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Unions and Deregulations: Some Lessons for Utilities

Fortnightly Magazine - September 1 1996

fully franchised industry."

As a practical matter, the economic impact statement and mitigation measures that the IBEW proposed to the FERC as merger conditions would be a form of labor protection. If these conditions are adopted, merged utilities would be required to provide severance benefits for employees who lose their jobs due to the merger.

The IBEW's comments also raise questions about the interplay of the FERC's regulatory scheme and federal labor law. For example, a utility's impact statement could promise that each dismissed employee will receive $25,000 severance pay. This commitment becomes a condition of the utility's merger approval; however, the utility has an obligation under labor law to bargain with the union over severance. Does the FERC's merger approval override that bargaining obligation? Or does the $25,000 figure become the floor for bargaining with the union?

The IBEW's apparent suggestion that shareholders rather than ratepayers should bear the costs of labor-protection benefits also raises significant questions regarding how, and whether, such costs will be allocated among various groups for rate purposes. Such allocation issues are beyond the scope of this article, but the fact that unions are prepared to raise them in regulatory proceedings indicates another card that labor might play.

Unions may also attempt to frustrate business strategies they perceive as threatening. During recent contract negotiations with Consolidated Edison Co., IBEW leaders evinced concern that deregulation will pressure the utility to cut costs by subcontracting or selling certain operations and buying back power from the nonunion purchaser at a lower price.8 To guard against erosion of their strength, the unions may seek restrictions on management's right to sell utility assets or redirect capital into nonregulated businesses. Like its peers in other deregulated industries, the IBEW has placed top priority on job security, subcontracting prohibitions, successor clauses, and other contractual protections against business strategies that will diminish its membership.

The Battle is Joined

Mergers aside, electric and gas utilities have already taken steps to reduce costs to meet the challenge of new competition. Although they have not resorted to wage reductions and two-tier wage structures as airlines and trucking firms were forced to do, utilities have sought to reduce labor costs by downsizing and changing work rules to increase the productivity of their remaining employees. These efforts may encounter stiff resistance from unions, such as corporate campaigns. For example, Washington Gas Light (WGL), the local gas distributor for the Washington, DC, area, sought more flexible work rules in bargaining with the Independent Union of Gas Workers (IUGW) in 1995. After the IUGW rejected the utility's contract offer and authorized a strike, WGL locked out the 1,100 employees (half its workforce) represented by IUGW. The union hired corporate campaign specialist Ray Rogers and has been waging a corporate campaign against WGL ever since. This campaign has not only attacked WGL, its CEO, and members of its board of directors, but has targeted WGL's principal bank.

Unions will also become increasingly concerned about nonunion utilities, especially if they have the potential to become low-cost providers that can compete with unionized utilities. Unions