THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Saturday, March 25, 1995 TAG: 9503250304
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Long : 149 lines
Virginia Power is planning a sweeping shakedown of its power plants, field functions and headquarters operations - a reorganization that its president said will easily save the utility tens of millions of dollars in annual costs.
But the changes may also eliminate hundreds of jobs over the next year at a utility that already has cut its work force by about 3,500 since the mid-1980s.
The good news is that Virginia Power's rates for the rest of the decade likely will continue to increase at less than the rate of inflation - if they rise at all. Virginia Power executives hinted that they may ask state regulators later this year to approve a plan to cap customers' rates in return for loosening controls on the utility's profit margins.
Increasing competition in the electric-utility industry is driving the reorganization, Virginia Power President James T. Rhodes said in a media briefing this week.
``We determined that we could not simply sit back and let things happen,'' he said. ``The bottom line is that these things are going to keep our costs, and hence our rates, competitive in the future.''
Customers won't see any immediate impact from the changes. But in the next year, as the company reduces the number of divisions and districts, they may have to contact a new office for customer service and bill paying.
Over the longer term, the utility will become much more customer-oriented - to the point where large portions of employees' paychecks will be determined by how well they are graded on ``customer-satisfaction measures,'' Rhodes said.
The reorganization will subject Virginia Power operations to unprecedented levels of scrutiny, particularly for their cost-effectiveness.
Rhodes said that as many as half of the utility's 1,500 ``corporate center'' jobs in Richmond could be turned over to outside contractors if those companies can perform the functions cheaper and if this so-called ``outsourcing'' doesn't damage Virginia Power's long-term competitiveness.
Another 220 people in Richmond will be reassigned to ``strategic business units'' that the utility, a subsidiary of Dominion Resources Inc., is carving out of its nonheadquarters operations.
Rhodes said it is too early to tell exactly how many of Virginia Power's 10,700 jobs - about 2,360 of them in Hampton Roads - will be lost. It will take several years for the utility to implement all of the changes, he said.
Utility analysts reacted favorably to Virginia Power's plans.
``It seems extremely aggressive and it does not surprise me,'' said John Watt, a director of Fitch Investors Service, a New York bond-rating company. ``This is a company that is committed to maintaining its excellence.''
David Schanzer, an analyst at Philadelphia-based Janney Montgomery Scott Inc., said Virginia Power's actions keep it in line with other utilities that are aggressively cutting costs.
He agreed that it is vital to reduce costs, noting that regulators have already loosened rules to give cooperatives, municipalities and other wholesale buyers of power greater leeway to shop for electricity. Meanwhile, big retail customers like manufacturers are pressuring utilities for rate reductions.
Rhodes said that much of Virginia Power's anticipated cost savings will come from ``re-engineering'' the way work is performed.
The company's coal- and oil-fired power plants and its hydroelectric facilities will be the initial proving grounds for this focus, Rhodes said. That should produce annual savings of tens of millions of dollars in those operations alone, he said.
Among other things, Virginia Power likely will ask employees in those plants to perform a greater variety of jobs, he said. One example: Operators of oil-fired generators that only operate in the peak winter and summer electricity-demand periods will be reassigned to maintenance work in other seasons.
Rhodes said that some of the changes will have to be negotiated with the International Brotherhood of Electrical Workers, which represents 4,000 blue-collar employees. The union's three-year contract with the utility expires Friday, and the Virginia Power president said that the two sides have had ``very thorough negotiations'' on such matters.
Those in the utility's commercial operations - field workers like linemen and right-of-way maintenance employees, as well as customer-service representatives - will go through the re-engineering process later this year. Next year, Virginia Power's nuclear-power plants will be subjected to the test, Rhodes said.
A process that will be carried further in the reorganization is the division of nonheadquarters operations into separate business units. There is already a unit for nuclear plants and another for fossil-fuel and hydro plants. The commercial operations will be folded into another. And a new unit called energy services will be created.
Energy services will step up Virginia Power's efforts to sell electricity outside its service territory in Virginia and northeastern North Carolina. Rhodes said Virginia Power's lower-than-average power-generating costs should help it drum up more business throughout the eastern United States.
A planned reduction in the number of division offices (from five to three) and district offices (from 35 to 22) will largely affect the roughly 600 managerial employees in commercial operations, he said. It's too early to say how many jobs will be eliminated.
As part of that change, a division office in Roanoke Rapids, N.C., will be consolidated into the Norfolk division office. But Virginia Power officials said that no employees will be transferred to Norfolk.
Rhodes said the changes will be stressful for the utility's workers. But he said: ``Nobody's going to benefit if Virginia Power can't survive and, hopefully, thrive in a newly competitive world. I think everybody realizes that.'' MEMO: HERE'S HOW VIRGINIA POWER PLANS TO MEET ITS GOALS
Job cuts. The company has already cut its work force from a peak of
14,000 in the mid-1980s to 10,700 today. Hundreds more jobs could be
eliminated in the next year.
Outsourcing. To save money, it will use outside contractors for
certain headquarters functions.
Changes in work rules. It wants more flexibility in assigning work,
which could mean a typical employee will perform a greater variety of
jobs.
Specialized business units. It has divided its nonheadquarters
operations into four main units, given managers in those units more
authority and held them more accountable for making improvements. The
units are:
Nuclear power plants.
Coal, oil and hydroelectric plants.
Commercial field operations. Linemen, meter readers, customer-service
reps, right-of-way and vehicle-maintenance workers.
Energy services. The selling of power outside Virginia Power's
current territory. This unit just landed contracts to sell power to
utilities in Kentucky and Ohio.
JOB TOTALS
Virginia Power employment, companywide
Nuclear, 2,250
Fossil/hydro plants, 1,830
Commercial operations (Line/customer service/field maintenance).
5,090
Richmond headquarters/corporate center. 1,480
Other. 100
SOUTHEASTERN VIRGINIA
Surry Power Station, 610
Chesapeake Energy Center, 210
Yorktown Power Station, 190
Commercial operations (Line/customer service/field maintenance).
1,360
NORTH CAROLINA
Roanoke Rapids-area hydro plants, 25
Commercial operations (Line/customer service/field maintenance). 300
ILLUSTRATION: Color graphic with map by Ken Wright
KEYWORDS: VIRGINIA POWER DOMINION RESOURCES by CNB