THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, November 23, 1994 TAG: 9411230470
SECTION: LOCAL PAGE: B01 EDITION: NORTH CAROLINA
SOURCE: BY LANE DeGREGORY, STAFF WRITER
DATELINE: BUXTON LENGTH: Long : 158 lines
One week after members began questioning spending practices at the Cape Hatteras Electric Membership Cooperative, power company officials hired a public relations firm to improve their image.
The co-op's board of directors hopes the $22,500 investment will help defuse some of the controversy surrounding the operations of the electric company.
Residents say they hope the Virginia Beach consultants will offer some answers.
``The directors want to give our money away to this PR firm? I can't understand that,'' said Frisco campground owner Wade Barnette, one of six customers who addressed co-op officials at a Monday night meeting. ``It's just throwing our money away.''
``We are not going to let this die,'' Barnette said Tuesday morning. ``We want an open meeting so we can get some first-hand information.''
In the past month, Barnette and others have collected more than 200 signatures from co-op customers requesting a full membership meeting of the area's only electricity provider. The nonprofit, tax-exempt co-op serves more than 5,000 Hatteras Island homes and businesses. It's owned by power customers. But officials only hold one general meeting per year.
``If the people want a general membership meeting, they'll have one,'' Board of Directors member Dale Burrus said Tuesday afternoon. ``But our bylaws say we need 40 days to advertise it first. We'll schedule it as soon as possible.''
Monday night, power officials opened their monthly board of directors meeting to the public and press. An armed sheriff's deputy, a Raleigh engineer, two Virginia accountants, the accountants' attorney, three reporters, two newly hired public relations experts, and a public relations consultant from the state's electric co-op joined the group. Nags Head lawyer Norman W. Shearin Jr., who has acted as the co-op's spokesman for the past month, did not attend.
Discussion lasted about 90 minutes.
``It was a very tense meeting. I was shocked that their counsel was not there. I was shocked that the accounting firm was there - with their attorney,'' Barnette said. ``This was the first step in a long journey.
``We got our questions asked. But we sure didn't get the answers we were looking for.''
On Oct. 18, Cape Hatteras Electric Cooperative Manager John A. Echols resigned after less than four months on the job. He said he quit because the board of directors was meddling too much in daily operations. He also cited improper spending practices by power company officials.
This month, Echols released documents showing that the electric co-op paid a Virginia accounting firm more than $434,206 during the past year. Those figures include a total of $22,380 for a private chartered plane to fly the accountants from their Danville, Va., office to Buxton. Another $10,429 was spent for the accountants' meals, hotel rooms and travel expenses. The accounting firm, Johnson and Dooley, received at least $30,000 each month of this year - more than $382,791 so far for 1994.
Besides the accounting fees, Echols contended that the co-op pays some of its employees too much. Echols earned $75,000 annually as manager. His assistant, Claudine Williams, who is now acting general manager, makes $64,000 a year, Echols said.
``There have been a lot of misconceptions, rumors and things we probably haven't answered correctly over the past several weeks,'' Burrus said during Monday's meeting. ``We've been advised by the state that we needed to do something about our public relations. It's a relief for us to feel like we can finally come out and speak.''
Brickell & Associates public relations firm handles publicity for the Norfolk Tides and Children's Hospital in Norfolk. The group is charging the Cape Hatteras electric co-op $7,500 per month for consulting services. Electric co-op officials have signed a three-month contract - with options to extend it for a year.
``The PR firm is going to poll the island to see what perception the people here have of us,'' said Burrus, who operates a grocery store on the island where he was born. ``What do they want us to do, exactly? We need to know what we should address.''
One resident worried that the additional expense of a public relations consultant would cause electric rates to rise. ``I hope not,'' said Burrus. ``But the members wouldn't trust us to do our own survey.''
Board of directors President Jack S. Gray opened Monday's meeting with a prayer. The motel owner asked God to help the nine-member governing group ``provide the best electricity for our little island.'' Gray did not speak during the rest of the discussion session, saying that other board members had requested his silence.
Instead, Burrus led the question-and-answer portion. Barnette and two other members of the Citizens' Committee for Responsible Utilities asked about the co-op's accounting fees, employee salaries and money paid to Gray for his board duties. High power rates were another primary concern.
``To say the people are incensed is the understatement of the day,'' said Jack Leatherwood, a retired Coast Guard captain who spoke for the citizens' committee. ``They feel confused, betrayed and frightened. This is not an adversarial situation. But we do feel that the membership of this co-op deserves to know what we got for these enormous fees.''
Board members, public relations experts and the accountants explained the co-op's expenditures. Johnson and Dooley are more financial consultants than accountants, they said. And the past year has been extremely busy, with damage from Hurricane Emily, plans to install a new 115-volt transmission line and complicated applications for a $20 million loan.
Officials, however, refused to discuss specific payments to the accounting firm. They said original invoices are missing from their office files. They have accused Echols - who vehemently denies the charges - of taking the receipts.
``We'd like to talk about those numbers. But we can't,'' board of directors member John Robert Hooper said. ``Our lawyer has advised us that discussing them could jeopardize ongoing criminal investigations.''
Electric co-op officials also would not discuss specific salaries. Hooper said the board does not plan to release Williams' annual earnings - much less those of other employees.
``Claudine has been with the company over 30 years. She lives with her mother and is very Christian,'' Burrus said. ``This already has caused her too much pain.''
Directors did confirm, however, that Gray has received more than $17,800 in electric co-op payments over the past year. He got $100 for each regular meeting and additional funds for working in the office after Echols and a second former manager resigned. That figure includes travel and hotel reimbursements.
``I served on the water department board for this island for almost three years for free,'' Leatherwood told Gray and other board members. ``I considered it my civic duty and I never asked for any payment. I don't understand why the water board is not paid - and the electric board is paid so much.''
Other citizens expressed concerns about electricity service and high rates. According to the Rural Electrification Administration and North Carolina Power, Hatteras Island residents pay an average of 30 percent more per month for electricity than residents of nearby Nags Head, which receives its electricity from North Carolina Power. In January, Cape Hatteras Electric nearly doubled its monthly service charge - from $8 to $15.
``Our rate right now is way out of line for what we're getting,'' said Howard Meyer of Avon, whose property owners' association has requested a federal investigation into the co-op's accounting procedures. ``Where is all of our money going?''
``We're rebuilding,'' Burrus said, explaining that the remoteness and unpredictable weather of the Outer Banks makes power transmission extremely difficult. ``Our expenses have never been this high before. And they never will be this high again. 1994's been a bad year.''
Despite such financial concerns, the co-op's accountant said Cape Hatteras Electric is in good financial shape. After the open discussion ended and the regular meeting began, directors voted to spend $207,041 on a new bucket truck to service power lines. Officials then began talking about Christmas gifts for the co-op's 21 full-time employees. Some wanted to give each staff member a $200 bonus, as they had last year. Others wanted to throw a party to improve morale.
Accounting firm President Ron Johnson, who did not offer any other financial advice throughout the meeting, said the co-op could give bonuses and throw a party, too.
``The employees have saved you a lot of money this year by working so hard,'' Johnson told co-op directors. ``The funds are available if you want to give them a good bonus and a party.
``We had projected $635,000 as the cash flow for this year,'' Johnson said. ``About $1.5 million actually has come in.''
Johnson was unavailable for comment Tuesday to elaborate on the financial variances. Burrus and Hooper said the extra revenue puzzled them, too. For 1994, Cape Hatteras Electric Membership Cooperative has a gross operating budget of $8.8 million. by CNB