Baby boomers are retiring, unemployment is low, skilled craft workers are in short supply, and human resources in the workforce are a growing issue for power industry management.
“Demography is destiny.” That useful phrase, often attributed to 19th century French social scientist (and father of “positivism”) Auguste Comte, offers an important lesson for the electric power industry today.
For a powerful example, look at the massive, troubled Vogtle nuclear construction project in Georgia. Southern Co. subsidiary Georgia Power, majority owner of the project, reported to the Georgia Public Service Commission in late April that construction contractor Bechtel is facing a serious problem attracting skilled labor to the site, where some 5,000 workers are building the two-unit, 2,234-MW nuclear plant expansion.
Georgia Power told the state regulators that labor shortages, particularly in skilled craft workers, could delay the already badly behind schedule project beyond the current projections of 2021 and 2022 (Figure 1). Shortages of workers also impact the construction costs, as the existing labor force must often work overtime, earning pay premiums. The report says unanticipated labor costs were “sending its budget 20 percent above what was initially set.”
A Georgia Power spokesman told The Atlanta Journal-Constitution that the utility company is “actively working with the building trades to attract and hire the craft labor needed for the project,” including a recent Bechtel-hosted job fair for skilled craftsmen.
U.S. Population and Economics
The Vogtle project is a microcosm of larger trends in U.S. labor demographics and industry economics found throughout the power industry. The Population Education website highlights some of the demographic issues in the U.S. today. The fertility rate in 2016 was 1.9 children per woman, below replacement level fertility of 2.1. The birth rate remains higher than the national death rate, so the population is growing, but very slowly. That’s combined with the aging of the baby boom generation (those born between 1946 and 1964), which reduces the workforce by retirements and death.
Immigration has become more important in America’s population. Population Education notes, “Immigration accounted for 45% of population growth in 2016, and in several states (Maryland, Massachusetts, and Rhode Island) made the difference between a shrinking population and a growing one. In 34 states, international arrivals outpaced domestic arrivals (people moving between states).” U.S. immigration policy will contribute to how this trend moves, as the Trump administration wants to slow immigration. The Washington Post recently editorialized, “America needs more workers. Trump’s war on immigration won’t help.”
Economics also makes a major contribution to workforce issues. The U.S. economy is growing steadily, if not spectacularly, averaging around 2% annually for the past several years, while U.S. unemployment has been reduced from a high of about 10% in 2009 to 3.9% in April, the lowest in 17 years, according to the U.S. Bureau of Labor Statistics. The result is increased competition for labor, particularly skilled labor.
The increased competition among employers comes as the electricity business is experiencing low growth and stagnant revenues and profits. Competitive power markets, which cover about half of U.S. utility customers, require bidders into wholesale markets to keep costs as low as possible.
Looking at utility employment over a decade ago, Brad Kitterman and Jack Dugan, then with the information technology consulting firm Logica, which has since become part of CGI, wrote, “At most utilities, little or no opportunity for significant revenue growth has existed for some time while increasing personnel related expenses have continued to squeeze profit margins. To achieve the annual earnings improvement targets of 10–15% their stakeholders have expected, utilities have had no alternative but to reduce ongoing operational expenses dramatically, and often that has meant cutting staff.” Little has changed (see sidebar “A Statistical Snapshot of the Electric Power Workforce”).
Electric companies are well aware of the human resource challenges facing them, but none has yet offered solutions that have attracted widespread adoption. Increased pay is one obvious approach, but the weakened state of utility earnings can be an obstacle. Job fairs are an easy approach, but without incentives for workers to switch jobs, they aren’t likely to yield major results.
Other industries have begun offering signing bonuses for skilled trades. The Wall Street Journal reported that two major U.S. rail carriers, BNSF Railway and Union Pacific, are offering up to $25,000 signing bonuses for trades such as electrician, plumber, and pipefitter (Figure 3). That’s on top of jobs that average $40,000 in pay for the first year and $60,000 for the next.
|3. Sign me up. Skilled trade workers, including electricians, boilermakers, and pipefitters, are being offered signing bonuses by BNSF Railways, a rare windfall for blue-collar recruits. Source: U.S. Air Force/Kelly White|
A spokeswoman for BNSF (owned by Berkshire Hathaway, which also owns the electric utility MidAmerican Energy) told the newspaper, “We are constantly evaluating the market and will use this approach when it makes sense to recruit talented individuals for hard to fill positions or locations.”
Global energy giant Siemens has long had a commitment to apprenticeships, growing out of its experience in Germany where apprenticeships are a widespread and popular part of industrial human resources programs. A U.S. Department of Labor (DOL) publication quotes David Etzweiler, CEO of the Siemens Foundation, “We’re passionate about scaling this ‘earn and learn’ model in the U.S. Siemens knows first-hand how valuable apprenticeships are to growing the workforce needed to be successful.” The publication identifies American Electric Power, Great River Energy, Idaho Power, and MidAmerican Energy as among the leaders in electric utility apprenticeship programs, which the federal department encourages. DOL identifies powerhouse electrician, line maintenance, instrumentation technician, and substation operator as among the skills companies are targeting with apprenticeship programs.
