Northeast Utilities: ‘Hard’ look at cuts
With the ink still drying on merger agreements with state regulators ”“ and memories still imprinted by the prolonged blackouts of 2011 ”“ Northeast Utilities hinted it would accelerate planned cost cuts.
In April, Northeast Utilities completed its merger with NStar, whose CEO Tom May now leads the combined company, with a spokesman saying May splits his time between Boston and Hartford.
Former Northeast Utilities CEO Chuck Shivery is now chairman and Leon Olivier continues in his Northeast Utilities role as chief operating officer in Hartford.
May said Northeast Utilities is still in the process of assigning managers their roles in the consolidated company, which starts anew with more than 9,000 employees.
“We initially thought that we would have our management team all picked and in place and up and running by now,” May said in a conference call. “But because we had so much trouble getting this merger through the different gates, we sort of held off so that we wouldn”™t be in a situation of selecting certain executives, which meant you ”˜unselected”™ others. And as a result, if it didn”™t go through, we would have had some broken china in the process. So we”™re a little bit behind.”
Asked about the timing for cost reductions, former NStar and new Northeast Utilities CFO James Judge ruled “conservative” a previous multi-year plan the company filed with regulators that among other elements spelled out an attrition-based plan for workforce cuts, with the company not planning on replacing workers who retire or leave for other reasons.
“We”™re looking long and hard at that issue,” Judge said. “We have an opportunity to actually accelerate some of those savings that we had targeted in that regional plan.”
Al Lara, a Northeast Utilities spokesman in Hartford, said Judge was not specifically referencing jobs in his response and that nothing has changed on the topic from what the company has previously stated.
What has changed is the official stance of Connecticut Attorney General George Jepsen with regard to job levels. In early April, the attorney general”™s office issued notice of a settlement agreement that included the stipulation that any Northeast Utilities staff reductions in Connecticut be made through normal attrition and not through layoffs.
In early May, however, a Jepsen spokeswoman forwarded a statement saying Connecticut layoffs are allowed under the settlement agreement, provided the company makes matching cuts in its other territories.
“The short answer is that other than the specific provision concerning line worker staffing, there are no absolute prohibitions on other reductions in employment levels,” Jepsen stated.
Even as it looks for workforce wiggle room, the new Northeast Utilities finds itself under the microscope at the Federal Energy Regulatory Commission, after a complaint from PURA and peer agencies in New England that transmission utilities currently enjoy “tariffs” that benefit utilities to an unreasonable degree.
PURA and other state regulators claim New England electricity customers are overpaying transmission operators by $113 million annually, an amount set to spike to $205 million in three years. If not a large amount by the measure of New England”™s estimated population of 14.4 million people, it is not insignificant by the bottom line of utilities and their shareholders.
Northeast Utilities executives said they saw the FERC pronouncement just a half hour before a conference call to review the company”™s first quarter results as a newly combined giant.
“It caught us a little off guard,” May said. “We”™re still sorting through it. But we ”¦ believe we have a strong basis for our position, and we”™re just going to take the next steps.”
[Editor’s note: This article was updated to reflect that Northeast Utilities CEO Tom May splits his time between Boston and Hartford.]