Mr. Chairman and members of the Task Force, I am pleased to come before you today to discuss Utility Worker protections during the transition to retail competition in The Commonwealth.
With impending competition, incumbent utilities are faced with the possibility of reduced revenues and the desire to hold the line on rates. They are concerned that they will not be able to recover their investments in generation facilities and other long-term commitments and are restructuring operations. Power plants, whose operation once was virtually guaranteed, are being sold, and older less efficient fossil and nuclear plants are being shut down. According to the Department of Energy, 86 power plants have been sold since January of 1998 through April of 1999. (See appendix 1)
Numerous mergers have occurred since restructuring initiatives first surfaced in the industry with Virginia utilities joining the trend. Many more can be expected. Utilities and energy providers will strive to increase their market power and expand their customer base in a competitive market.
This will inevitably affect system reliability and put current utility employees at risk as new owners seek to streamline operations to maximize profits. System and plant reliability is directly dependent on worker familiarity and expertise with those systems and plants. Safeguards should be put in place to minimize the impacts on the system and the workers.
From the labor perspective, that translates into a lot of pressure on utility management to cut costs and even more pressure on the utility workforce to maintain wages, benefits and safe working environments. One of the easiest places to cut costs is labor and deferred maintenance.
Energy Insight, a trade publication, using 10 years of data drawn from Resource Data International, Inc.'s POWERdat database, looked at utility power plant employment trends and generating station maintenance expense histories for three types of plants operating in four parts of the country. The data show that in three of the four regions, power plant employment fell anywhere from 29% to 32% over the decade. Total maintenance expenses in the same three regions dropped, anywhere from 11% to 25%. In the fourth region, The Northeast, which has been plagued with nuclear generation troubles, data showed employment was up 32% as maintenance costs rose 250%. (See appendix 2)
According to the Bureau of Labor Statistics, utility production workers have declined by about 46,000 nation wide from 1990. The production workers at Virginia Power have declined by about 1,000 in the last 6 years and total employment has been reduced by about 6,000. I believe that the facts show that the Utility Industry has been in transition for almost 10 years.
There are roughly 16,000 utility employees in the Commonwealth. 3,700 of them are production workers and IBEW Local 50 represents the vast majority of those. (Formerly known as The System Council U-1, International Brotherhood of Electrical Workers.)
Workload is increasing due to added customer base and reliability improvement programs and the layoffs of clerical and customer service workers. The increased workloads and responsibilities are being shifted to the remaining utility employees who now cover expanded daily work routines. The workload is compounded when the inevitable emergency situations arise and there are fewer people to deal with them. Overtime work is at an all time high, stressing workers and their families. I know of one power station in this Commonwealth that is almost one half million dollars over budget in overtime. I would guess that there are more.
The reliability, integrity, and safety of the Commonwealth's electric system have depended on a workforce of skilled and dedicated employees, equipped with technical training and experience. A well trained, qualified and dedicated work force is essential to any restructuring plan. At this very moment, as in every moment of every day, there are hundreds of utility workers on the job, for the public benefit, producing, delivering and maintaining the electrical energy that is so essential to our lives.
HB 1172 recognizes assistance for employees of electric utilities whose employment will be directly affected by the implementation of competition for the purchase and sale of electric energy.
The generation, transmission, and distribution infrastructure in this Commonwealth was built and is maintained for the benefit of the public interest. The cost incurred to build and maintain these assets were approved by the public, for their benefit through the State Corporation Commission.
The costs of generation are not the same from facility to facility. Some plants run more efficiently than others due to age, technology, fuel, location etc. Today, some of the high cost generation facilities are used and useful because of the load demands of the Commonwealth and the limited availability of electricity supply.
As the laws and regulations change to allow lower cost generation to serve that load and demand, some of the high cost generation facilities will no longer be economic to run. They will be closed and utility workers jobs will be eliminated.
In other words those jobs will be lost due to statutory and regulatory change and not due to a business decision. It is only fair that those affected employees, whose jobs were once used and useful, be given some benefit through the statutory and regulatory change that adversely affected them.
Since 1996, 20 States have enacted final restructuring statutes. Those include: Arkansas, Arizona, California, Connecticut, Delaware, Illinois, Massachusetts, Maryland, Maine, Montana, New Jersey, New Mexico, Nevada, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, and Virginia.
Of those 20 States, 11 have enacted some form of worker protections, 5 have directed Legislative Task Forces or Public Utility Commissions to study the issues with only 4 States excluding worker protections.
Worker Issues:
With the increased merger and acquisition activity, workers are concerned about keeping their jobs and maintaining their wages and benefits as well as maintaining safety and reliability of the system.
The protections enacted in other States seem to address both of those concerns in a variety of ways.
Buying entity contracts with the selling entity to operate the plant for two years. (CA)
Existing employees operate the plant for two years. (TX)
The buying entity offers employment to existing employees at current wages and benefits. (CT, NJ, IL)
The buying entity recognizes current Collective Bargaining Agreements and agrees to bargain faithfully with The Collective Bargaining Agent. (CT, DE, NJ, MA)
Staffing Standards. (PA)
In the event of job loss, benefits such as severance, early retirement, unemployment compensation, retraining, training, outplacement and related expenses and health care coverage as related to non-managerial employees either recoverable through rates or public benefits charges. (AR, CA, CT, DE, MA, NJ, NM, OR, TX, IL)
Connecticut has a plan for tax incentives to employ displaced utility workers.
(See appendix 3 for Worker Protection from States mentioned)
The reliability, integrity, and safety of the Commonwealth's electric system have depended on a workforce of skilled and dedicated employees, equipped with technical training and experience. However you choose to address these worker issues, it is in the Commonwealth's best interest to protect the jobs of utility workers who have been responsible for assuring reliable and safe electric service to the citizens of this Commonwealth.