Power Struggle: Unions Fight Electrical Deregulation

"This is our NAFTA," says Carl Wood, until recently the national deregulation coordinator for the Utility Workers Union of America. The UWUA, along with the International Brotherhood of Electrical Workers, is fighting deregulation of the electrical industry, which is already well under way in some states.

"Deregulation of electricity has all the same implications for consumers and workers that NAFTA did," says Wood, who, a few days after we spoke, was appointed to the California Public Utilities Commission by Governor Gray Davis. "It means loss of jobs, and a real degradation of standard service.

"There will still be high quality service for people who can pay for it. But for working class people--it's happening already--they are attempting to lower expectations about reliability and service response."

This could mean longer waits to restore interrupted service or install new service, and even rate structures under which only those who pay a premium are guaranteed electricity 24 hours a day.

"Of course, if you really want to turn people against deregulation," says Wood, "just mention phone calls at dinner time" from telemarketers proposing to switch electric companies.


"Because of changes the companies have made to meet restructuring," says Jim Dushaw of the IBEW's Utility Department, "the system is being stressed now." Jobs in the electrical utility industry have been cut by 30 percent since the mid-1980s, many of them in mid-management but also in generating plants and line maintenance. A smaller staff means it's harder to deal with unusually high demands. According to Dushaw, most observers agree there's a high risk of some kind of "reliability event" this summer in the Midwest, on the West Coast, or perhaps in New York.

Mike Parker, an industrial electrician and co-author of Labor Notes' books on management-by-stress, says that getting lean has meant getting rid of power-generating capacity that in the past would have been on standby for abnormal demands. Instead, companies now depend on getting electricity from further away on the grid.

"With the system tied together so much more tightly," says Parker, "when something does happen--a mistake somewhere, or Y2K, or some natural disaster--things will go down for longer. They'll either have to cut a section out entirely or put huge areas on brown-out." During an early-June heat wave, in fact, a northeastern utility threatened to brown out some areas if residents didn't voluntarily turn down their air conditioners to conserve.


Early in the century, a few powerful utility holding companies dictated prices and ignored customer needs. New Deal legislation established state commissions to regulate utility companies, which were granted a monopoly within their service areas--and guaranteed a profit--in return for providing universal service. The system worked; customers take it for granted that the lights will come on when they flick the switch.

Why deregulation? Dave Poklinkoski, president of IBEW Local 2304 in Madison, Wisconsin, has fought deregulation in that state as part of a coalition called Customers First! He cites three reasons why big business, Wall Street, and some politicians are jostling to introduce competition into the electrical industry:

  1. Large industrial companies--big users of electricity--are seeking lower rates for themselves (which will mean higher rates for everyone else).

  2. Utility companies and independent power-generating companies are positioning themselves to buy other companies or sell off chunks of their own--whatever will increase profits.

  3. All this is aided by the bipartisan ideology of the "free market."

The first steps came in the 1970s, when industrial companies lobbied for competition in the electrical industry. A 1978 bill was intended to provide incentives for renewable energy sources, such as wind energy; it mandated that utilities buy from qualified independent producers. Most of those, however, were plants burning fossil fuels that were set up to sell electricity directly to factories. What happened instead of windmills and solar power was an explosion of new companies building generating plants. The owners of these plants now want to penetrate the vast market controlled by the utilities.

Congress passed a 1992 law that enabled a merger wave and wholesale competition in the industry. The law also allowed states to authorize retail competition, where the local utility's monopoly would end and any customer could buy from any provider. According to Poklinkoski, 19 states have passed legislation instituting retail competition (sometimes called "retail wheeling") to begin at a time certain. Electricity thus becomes not a service but a commodity. The process is most advanced in California, Pennsylvania, and New England.

Retail wheeling means that among the new companies allowed are those that do not produce or transmit kilowatts, but simply market electricity. New Hampshire set up a pilot project in which the state subsidized new firms, just to get consumers used to the idea that they could switch electric companies. Customers were flooded with junk mail and "incentives" such as soda can holders. (Further progress on deregulation was blocked by a suit from the state's main original utility company.)



