MONTHS OF NEGOTIATIONS LEADING TO FAVORABLE LABOR CONTRACT FOR CHUGACH TEMPORARILY ON HOLD

A labor agreement that will result in more than $1million in savings, provide greater flexibility and efficiency in utilizing its workforce, and also help Chugach Electric Association to both recruit as well as keep talented employees, has temporarily been stopped from being put into effect by a lawsuit. The action was filed by Ray Kreig and a group calling itself "Chugach Consumers." Kreig ran unsuccessfully for the Chugach Board in its April board election, losing by nearly 3,000 votes.

The labor agreement was a result of lengthy negotiations between Chugach and a portion of its workforce.

While the represented employees have approved the agreement in a formal vote, the Chugach board has not yet had a chance to vote on it. The board had been scheduled to take up the agreement at a meeting on Dec. 6, but action by the board was blocked by a temporary restraining order issued by a Superior Court judge earlier in the day. The Court took the unusual action in response to the lawsuit against Chugach.

Part of the stated rationale for the TRO was to give the Regulatory Commission of Alaska time to consider whether it should try to block the board from taking action on the proposed labor agreement. However, before the board meeting even began, the RCA had already issued notice that it did not intend to interject itself into the negotiation process between Chugach and one of its bargaining groups.

In response to the events, Chugach moved the issue into the federal court system. The issue will now be heard in a District Court courtroom. It is common for issues concerning labor law to be resolved in federal court.

"Ordinarily, Chugach prefers not to negotiate its labor contracts or discuss pending litigation in the media," states Bill Stewart, Chugach's CEO. However, when lawsuits cause serious harm to Chugach customers as these do, the Association has a responsibility to speak out so the public and our customers can know the truth. The complaints filed by Ray Kreig and Chugach Consumers are publicity stunts that are bad for Chugach customers. They hurt Chugach customers because they seek a bargaining approach that is almost guaranteed to cause labor strife and would prevent customers from getting more than $1 million dollars in work rule savings that Chugach has successfully negotiated, using highly experienced labor attorneys and its very knowledgeable staff. Every day that passes is a day Chugach does not get the benefit of work rule revisions. The lawsuit forces Chugach's customers to pay costly attorneys' fees to defend against these groundless actions." Stewart added, "Ray Kreig and Chugach Consumers claim the lawsuits' purposes are to help Chugach customers. Unfortunately, they have misrepresented what the negotiations have achieved. Sadly, the lawsuits in fact hurt Chugach customers. They are only good for the lawyers involved."

The labor agreement before the Board is the result of months of give-and-take at the negotiating table between representatives of bargaining teams for both the management and the Union, culminating in an agreement on the terms of a new 4-year agreement for employees working in what is referred to as the "Outside" bargaining unit. These employees comprise a fourth of the workers represented by the union at the utility.

Approximately two-thirds of Chugach's 348 employees are represented by the IBEW under three separate labor contracts. The Outside contract covers 58 regular employees, primarily linemen, warehouse workers and mechanics.

Under the terms of the proposed new contract, during the 4 year term employees will receive annual wage increases of 6 percent the first year, 5 percent in the 2nd year, 5 percent in the 3rd year and an adjustment equal to the change in the Anchorage consumer price index in the 4th year. According to Stewart, last year the national average for a labor contract increased wage costs for U.S. businesses by 3.2 percent. The Outside Agreement Chugach has negotiated contains significant work rule changes which will benefit Chugach members. Its overall labor cost increases are less than the 3.2 percent nationwide annual labor wage cost increase. "In other words, this contract overall contains lower costs than most labor contracts nationwide. That is good for Chugach's customers. Claims that the newly negotiated Outside Agreement is unduly costly is flat-out wrong," says Stewart.

Those increases are comparable to those in the Lower 48 and are intended to fairly compensate a highly skilled and valuable work force. They are also intended to help Chugach attract and retain employees that are in high demand at other companies in Alaska and many parts of the country - particularly the West Coast which competes for the same pool of workers as Chugach.

Under their last contract with Chugach these employees had wage increases below the cost of living index during two of the last three years, and a wage freeze in the other year. It has become more and more difficult for Chugach and other Alaska utilities to recruit and retain skilled workers. Going into these negotiations, Chugach determined that it was near the middle of the pack in the wages it paid to journeymen linemen in Alaska.

Chugach also agreed to increase its contribution to the pension plan by 50 cents per hour during each of the first 3 years of the agreement. It was the first increase by Chugach to the pension plan in approximately 20 years.

In addition to agreeing on wage and pension increases, Chugach and the IBEW also agreed on a number of beneficial work rule changes. Work rules cover a variety of situations, including lunch breaks, overtime rules and the composition of crews. Bargaining led to changes that will make the day-to-day operation of the utility more efficient. The cumulative effect of the work rule changes will provide a significant offset to the cost of the new wage and pension benefits.

"The new contract will benefit members and customers for years to come," said Chugach Chairman Jeff Lipscomb. "Both parties bargained in good faith and we are pleased with the outcome. In the end, this contract will provide some of our employees with real wage and benefit increases for the first time in over six years while lowering other costs and increasing productivity. The experience, training and skills possessed by our employees are critical to our success in improving reliability, productivity and keeping costs low. While over the last 10 years the number of Chugach customers and power sales have increased, the number of employees at Chugach has decreased."

In the first year, the new agreement will add less than two-tenths of one percent to the cost of power. That would add less than 20 cents per month to the bill of the average residential customer using 700 kilowatt-hours of service per month. While costs in future years will be higher due to the compounding effect of raises, the work rule concessions will also lead to savings year after year.

By comparison, fuel increases have had a much greater impact on bills. In December 2006 the average residential customer's bill was approximately $13 higher than a year earlier due to higher fuel costs.

The contract was approved by union members in a vote two days before Thanksgiving. The Chugach board has not yet voted on the new agreement. Certain terms of the contract are retroactive to July 1, 2006 - the day after the last contract expired.

Negotiators from both sides will soon continue work on the other two Chugach contracts. That work has started, but negotiators agreed to make the Outside Agreement their first priority.

Chugach is the largest electric utility in Alaska, providing power for Alaskans throughout the Railbelt through retail, wholesale and economy energy sales.