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The Union Label: Electric Restructuring's Hidden Side

Fortnightly Magazine - September 15 1997

In union circles, they call it "burial insurance." That apt phrase denotes the severance, early retirement and re-training packages negotiated for veteran utility workers sideswiped by a changing market.

So far, labor has won some insurance: through legislation in California and in Maine; through a commission order in Massachusetts; and a pending settlement agreement in New York City, prompted by a commission order.

Labor lost hard in Pennsylvania and in Rhode Island, however. Worker protections weren't built into restructuring decisions in those states. One union official calls the Pennsylvania episode a "thief in the night."

The protection agreements, in most cases, give workers 24 to 30 months of guaranteed employment through the transition to a free, and often, divested market. Those not kept get a golden parachute.

For the rest of the nation, the future of worker protection promises to put labor through its paces and to test the political mettle of legislators and utilities.

Weighing the Costs

Changes from electric restructuring have cut roughly 25 percent of utility labor nationwide since 1990, says Jim Dushaw of the International Brotherhood of Electrical Workers. Between the IBEW and the Utility Workers Union of America, the two major utility unions, there are now about 270,000 collective bargaining unit employees. That's about 65% of the 413,000 utility workers nationwide, according to 1995 data from the U.S. Energy Information Administration.

Litigation will shape the future of worker protections. It appears that states will preserve workers' jobs if utilities sell off plant and equipment to new competitors. Collective bargaining units, however, won't be protected, although there's disagreement on this point. Maine, for instance, seems to have covered all the bases in its restructuring bill (see sidebar).

One union attorney says divestiture won't lead to "union busting." Yet a third union source notes that under the National Labor Relations Act, unless 51% of existing employees are kept through a company-to-company transaction, the bargaining unit expires and "you start from scratch."

So utilities could find themselves negotiating downsizing solutions with their unions without legislative mandates. One utility representative says that's how his company would prefer to handle matters. Looking at the deals struck, a severance/early retirement package for 1,000 workers could cost $100 million or more.

Utilities will have to weigh those costs against the idea of relying on lower-wage workers to handle a product that forms the keystone of a highly reliable system, the unions say. Commissioners and legislators, meanwhile, must decide which end of this political hot potato to hold. They may find it difficult to tell consumers: "We're restructuring the industry to lower costs, but on top of stranded charges, we've got a worker protection assessment. It's only $100 million or so (em pennies on your kilowatt-hour rate."

To a consumer who has lost a job to corporate pruning, and who's looking for pennies-per-kWh savings through retail wheeling, this argument may ring hollow. Why should a utility worker receive more protection than a trained factory hand at Intel Corp.?

"Utilities have never had to face the issue of layoffs being a major issue," argues Carl Wood,

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