A wrinkle on utility apprenticeship programs is the Northwest Lineman College, an accredited four-year private-sector school to train lineworkers. Started in 1993, the college’s main campus is in Idaho, with other locations in California, Texas, and Florida. It describes itself as “a four-year educational curriculum providing the related instruction component of apprenticeship for lineworkers. It is a fully accredited program offered to electric utility and construction companies for their apprentice lineworker employees.
“Northwest Lineman College provides all related instruction, manages training calendars and records, and sends notification of all required training for apprentices. Upon successful completion, enrollees will earn Northwest Lineman College Certificate of Completion and Department of Labor Journeyman Certification if the participating utility or construction company’s program is registered with the Office of Apprenticeship or similar state agency.”
|The Whistleblower Challenge
Understanding and dealing with employees who feel they or the public have been subject to discrimination, particularly when they believe company management has been covering up personal or public health and safety issues, has long been a challenge to the power industry. Tough federal laws and a tight labor market together make dealing with whistleblowers even more difficult.
Today’s labor market, as older workers move out and younger staff take their place, could make whistleblowing more common, Sherry Travers (Figure 4), an expert in labor and employment law at the Dallas firm of Littler Mendelson, told POWER. “Somebody in their 40 to 60s may be reluctant to raise issues because [they] believe they might have problems finding another job. People coming into the work force don’t have that perspective.”
There is a tendency for management to want to retaliate when an employee raises health, safety, or discrimination issues, according to Travers. That’s the worst possible reaction, as numerous laws at the federal and state level are designed to protect against retaliation. Those laws are designed to encourage people to come forward. Also, the rise of social media and access to news media has given aggrieved or injured workers powerful tools to make their case.
The Department of Energy’s (DOE’s) Office of Inspector General offers online whistleblower information and a “whistleblower protection ombudsman.” The office says, “Whistleblowers play a critical role in keeping our government honest, efficient and accountable. In recognition of this, federal laws outline the duty of federal employees to disclose wrongdoing, and they are to do so in an environment free from the threat of retaliation.” DOE contractor employees are also protected against retaliation.
DOE says the whistleblower ombudsman’s role “is to educate DOE employees, contractors and grantees about prohibitions on retaliation for protected disclosures and their rights and remedies if they have been retaliated against for making protected disclosures. The law does not permit the whistleblower protection ombudsman to act as a legal representative, agent, or advocate for DOE employees, contractors and grantees.”
Two industries in Travers’ practice, health care and financial services, have made great strides in developing structures and policies to manage whistleblowing and eschew any form of retaliation. Not so much in energy, said Travers. “Energy industries have basically been in the shadows of health care and financial services.”
There is a tendency among some managers to turn a blind eye to workday problems. According to Travers, when it comes to energy workplaces, “workers tend to be out in the field and more remote from top level management. There are also transient workers. It’s much easier for things to go undetected or unaddressed.”
When it comes to responding correctly to whistleblowers, including issues of internal reporting and redress of legitimate claims, “the energy industry is way behind,” said Travers. Many are still in the bad old days of the “hotline,” where employees can call in their grievances. “Those are a black hole, where a worker calls in and nothing gets done.”
Instead, companies need to plan programs to respond to whistleblowers that include training managers, providing clear communication, ensuring transparency of the process, and responding rapidly. “If a complaint is filed,” said Travers, “something must be done about it. Quickly.”
Changing Business Practices
While most of what utilities are looking at to meet their workforce problems—pay, job fairs, bonuses, training, and apprenticeships—are fairly conventional, consultants Kitterman and Dugan suggested a more radical approach in 2006. “Utilities now have the unique possibility of making business improvements that can reduce future costs,” they said.
The crux of their approach was a “digital organization,” where “the high performance utility will institutionalize (capture existing employee knowledge about) its key procedures and business processes, and exploit documented best practices before employees fly out the door. The high performance utility will succeed by challenging accepted ideas of business as usual and finding new ways to perform and improve on its core business despite staffing challenges. … An integrated universal communications platform must be viewed as the next technology that will afford utilities further opportunities to lessen their dependence on headcount.”
Since then, many utilities have moved in that direction, although none appear to have achieved total interconnectivity of operations. Last year CGI consultants interviewed 116 utility clients. They said, “The client insights indicate that executives are accelerating digital to enable deep transformation and lead in operational excellence.” Of those interviewed, 88% said a top goal in their organization was “becoming digital organizations for customer and operational excellence.” ■
—Kennedy Maize is a long-time energy journalist and frequent contributor to POWER.