BGE and Pepco: Where the layoffs may hit hard Low-level executives at risk from merger


Middle managers and white-collar professionals will probably make up a majority of the 1,250 layoffs stemming from the planned merger of the Baltimore Gas and Electric Co. and Potomac Electric Power Co., according to utility analysts and industry experts.

As in banking and other industries that have undergone consolidation in recent years, the BGE and Pepco low-level executives likely to be affected are those whose jobs in the separate companies will become redundant once the planned merger takes place in early 1997.

Those duplicate positions include billing, data processing, accounting, finance, planning, purchasing and public relations. Certain aspects of the two utilities' marketing and customer service departments are also likely to be trimmed.

Surprisingly, maintenance, construction, power plant and line workers with the two companies won't be adversely impacted by the layoffs, analysts predict.

"Because they are so close geographically, I don't doubt that they could get rid of some blue-collar workers," said Barry M. Abramson, a Prudential Securities Inc. utility analyst.

"But you can't get rid of half the people who climb up poles after an ice storm."

BGE and Pepco hope that many of the jobs cuts will come through attrition over the next 18 months, and from the effects of an immediate hiring freeze.

At this point, neither side has directed where cuts will occur. Those decisions are to be made by a transition team comprising BGE and Pepco executives in the coming months, said Arthur J. Slusark, a BGE spokesman. Early retirement plans are not planned, company representatives said.

What is also unknown is the role in the cuts of the International Brotherhood of Electrical Workers, whose Local 1900 in Washington, D.C., rep-resents many Pepco employees.

The president of the local, Jim Hunter, met yesterday with international union leaders and plans to meet with Pepco executives this morning.

BGE's and Pepco's planned reduction of 10 percent of the combined utility's work force isn't unusually large, analysts said. Of the utility mergers that have been completed, most have cut roughly the same percentage of employees to achieve targeted cost savings.

In a prime example, Portland, Ore.-based PacifiCorp pared 1,500 employees -- or more than 10 percent -- through attrition in the wake of its 1989 union with Utah Power & Light Co. Another 500, however, were let go from the $12 billion energy concern.

"We showed savings of $500 million through the first five years after the merger," said Dennis P. Steinberg, a PacifiCorp senior vice president. "In retrospect, it was a good deal for our customers, shareholders and employees."

In the case of BGE and Pepco, the 1,250 positions that are eliminated from the $15 billion entity will account for a bulk of the $1.3 billion in savings projected though 2007, company officials say.

"We're mindful of the significant reduction of personnel in any way," said Edward F. Mitchell, Pepco's chairman and chief executive. "People will be let go in a compassionate fashion."

While the trimming isn't expected to be terribly detrimental operationally to either side, both companies have already aggressively shaved employment rolls in response to increased competition.

Pepco, most dramatically, trimmed 760 employees, or 15 percent, between 1989 and 1994, said Nancy Moses, a Pepco spokeswoman.

Most recently, a January employee buyout decreased total employment by 340 workers. Pepco intends to take a one-time charge of $7.4 million associated with the voluntary severance plan, which it projects will save $15 million annually.

BGE, too, has lightened its work force in recent years, cutting roughly 1,000 workers from its 1992 employment base.

In 1993, BGE conducted a voluntary special early retirement program, with the termination benefits associated with those separations totaling $105 million, according to documents filed with the Securities and Exchange Commission.

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