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In 1995 California received a quick lesson in the dangers of cost-cutting for restructuring. Eric Wolfe, communications director of IBEW Local 1245, tells the story: "The Public Utilities Commission here proposed radical restructuring. In their proposal, called the Blue Book, they never once mentioned service reliability, in 100 pages.

"Our members spoke up at hearings. The head of the commission seemed to think service was not a problem, it would always be there. Our position is that service is a product of work, it's not God-given.

"In 1994 PG&E [Pacific Gas & Electric] shed 3,000 bargaining unit jobs. There were thousands of rotten power poles; PG&E had cut down on their tree-trimming budget.

"Then we had three 'storms of the century' right in 1995. These were very intense, sustained storms, with winds over 100 miles an hour.

"The power outages were widespread and lengthy. PG&E took such a beating in the press--and we helped orchestrate that beating--that they did an about-face." The union organized calls to the Public Utilities Commission, and the company ended up hiring thousands of temporary workers to bring the system back up to snuff.

The legislature mandated guidelines for service reliability, including financial penalties if outages exceeded a certain duration. "That is the biggest job security point for us," said Wolfe, "because they have to have the people to get the job done."


The IBEW and UWUA have organized coalitions to lobby state legislatures and Congress. The unions are opposed on Capitol Hill by lawmakers from industrial states whom Wood calls "free market liberals," such as Rep. Ray Markey from Massachusetts. Thus far, the main Congressional resistance to deregulation fervor comes from Republicans in rural states, where electricity rates tend to be low.

Deregulators have had more victories on the state level, but one success story for the little guys is the work of Customers First! in Wisconsin. This coalition of rural electrical co-ops, environmental groups, farm organizations, the AARP, unions, and municipally-owned power companies forced the state to slow down on deregulation. Dave Poklinkoski says they've bought three years.

"Our bills had something for everybody," says Poklinkoski. "We created an independent transmission company. We set maintenance and service standards for generation, so that cost cutting on maintenance doesn't become a way of competing. The big utilities will get a freer hand to invest in utilities anywhere, not just in Wisconsin. We got successorship language that maintains union contracts. We made provisions for 'public benefits'--incentives for efficiency and conservation that would not survive the magic of the market.

"The key was the broad-based coalition. Energy is horribly complex. A politician would rather vote on the official state dog than on a sweeping energy policy they couldn't possibly understand. So if all the stakeholders come up with something and say 'let's do it,' the politician will pose in front of a camera and go along with it."

The IBEW has opposed what the union calls "rapid, radical deregulation," more or less ceding the point that deregulation is a foregone conclusion. The union is perhaps leery of openly opposing Clinton, who actively pushes deregulation.

The Utility Workers have opposed deregulation altogether, taking the position, in Wood's words, that "moving into a market situation as opposed to a regulated monopoly is inherently bad for consumers, and will lead to unregulated monopolies. We decided we might as well take the principled position now, and say 'I told you so' later."

Wood sees the union's main accomplishment as obtaining worker protection language--cushions for those displaced. But the UWUA has found no success in shaping legislation to be more consumer-friendly.


Poklinkoski says deregulators' true attitude toward consumers was revealed at a symposium held in Madison last year. A vice president of Ameritech, one of the regional phone companies, spoke on his industry's experience with deregulation. He asserted that the process would not work until every customer paid the true cost of telephone service. As Poklinkoski tells it, "He said, 'I have friends who have condos in Colorado; the true cost of service there is $140 a month, and they can afford it. I have property in northern Wisconsin--the true cost is $110 a month, and I can afford it.'"

Wood points out that up till now, "electric service is more democratic than the school system: a rich person can't buy better electricity than a poor person. With deregulation, the loss will not be that the rich will have better electrical service; ordinary people will have worse."

Poklinkoski sees an opportunity for unions: "Electric utility restructuring and deregulation impacts everybody. Utility workers are in a key position to represent the best interests of the community in this fight. In the process of fighting for the best interests of the community they are fighting for themselves."