PUD's new general manager says utility is healthy and prospering
Lou Marzeles
News Editor
Winston Low brings power to the people. He did it back in south Texas, where he's from, and now, as general manger of Klickitat PUD, he wants to bring more power to the utility itself.
In a far-ranging interview, Low spoke of the utility's upcoming bond issue-an object of considerable and sometimes dark speculation around the county of late-as well as PUD's tumultuous audit process on its 2007 books and a discussion of the utility's projected growth.
His task has not been without controversy. Since he assumed his position in January, there has been significant restructuring of the utility. Some of it, to his sense, has gone wildly misunderstood. He's heard of some talk in the community about the changes he brought. In his soft Texas accent, he expresses concern for accuracy of information.
He begins with the exhaustive audit recently completed on the utility's books for 2007. PUD's accounting showed signs of something wrong with the process, and the state auditors, which normally would do a utility audit, were swamped.
"We went to the state auditors and asked for permission to bring in an outside auditor, and they gave it," Low says. "We went to Moss-Adams, and they did an audit on the utility for '07. An audit normally only takes three weeks. They're in and out, and you have your finished report in a month and a half, two months. This audit took over four months. It cost a lot of money and time to get it done. What Klickitat PUD got from the audit was an unqualified opinion, and that's what you want; that's a clean opinion. But that took four plus months for them to issue that. With my first visit with the auditors, they didn't think they were going to be able to issue an opinion, period."
Addressing the obvious question put to him, Low is quick to respond. "No money was embezzled," he says. "There was nothing wrong. It was just bad accounting. It took 32 adjusting entries. The adjusting entries were $50 million. But no money was missing."
So what was wrong? "They said they thought the department just got overwhelmed," Low responds. "They got so far behind that it became hard to catch up. If you don't balance your checkbook for 10 years and then you go to balance it, how hard do you think it's going to be? It could be difficult or it could be dead on. We got so far behind that it just kept compounding and compounding. And so there were some changes made. The person who was running that department is now in our generation department," though Low adds that this shift was more about putting the person, who clearly had value, into a more workable situation. "And we brought in two new people to help put that department where it needs to be," he says.
The audit process was uncomfortable for some in the accounting department. Apparently speculation ran high. Low feels the speculation was never based on the facts, though out of a sense of propriety for how the matter is discussed, he won't go into particulars.
"I can say that no one has been fired since I've been here," he says. "We've had one person retire and one person in the accounting department quit. The one person who quit left over the weekend and didn't tell anyone why."
Low is quick to acknowledge that practices in the accounting department were not what they should be. "The accounting department was a mess," he says. "There were a lot of findings that they had to have corrected. These findings were actually pointed out by Moss-Adams in 2007, at that time, and they were never done. The previous management never corrected these before. They were given all the points that needed to be done, and nothing was done with them."
Today, Low says, the accounting department is solidly on track and working with high diligence. As to the audit and talk of what it might "really" have meant, Low repeatedly emphasizes that neither he nor the utility have anything to hide. "The audit is public record," he points out. "Anyone can come in and ask for a copy of the audit, and one would be handed to you."
He adds that some speculation about the utility has arisen from the fact that, in the end, the 2007 audit came out as a good one; in light of that, some wonder why the need for reorganizational shifts and changes in the department. "But it took four months and 32 adjusting entries to get that good audit, so did you really have a good audit? You really didn't," he says.
Low emphasizes that there was never anything sinister going on at the PUD, no runaway agendas or carefully guarded secrecy. "There's nothing that they're hiding," he says. "The utility is not hiding anything. The utility can't hide anything; we have an outside auditor that's in there. I'll take the heat for whatever happened because I'm the current manager, but I wasn't even here during that time, back in '07. Did the audit put a lot of heartache in people who thought there was something going on? Yes, but I can tell you, nothing's going on."
Among the changes Low brought to the PUD, his reorganization of departments was another source of some confusion. When he arrived at the utility, he soon found that some departmental relationships were completely out of line with standard organizational structure common among almost all utility companies. "So some shifting occurred," he says. "The purchasing/procurement department had been under the operations department. Well, most of your purchasing is for operations; they're for your poles, your underground transformers, your overhead transformers, your wire-all of that is purchased. And when your purchasing is done by your operations department, which is over it, there's a little bit of a conflict there, because it's really all being used within your department."
Typically organizational flow charts for most utilities show that purchasing and procurement departments functionally belong under the accounting department. So Low did that here, shifting purchasing under accounting. "We moved that out from under operations and put it under the accounting department,' he says. "The person who was in charge of procurement basically just moved from under one department to another; he still does the same job."
A bumpier change came when the front office, where billing is done and long something of its own realm, was also moved under accounting. "All the billing goes out for your water, sewer, electric rates," Low says. "All that's done up in the front. Well, they weren't tied to accounting. But that's all your billing; that is accounting. That's all your revenue that comes in on a daily basis when people come in to pay their bill. That needed to go under the accounting department also, which should have been done years ago.
"So you have some people who've been here for a long time, and sometimes people think they're getting demoted. But they're not getting demoted; no one has gotten demoted except for one person who left the accounting department. But the people in the front office, the customer service supervisor, the human resources supervisor, they're still doing the same jobs. They didn't lose a penny."
