Assembly Bill 323 Comments: This bill legislated an audit of TMWA's ratemaking practices and financial records by the Bureau of Consumer Protection and required $100,000 funding from TMWA to pay for it. The Audit report was completed and received on December 31, 2005. There have been several stories in the news, including the Sparks Tribune and the Reno Gazette Journal. TMWA board members, at their April 2005 meeting, voted to support the bill, but not the funding source, as it is at TMWA customer's expense.
NOTE From Lori Williams, TMWA General Manager: We are perplexed as to why any legislation was needed to conduct an audit, since as a public agency the ability to audit and/or thoroughly review our financial information is always available under current law to anyone who is interested.
However, TMWA Board voted to support the audit and staff welcomes the investigation proposed by AB323, because it will provide a forum to review how the utility's financial situation came about and explain the basis for previous rate increases.
Here are some of the comments that we think are needed for you, our customers, to fully understand all of the issues raised in the completed Audit and Assembly Bill 323:
Criticism of ratemaking practices: Since inception, TMWA has followed national standards for ratemaking methods recognized by organizations such as the American Water Works Association. Nationally recognized utility experts have reviewed the financial and rate models used by TMWA, and provided expert advice on TMWA's ability to bond for future capital improvements. Inferences that TMWA does not use industry recognized methodologies, practices, or experts are simply not true. The Audit confirmed that TMWA's rate-setting practises are "acceptable and reasonable".
Allegations of spending money on unneeded projects: Some of the distribution system, including the water mains under the ground, is now reaching the end of its useful life, well over 50 years old. Rehabilitation was not a priority in the past, but it is now eminent to TMWA. Well over $100 million has been spent on Capital Improvement projects including repair, rehabilitation and new construction since the inception of TMWA in 2001. The prior annual rehabilitation budget was significantly less. It is the responsibility of TMWA staff and board to maintain a safe, reliable and economically viable water system for our customers over the long term. The Audit confirmed that TMWA's Capital Improvement Program is appropriate and in line with comparable water systems.
New Building: TMWA's present location was considered a temporary solution and was, quite frankly, too small when we moved here in June of 2001. However, it was the only building even remotely feasible in the three weeks TMWA had to find something suitable for our operation. A committee of board members and staff researched all alternatives including expanding at the present location, finding an existing building or constructing a new building. Constructing a new building was the most cost-effective solution. The construction of the new facility is expected to be cost-neutral to customers of TMWA in the first year and save money in future years. Most important, TMWA will own this asset, which will be paid off in the futurethe alternative, lease payments, would never go away.
Salaries and "bonuses": Like all companies and organizations, TMWA must pay our employees a competitive salary in order to attract and retain a great team. We do not pay bonuses, and percentage of our pay is "at-risk". If we do not meet our corporate and/or individual goals, these incentive payments are not paid to employees. However, to ensure that our salary ranges are not out of line for the industry and community, an extensive and detailed study, preformed by an outside contractor, was completed and presented to the board at its January, 2008 meeting. Click here for the survey report.
The Truckee River Fund: Suggested and approved by TMWA's Board of Directors as a way to not only ensure our watershed is protected by funding appropriate projects along the Truckee River, but to leverage those funds in order to get matching donations from other agencies. This fund was never meant to fund charitable projects but rather to assist in funding meaningful projects that protect or enhance our resources. Protecting our water supply and watershed is vital for TMWA customers. The Audit confirmed that teh fund was appropriate to assure continued access and use of the Truckee River.
No Accountability of TMWA: The members of the TMWA Board of Directors are elected officials or their direct appointees a group of local people who are much more accessible and accountable to its customers than in the prior oversight of Sierra Pacific by the Public Utilities Commission of Nevada in Carson City. All of the Board of Directors' discussions and decisions, including the rate filings, are subject to open meeting laws and have been conducted in a very open process with numerous noticed public meetings including multiple Board and Technical Advisory Committee meetings. TMWA also held multiple public information sessions at various locations on each rate filing. Public interest and participation in this open process was minimal. The Audit confirmed that TMWA properly solicited and recieved input from the general public.
$100,000 to pay for the audit: Assembly Bill 323 directed TMWA to pay up to $100,000 for the audit, a cost the TMWA board does not think TMWA customers should be forced to bear. The only financial resources that TMWA has available to fund the proposed audit are revenues collected through customer rates and developer fees. The audit will directly cost TMWA's customers.
Please note that the BCP was a signatory on the Order of Divestiture of assets from Sierra Pacific Power Company to TMWA (PUCN Docket No. 01-1044). These are the documents that approved the sale of the water assets to TMWA and set up the future financial constraints and shortfall that water customers are now experiencing. Testimony regarding the sale and PUCN order can be viewed here: http://www.tmh2o.com/about_us/financial_information/. These historical documents clearly identified concerns by the BCP that the water customer revenues were insufficient to cover expenses, including both the operating costs of the utility and the debt service on acquisition bonds.
