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...Storm Warning: (From Page 5) sources. “I think utilities are going to be a target.” With the utilities’ enormous cus- tomer base up for grabs, acquiring utili- ties could turn into a corporate gold rush. And big oil won’t be the only in- dustry saddling up its pony for the ride. “There is something about electric and natural gas utilities, with their cap- tive, rate-paying consumers, that is irre- sistible to venture capitalists,” says Har- gis, the former FERC lawyer. “They want to use those guaranteed revenues to invest in risky, potentially high-profit, nonutility schemes. They want to keep the profits and have the utility’s cus- tomers bear the risks and assume the debt.” Utility stocks, for decades a safe repository for retirees’ savings, could morph into short-term investment prop- erties. Tyson Slocum, who works on en- ergy policy at Public Citizen in Wash- ington, D.C., says private equity funds could seize the opportunity to “Grab a utility, squeeze money out of it and toss it aside for the next buyer.” The gold rush will be global. As Stu- art Caplan noted last October in Infra- structure Journal: “Overseas investors interested in acquiring critical mass in the U.S. utility sector will no longer be stymied by PUHCA’s … requirements.” What Is A Utility For? In announcing the merger of their holding companies in late 2004, Exelon and PSEG executives sounded almost giddy over the possibilities for their new, combined company. They talked about how they would “create efficiencies.” They enthused about “operational synergies” and “im- proved asset optimization” and “cash- flow growth.” They gushed over the op- portunity to improve “financial flexibility” and positioning the company “to meet the changing landscape of the energy industry into the future.” But all of this post-PUHCA sloga- neering and “positioning” begs a central question: What is a utility for? Most people believe a utility’s pur- pose is to keep their homes lit and heated, to power their businesses, to do whatever planning and maintenance is needed to keep service reliable, and to respond effectively and immediately whenever that service is interrupted. Do “operational synergies” and “fi- nancial flexibility” serve to further that purpose? The Exelon-PSEG executives pre- dicted in December 2004 that “syner- gies” would start out at $400 million and grow to $500 million annually by the second year. Synergy, if you believe Webster’s, means “to work together” such that the total effect is greater than the sum of the parts. The Exelon-PSEG executives, how- ever, seem to think that synergy is just another word for saving money. About 85 percent of the savings, according to their projections, will be “cost related.” These savings include “the elimination of duplicative activities” and “improv- ing operating efficiencies” and “im- proved sourcing.” Still not clear? The executives go on to explain that “a portion of any job losses will be offset by anticipated re- tirements and normal attrition.” Or to be still clearer: “Reductions due to the merger are estimated at approximately 5 percent of the consolidated work- force,” which boils down to a loss of 1,400 jobs. Utility workforces, apparently, are no longer being downsized, they are being “synergized.” But changing the word for slashing the workforce will not alter the reality that utilities nationwide are al- ready short of the people they need to maintain service reliability at the level Americans have historically enjoyed. Reliability at Risk The utility workforce overall was re- duced by 25-30 percent during the 1990s, when utilities believed that downsizing was the way to prepare for retail electric competition. Now that shrunken workforce is quickly aging. By 2010, half of today’s experienced utility workers are likely to retire, ac- cording to numerous published reports. Some top executives may regard this mass attrition as an opportunity to save money for the next merger or takeover. But some people question how utilities can continue to function if there is con- tinued attrition of the workforce. “It is possible to end up with a sce- nario where some utilities are operating like utilities in third-world countries,” says Steven Kussmann, executive direc- tor of the Utility Business Education Coalition in Reston, Va., quoted in a story in the November-December 2005 newsletter of the American Public Power Association. “They won’t have a sufficient number of qualified people to operate them. The result will be danger- Protecting Union Members’ Smiles and Wallets Quality, Affordable Family Dental Care: Ask About: • General, cosmetic, and specialty care • Orthodontics (braces) • Most insurance and union plans accepted • Easy credit and low monthly payments, O.A.C. • Evening and Saturday appointments • Children Welcome Bright Now! Dental Grants Pass 1021 NE 6th St. Grants Pass, OR 97526 541-479-6696 An Bongmin, D.D.S. John Christopher, D.D.S. 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Khoa Hoang, D.M.D. Adam Ho, D.D.S., P.C. www.brightnow.com PAGE 8 ous working conditions and unreliable power.” Five Florida Power & Light linemen interviewed by the Miami Herald in No- vember said the utility had thinned their ranks so drastically that the crews now spend most of their time doing “revenue jobs,” like hooking up new customers rather than performing maintenance on existing infrastructure, which may ex- plain why Hurricane Wilma encoun- tered so many rotten power poles. Inadequate tree trimming around power lines has been implicated in costly wildfires, and worse. When an untrimmed tree branch in Ohio con- tacted a sagging transmission line in Au- gust of 2003, the resulting explosion knocked out power to 50 million people in eight U.S. states and two Canadian provinces, costing $6 billion. A blue rib- bon panel convened by Illinois Gov. Rod Blagojevich found that inadequate tree trimming, obsolete equipment and inadequate training contributed to the severity of the outage. At a time when utilities ought to be plowing resources into trimming trees away from power lines, replacing aging gas lines and rotten power poles, and hir- ing and training the people needed to do this work, they are having trouble staying focused on their essential mission. They’re looking for “synergies” when they ought to be looking for linemen. If it’s hard to keep utilities focused on reliability issues as PUHCA fades into history, it will be even harder if util- ities fall under the ownership of oilmen or financiers, according to Tom Schnei- der, an independent energy consultant and former director at the Electric Power Research Institute (EPRI). “Traditionally you get to be a (util- ity) CEO by learning the business,” says Schneider. But if these homegrown CEOs are replaced by new management brought in from outside the industry, there will be a “total loss of any techni- cal understanding or judgment” at the top of the company. “They’re just not going to understand the industry. That translates to (not un- derstanding) workforce requirements,” Schneider says. As utilities are absorbed into ever-larger holding companies, there will be a “dilution of management attention” to service issues. Who’s In Charge? The Energy Policy Act had the virtue of converting voluntary reliability stan- dards into mandatory standards, and giv- ing enforcement powers to the Federal Energy Regulatory Commission. Given its past commitment to “the market,” though, it’s hard to be optimistic that FERC will perform this role effectively. As Hargis, the former FERC attor- ney, noted in 2003, the agency has (Turn to Page 12) BENNETT HARTMAN MORRIS & KAPLAN, LLP Attorneys at Law Representing Unions and Workers Since 1960 Bright Now! 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