In all the controversy over the amount of money customers are being asked to pay for the merger of the state’s three major electric utilities, one issue seems to have gotten lost. What effect, if any, would the landmark merger of Narragansett Electric Co., Blackstone Valley Electric Co. and Newport Electric Corp. have on the reliability of electric service in Rhode Island?
Attorney General Sheldon Whitehouse’s office was scheduled to file testimony on the issue with the Public Utilities Commission on Monday.
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“We want to ensure that whatever plan is approved, the companies will maintain the highest service reliability,” Assistant Attorney General Paul Roberti said. “We will focus on the level of distribution investment and staffing and probably suggest that there needs to be some quality of service standards.”
Narragansett Electric estimates its acquisition of Blackstone Valley Electric and Newport Electric could save the merged entity $11 million a year beginning in 2005 compared to the cost of operating the companies separately.
Some of those savings would come from consolidating customer service and maintenance operations and from job cuts.
Narragansett Electric’s parent company, New England Electric System of Westborough, Mass., plans to eliminate more than 300 positions in Massachusetts and Rhode Island following its acquisition of Boston-based Eastern Utilities Associates, which owns Blackstone Valley Electric and Newport Electric.
These cuts would come on the heels of a steady decline in employment at all three utilities.
The number of full-time employees at Narragansett Electric, for example, has slipped more than 30 percent in the last five years from 767 to 522, according to company reports filed at the Federal Energy Regulatory Commission. The sale of the company’s electricity generating plants contributed to the decline in employment.
“If you don’t have any workers, it’s hard to maintain your system,” said Charlie Higley, an energy analyst for the Critical Mass Energy Project of the consumer group Public Citizen. “All these utilities are cutting back on the people needed to do the maintenance. I think we’re going to see more and more of these outages in the distribution system.”
Many of the merger-related job cuts could be achieved by offering early retirement to certain employees, said Ronald Gerwatowski, Narragansett Electric’s general counsel.
“The way we’re doing the consolidation shouldn’t affect reliability,” Gerwatowski said. “In fact, we think we’re going to be better at it because, combining the best of everybody here, we think we’re going to be well positioned.”
The utility is required to file regular reports on its quality of service to the PUC, which the commission’s attorney describes as “generally good.”
Scores of electric utilities have merged around the country in the last several years, but it’s difficult to draw any conclusions yet on what impact the consolidation has had on service reliability, said Susan Stratton, director of the Wisconsin Public Utility Institute at the University of Wisconsin at Madison.
“Quite often when there are cuts in employees you don’t see the results of it, in terms of reliability, for a number of years,” Stratton said. “The classic example is companies cut back on their staff that trim trees. Well, it takes a few years for the trees to get overgrown and interfere with the transmission lines. Then you see more outages.”
Stratton said another area of concern is the customer service department, where job cuts can leave customers on hold listening to Muzak for 10 or 15 minutes when they call to report a power outage.
Narragansett Electric reported a customer service payroll of $1.3 million last year, 16 percent less than it spent for customer service employees in 1994, according to Federal Energy Regulatory Commission data. And the $6.2 million the company spent maintaining power lines and transformers last year is nearly 20 percent less than the $7.6 million it spent in 1994.
But Narragansett Electric’s $50 million in profit from utility operations last year is a more than 60 percent increase over the $30.1 million in profits it reported in 1994.
The utility’s financial reports don’t reflect the full scope of its maintenance and customer service operations because employees in both areas were shifted from the company to its parent, New England Electric System, or related companies during a corporate reorganization early in the 1990s, Gerwatowski said.
He expects the merger to result in a further shuffle of workers between the utilities and from them to the parent company or its subsidiaries. Customer service employees, for example, could be centralized in Providence or Westborough, Mass.
Special telephones would tell customer service representatives if they should answer the phone as “Narragansett Electric Co.” for calls originating in Rhode Island or “Massachusetts Electric Co.” for calls originating in the Bay State.
The merger also would require that certain satellite offices be closed to eliminate redundant operations and produce the anticipated cost savings.
“Instead of having a satellite office for Newport in Newport, you could just use the satellite office in North Kingstown, where it’s just a short trip over the bridge,” Gerwatowski explained.
