create a fund balance to use when those missed predictions occur, because TVA must be paid regardless of the accuracy of our predictions.

            3. Alternative Rate Considerations. This is one of the most unusual recommendations from the Council. The suggestion here is that we poll our customers (we assume just those actually using the Alternative Rate - TRS and TGSA1) to ascertain their interest in modifying the rate to introduce time-of-use elements to the rate. This feels odd because everyone we know that went to the Alternative Rate, did so because they sought the solace and simplicity of an old-style kWh rate with fixed kWh charges. Still, we agreed to pursue each of the recommendations, and we are presently sending out a letter to each customer on the TRS/TGSA1 rates to ask them for input on this question. Responses to the letter are coming in and we will have a summary for you in January.

            4. Improvement to RoundUp Product. The recommendation here was quite simple. We were asked to modify the product such that anyone interested in participating could choose a fixed amount to be automatically added to their monthly bill and then donated to Community Relief. The objective here seems to have been to gather more funds for the use of Community Relief, by increasing the amount donated by a participant beyond the sub-one dollar amount achieved by simple rounding up of the bill to the next highest even dollar. We found that the software could easily be adapted to do this and we have already accomplished this change. We still need to create marketing to better inform the customers of this change, and that is in process.

            5. Annual Rate Review. The recommendation was that we conduct an annual review of the effectiveness of all retail rates, and recommend changes based upon that review. This is a great suggestion that is already on-going. In January we will have a presentation on rate effectiveness based upon data from 2017 consumption and billing.

            6. Expand Education Initiatives. This recommendation is the one which surprised us the most. The Council recommended that we use multiple media outlets and create a speaker bureau which would allow us to provide energy usage and savings advice to a wide variety of meetings and groups throughout Glasgow. Honestly, we felt we were already doing that, and, a lot of the feedback we have been getting has been negative as many folks feel they do not need to be educated. However, since we accepted this recommendation, and since you instructed me to redouble our efforts to educate our customers, we are on the case. We have already conducted, two full blown educational sessions lead by Jeff Christian, a former director from Oak Ridge National Laboratory, and someone considered to be an expert in the energy efficiency field. The event was heavily advertised with special arrangements for transportation via city bus and individual transport for those with transportation needs. Mr. Christian did a fantastic job speaking at the two forums on August 31, however, less than 30 total customers attended. Other educational efforts will continue.

Bi-Annual Write Offs
It is again time for us to weigh the list of bad debts identified over the last six months and act to move them to the write-off portion of our ledger. The list of the customers who have taken our services, but failed to pay for them for the last six months will be sent out when it is final (as of the writing of this narrative, they are not complete). We will go over the details of how this year’s write-offs compare to the past at the meeting.

Newer members of the board might not even know what this is. Eleven years ago, a treasured member of the EPB team, Jama Young, passed away, leaving a great void. As a way to honor her and make sure that her spirit never passed, we created a foundation that is funded by voluntary contributions by members of the EPB team. No public money is involved in the RBG foundation.

RBG started off with a commitment to WKU and its Gatton Academy of Mathematics and Science, of $50,000 to name the community meeting room there after Jama. We met that commitment in three years, and since then we have been involved in many similar projects, including naming a room at Glasgow’s Boy and Girls Club building after another departed team member – Janice Crenshaw, sponsoring the STEAM laboratory at Red Cross Elementary, and making the Dolly Parton Imagination Library reality for Barren County children.

The following report is from our activities for 2017. I am very proud of my team’s work and its concern for others as evidenced by the record of RBG Foundation.

            For our Christmas project this year, the RBG Foundation sponsored students from the Glasgow and Barren County School systems.  Our goal was to help students at the middle and high school levels. 

We “adopted” 8 students from BCMS, Trojan Academy, and BCHS (7 boys and 1 girl).  We were given lists of clothing sizes, along with a wish list for each child.  Many of these kids needed coats, shoes, even underwear and socks.  We were able to buy all of the clothing they needed, as well as their wish list items.  When I first talked to resource center staff, they said these 8 stars had been waiting for a while.  They must have been waiting for us!

