DAY BY DAY

I begin learning the ropes of my new job, and trying to figure out exactly how SRP came to be. 03/10/2016

DAY BY DAY

The origin of my new employee dates back to 1903 when the Bureau of Reclamation built the hydro electric Roosevelt Dam on the Salt River, the first project constructed under the provisions of the National Reclamation Act. Local farmers formed a company named Salt River Water User’s Association and pledged their lands as collateral for the loan used to finance its construction.

The Bureau completed the dam in 1911 and operated it until 1916.  The Association struck a deal that allowed them to run the facility. It remains the only Federal reclamation project in the country run by non-government employees.

This picture shows the dam as it appears now, increased in height to provide significantly more water storage capacity. A bridge now enables automotive traffic to cross the reservoir. Previously, cars had to navigate their way across the top of the dam.

Initially, nearby copper mines purchased the dam’s entire power output. The revenues these sales generated helped offset the cost of providing irrigation water. Subsequently, the Association built transmission and distribution lines that delivered power to their farms. Years later, when these lands were developed into residential and commercial tracts, SRP inadvertently found itself a major supplier of electricity throughout metropolitan Phoenix.

It provides power within a well defined service area. The Arizona Public Service company’s service area rings SRP’s. This utility provides power to portions of major cities within SRP’s service area. Their proximity makes it difficult for newcomers to figure out “Who’s on first?”

Soon after joining SRP, I participated in a week-long orientation program that included field trips to Roosevelt Dam and many other Project facilities. It gave me a unique opportunity to familiarize myself with the sprawling canal system, and to learn about the company’s organizational structure and its unique history.

In the mid 1930’s, Arizona’s legislature approved the Association’s request to form a quasi-municipal entity called the Agricultural Improvement and Power District. All the Water Users assets were placed under the umbrella of the Power District. At the time, the Power district had three employees, the Association many hundreds. Today, the Power District employs over four thousand people, while its counterpart still employs about four hundred. 

Its municipal status allowed the company, now called Salt River Project, to raise capital more cheaply. Instead or having to pledge farm lands as collateral, it could now pledge revenues from power sales. This helped provide capital needed to build or buy numerous power generation plants.

Both the Power and Water organizations operate independently but side-by-side, controlled by boards of ten officials elected by landholders, one vote per acre. I own one fifth of an acre, and have one fifth of a vote, should I choose to cast it. Members of families who began the Association continue to own most of the land and have the most votes which allow them to vote themselves as board members. The Supreme Court upheld this method of voting when unhappy residents sued to have the voting system changed to allow more diversity. 

Voters elect a President and Vice President, but they leave the operations under the control of a paid employee, the General Manager.

SRP derives its revenue from the sale of power and irrigation water at rates set by its respective boards. Revenues that exceed expenses are retained for operational needs. The landowners are its stakeholders, but no dividends are paid. When I joined the company in 1967, its revenues were $250 million. By 2015, its revenues topped two billion dollars.

SRP’s status as a quasi-municipal district makes it exempt from paying state taxes. To retain its status, SRP now voluntarily contributes funds to the state equivalent to what its rival, Arizona Public Service, pays in taxes. However, it is still exempt from federal taxation.

A hybrid entity, SRP ran its procurement function like a private corporation. It never conducted public bid openings nor did it have to explain or justify its purchasing decisions.

My job centered on the procurement of materials and supplies, stocked in our warehouses, needed for the maintenance, repair and operation of various facilities. These were termed MRO inventory and assigned specific stock inventory numbers. Warehouse personnel monitored the inventory levels and sent “traveling” requisitions to Purchasing authorizing a buyer to replenish the supply. Buyers bought the same items over and over again, in small amounts. Limited warehousing space dictated how much could be bought at any one time. Every day a bazillion of these cardboard forms would arrive at my desk, each of which carried the history of its previous purchases. I doled them out to the buyers for them to take action.

Engineering initiated the other primary purchasing authorization document, a bill of material. It listed the amounts of various items needed to construct new facilities.  Some of the items identified happened to be MRO items. The quantity needed for the job sometimes exceeded the quantity normally carried in inventory. When the item arrived at one of our warehouse locations, it became a challenge to keep them apart physically. From an accounting point or view, these construction items bearing the same stock number as its MRO counterpart, would enter our inventory system, inflating it to levels I had to try and explain to management.

Paperwork drove me nuts. Lacking a tracking system, these traveling requisitions and bills of materials forms often got buried in the piles of paper that swamped buyers every day. 

The company employed a “Ditto” machine to create its purchase orders. A secretary typed a purple-inked “masters,” affixed them to the machine’s drum, which when turned imprinted the data onto blank pre-numbered collated purchase order forms. The secretaries found this task messy and labor-intensive. I laugh now, just thinking about how antiquated this seems today.

SRP limited my purchasing authority to a miniscule $5,000. Any order for a sum greater than that amount required Executive Approval. This entailed my attaching a statement to the purchase order form explaining or justifying the award, even if the merchandise happened to be proprietary in nature. You can’t buy GE parts from Westinghouse, as an example. Even in such instances, they gave me no additional latitude in expenditures. Naturally, it delayed routine actions.

SRP contracted with many retail outlets to serve as collection offices for its power and water customers. Unfortunately, it couldn’t figure out an effective way to pay these stores their collection fees. They chose to issue each store a purchase order, a new one every year. To obtain payment, these entities had to submit a copy of the purchase order form to our Accounts Payable monthly. The number of pieces of paper needed to implement this system flabbergasted me. It took a few years but I managed to eliminate the use of purchase orders to facilitate this payment process.

It took me longer to end another long-standing company practice that allowed employees to utilize a purchase order form to buy items of a personal nature from local merchants. I think it had its roots when the Bureau of Reclamation ran the company. A procedures document of some twenty pages had been written to explain how these forms were to be processed. It blew my mind away.

I spent months trying to unravel accounting problems associated with the purchase of industrial gases and the subsequent need to pay manufacturers’ rental or demurrage fees for cylinders we did not return, timely or otherwise. Many cylinders of gas went to remote construction sites. Field personnel took little interest in keeping track of them, and no one would take responsibility to authorize payment when the bills came due.

My work consisted mostly of trying to streamline or eliminate the processes that created a paper jungle. My boss, George, continued to have a low opinion of most of the Purchasing Department personnel. He expected and encouraged me to replace them. After some consideration, I chose to retain them all. I strove to introduce new procedures and improve efficiency, not toss out the handful of men who continued to support me in all ways possible.

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