The Roosevelt landfill project, where the PUD generates electricity from the landfill's methane gases, was also shifted. Formerly under the operations department, Low considered that an inaccurate placement. Operations has to do with making sure lights stay, what need to be rebuilt out in the field, checking on wastewater, and things of that nature. Roosevelt is all about generating power. Naturally enough to Low, it needed to be moved under the power generation department, and he made that change. All the reorganizing was organic to standard utility structure. "Those were just simple restructuring," he says of the changes.
Low turns to the upcoming issuing of bonds to raise funds for the PUD. "The bond issue is for a couple of different things," he says. "One is for the expansion. We've been using the utility's cash to pay for the expansion so far. Well, we don't have enough to finish our projects, and we've already been on the bond market before. So the bond issue is to help finish out this project."
Low points out that a utility normally projects out two to three years of capital expenditures, anticipating costs for new projects, ongoing development of existing ones, upgrades on equipment, and similar needs. For the current bond for Klickitat PUD, Low says the goal is between $50 and $60 million. But he significantly adds: "This isn't going to cause a rate increase for one consumer. All the numbers show that we will pay for this bond issue without it going out onto the rate payers. Even with Bonneville getting ready to hit us with a rate increase, right now the board is still talking that we're not looking at a rate increase. We're going to fund that out of the revenues that we have from our projects."
Low is aware that the issuing of bonds for a utility that is ostensibly financially sound looks a little-or a lot-strange to some people. "There's nothing funny with a bond issue," he states. "People might say, 'Well, why do you need $50 million?' Well, some of it is going to help finish paying for projects, because we've been paying for that with cash; and the rest of it is for future expansion.
"Bond issues cost quite a bit of money and take a long time to get going," he points out. "You have to go to the bond rating agencies; you have to hire bond councils; you have to hire financial advisors. We hired Barclay's to be out there with us on this one to be the marketer of the bond. You go out and issue bonds for a two- to three-year window, because you don't want to go out and say, 'Well, all we need is $10 million now to finish this project,' because in a year or two you'd be going back out and say you need another $10 or $20 million. That's the reason for the bond issue. There's nothing funny with it whatsoever. And the commissioners review every expenditure; they look at every check that's paid. They're doing their job."
Klickitat PUD is, on the whole, on sound financial footing, Low indicates, which allows the utility to keep its rates to consumers lower. While all the utility's power to supply the needs of its consumers is presently purchased from Bonneville Power, the PUD does bring some of its own resources into the load. Those include the McNary Dam and the White Creek wind farm; the latter is partially owned by the PUD. "White Creek was one of the first big wind farms," Low says. "Klickitat PUD and Cowitz are in there with some other partners, and being the two PUDs in there, it's the largest public wind project in the county. We just won an award for it. All of that power is sold out on the market, because we get a premium price; we make more money off selling it on the market than bringing it into our portfolio at this time."
The same is true with power generated from the landfill. A major expansion at Roosevelt is presently under way, with completion projected for June of next year. That expansion, now being paid for out of the utility's cash, is a major reason behind the bond issue. The landfill, Low points out, has recently won a prestigious industry award and is unique in several respects.
"Allied Waste brings all the garbage in, and we're taking all the methane gas off of it and producing electricity," Low says. "They have about two miles of train a day of garbage that comes in. It's unloaded at the bottom in the Gorge down at Roosevelt, off trains by the Columbia River. They have big large trucks that take the garbage up the mountain, and they unload it back in the hills. You can't tell the landfill's there if you're driving down the road."
These additional projects remain available to the PUD should it need to bring into its energy portfolio. At present, though, it makes more money selling energy on the market, and Low emphasizes that the arrangement significantly helps keep consumer rates lower.
"This utility is much larger than utilities for counties of similar populations," Low says. "They're nowhere close to what Klickitat PUD does, because most of them don't have the additional power generation. We get to get lumped in with the bigger utilities that have larger generation, and the ones that generation are the large utilities. Klickitat wouldn't be considered a large utility except for that we do things that no one else does."
More planned outages coming
More planned power outages announced by Klickitat PUD are scheduled for this Saturday, from 10 p.m until approximately 11 p.m. and then again the next morning, Sunday, from 5 a.m. until approximately 8 a.m.
The main reason for these outages is that the Bonneville Power Administration (BPA) will be performing critical maintenance to substations that serve Klickitat PUD, and power must be "switched" to alternative circuits while certain substations are undergoing maintenance. This outage affects all customers in the towns and surrounding areas of Goldendale, Blockhouse, Centerville, Klickitat, Wahkiacus, and Wishram. Customers in Wishram and Klickitat may experience a shorter outage in the morning hours compared to other customers, given their location in proximity to certain equipment.
Unless they have received PUD's letter announcing the outages, customers from the Goodnoe substation including locations on the Bickleton Highway, Old Mountain Road, Hoctor Road, and nearby roads are not expected to be impacted by these planned outages.
PUD's letter advises that the planned outages are based on best available information and that power could come back on at any time without prior notice. If more information is desired, call 773-7632 or (800) 548-8358 and ask for the Operations Department.
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