The money that was spent on Barren County students was matched in a donation to the school resource office at GHS.  Their resource person takes needy students shopping and buys what they need.  There was one student from GHS that had been sleeping on the floor.  The school found a bed for her, but part of our donation was going toward buying her sheets and bedding.

For $2900, we were able to make Christmas brighter for several students and families in this community.  What a blessing!

Of course, the RBG Foundation would welcome your participation if you are interested. Please call me if you want more details.

Recommendations and Superintendent’s Opinion on EPB Pay and Benefits Plan for 2018
Each December we face the task of balancing our need to compensate the EPB team fairly for their work on our behalf, against the backdrop of a fairly-stagnant local economy in which wages and benefits have remained low for several years. To accomplish this, we turn to a group of eleven peer utilities (even though those peers are usually doing less for their customers than our team, because, most of our peers do not offer the wide variety of services that we offer) and use their Journeyman Lineman pay as a guide for the annual update of our compensation plan.

I am proud of the way our team is walking our talk. Any visit with folks from any of our peers, large or small, will result in the realization that our folks are accomplishing things that are well ahead of what they are doing – or even thinking about. That reality must flavor our discussions of pay plan changes for 2018. If we want to continue to lead our industry and provide cutting edge solutions for our community, we must continue to invest in our human resources. They are equally important to our poles, conductors, and substations.

The 46 members of the EPB team were the men and women standing at the wall of the fort in 2016 and 2017 as we suffered unfair criticism for becoming the first utility in the nation to implement a near non-volumetric energy rate. They are battle weary, and bewildered that some in the community have attacked them for their efforts to help the community, but still they continue to accomplish our mission. Of course, we all know that 46 team members are not really enough to assure the accomplishment of our mission, but we don’t want them to know that! We have a time-tested, successful formula for compensating them and I am confident that we are doing the right thing this year when I recommend a return to our time-tested formula for valuing their service to the community.

With the maturing of our new rate architecture, we are confident that the revenue to fund these additional expenses will be there for us. We feel that many of the changes and investments you have allowed us to implement over the last few years have the potential to reduce our expenses and improve our economic stability. No matter what, we are going to need the trained professionals that make up the EPB team if we are going to carry out our mission, and continue to explore new worlds on behalf of our customers. This recommended pay plan should be seen as essential maintenance on the human plant which completes Glasgow’s grid.

With that explanation, we can get down to business on the 2018 pay plan review. When we queried the eleven other utilities we have been measuring ourselves against this year, we found the average wage for Journeyman Lineman is now $34.77 per hour. Our present rate is 3.9% behind this average. This difference is higher than usual, but a close review of the survey result reveals that a couple of our peers recognized the steep difference between their Journeyman Lineman rate and their peers was causing the loss of trained personnel, so they made a major pay adjustment. For those new to the Board, many years ago the Board made a finding which established the relative value of EPB jobs to the job of Journeyman Lineman. Since then we have continued to believe in those relationships such that we value all of our jobs in a fixed proportion to Journeyman Lineman. These relationships have been successfully utilized for many, many years and we still deem them fair, accurate, and equitable.

I am recommending a 2.9% increase for our hourly positions, which is below the level calculated from the survey. I think the full 3.9% produced by the survey is too abrupt, and when considered along with the CPI discussed below, the 2.9% I am recommending is more appropriate. While 2.9% is still considerable, our struggle to find the right employees as we enter a time of large numbers of experienced people leaving us, can only be won with our tradition of fair and equitable pay and benefits.

A pay matrix is applied to each position, and we will review these at the meeting. Each position is assigned a pay range, the median of which is calculated from the Journeyman Lineman pay discussed above, with a minimum, and maximum figure for each position. Progress through the range is based upon the merit review of each employee’s performance during the year. These ranges simply identify the range of salaries applicable to each job. Your approval of these ranges does not mean that everyone, or anyone, gets a salary change. It only keeps the value of the jobs current and gives us the boundaries for each person’s pay, depending on their performance.

As we have discussed over the past few months, we are also looking at significant  retirements within the near future, and a temporary increase in the overall payroll as we reclassify and hire new personnel to replace those individuals who will be leaving, is a reality.

In total, I am asking for a net $82,632 for compensation cost increases in 2018 (since we had a Line Foreman resign in 2017, our compensation costs for last year were dramatically reduced). This amount breaks down to $41,326 for merit increases during the year, $70,930 for hourly and apprentice wage increases, and a new net of $15,700 for projected increased costs associated with hiring and reclassifying folks to replace those planning to retire. These costs are offset by a $45,000 credit due to resignation this year, producing the $82,600 net.

As you know, we have a state approved apprentice lineman program which currently has two Apprentice Linemen enrolled. We also have three folks in a technician apprentice program. This apprentice class is essential for the EPB to meet its mission over the next couple of decades. We also plan on starting new apprentices this year.  All in, compensating this team as recommended in 2018 will generate a net increase in our payroll of about 3.0% over what we were approved to spend in 2017. But this does not tell the whole story. Our work at attracting the SET project has, so far, paid over $260,000 in our salary expenses as we charged out time to the project. This is something that benefitted us, even though no one directed us to attempt to gain this funding. This funding has already paid for about three years’ worth of our normal salary increases.

As another valuable resource to be used in considering this matter, we researched the CPI increase over the last year. According to the Bureau of Labor Statistics web site, the increase for CPI-W (all wage earners and clerical workers), US City Average, all Items was around 2.0% for the last 12 months. You can study this yourself by going to and looking at the data summarized on the graph. This information aligns closely to my recommended 2.9% adjustment recommendation for wage and salary adjustments for 2018. I will recommend that you approve the 2018 Pay Plan as it is presented here.
While we are discussing pay and benefits, it seems like a good time for a preliminary review of the EPB Wellness Plan that we implemented early in 2014. You may recall that we talked about this over a span of a couple of board meetings and finally implemented it in January 2014, at an estimated annual cost of $16,085. Roughly $6,000 each year, has been paid to Health Advocate to administer our plan, leaving about $10,000 for employee incentives to make health improvements. A payment of $200 is made to each employee who completes four campaign objectives during the year, one of which is submitting to a biometric screening. With a small work force and little personnel redundancy, keeping a healthy team is vital, and this Plan helps us with that objective. The 2017 effectiveness report is not yet available, but should be ready for the January meeting. I will give you the details then.

The last salary and benefits issue is your normal annual evaluation of my performance and my pay, which has not been done for 24 months. Although you normally ask me and the press to leave the room as you deliberate on this, I do not believe (and Jeff Herbert confirms this) that you can go into Executive Session just to consider my performance in private (obviously you can kick me out of the room whenever you wish).

For your information, and such that I might not have to answer this question again during the meeting, my salary is 106% of the proposed median for our Grade 1 range. A straightforward way to evaluate my worth is to use the same system that I use for everyone on the team. First, we conduct performance evaluations and reduce the performance to a number based on this system of performance levels:

            1.0       Performed consistently above majority of employees. Contributed well beyond normal job demand to Glasgow EPB’s success.
            2.0       More than meets the requirements for a competent experienced employee.
            3.0      Meets requirements for a competent experienced employee.
            4.0       Meets basic job requirements but below average for EPB personnel.
            5.0       Required more than minimum help from supervisor and others. Has potential to overcome deficiencies and shows willingness to do so.
            6.0       Performance as a whole was below basic requirements or was deficient in one or more major aspects. Employees at this level may be considered for remedial action, such as termination.

Once a numeric score is rendered, we use this merit matrix (provided below) to arrive at a recommended salary adjustment. One axis is the percentage of the median and the other axis is the numeric performance score. The point of intersection of those axes is the amount.

I am furnishing this just in case you want to streamline this process. You are in charge of this, and you can skip it all together if you wish.


Well, that ought to be more than enough to set your head to spinning for this month. Let me know if you have any questions before the meeting.