Wwp Digs In For Long Haul Spokane-Based Utility Struggles To Get Back On Track After Surprise Delay In Proposed Merger With Sierra Pacific

The shock has worn off at Washington Water Power Co.

A month after the Federal Energy Regulatory Commission stunned company officials by blocking - and nearly killing - a merger with Sierra Pacific Resources, the Spokane utility has launched an aggressive reorganization effort.

Chairman Paul Redmond said the plan calls for extending the company’s lucrative power brokering across the country while continuing to nurture local customers.

Several executives will get additional assignments; some to grow specific WWP markets, others to upgrade support services like information systems.

Redmond said the activity will serve, in part, to refocus workers and officers on the business of being WWP while the merger partners prepare their case for a FERC administrative law judge who has scheduled hearings for June.

Redmond said a final decision on Altus, the name of the proposed company, may be at least a year away unless WWP and Sierra representatives can allay some concerns raised by FERC staff.

“We’re examining what our position on that will be,” he said.

Meanwhile, Redmond added, “We’ve got a company to run.”

More than 100 Spokane workers had accepted sweetened early retirement or severance packages as part of WWP and Sierra Pacific efforts to pare redundant positions.

Redmond said those offers were conditioned on the merger closing, and FERC’s action was a blow to many employees who had made plans to leave the company.

“They’re not happy in many cases, but they understand,” he said. “When we got blindsided, they got blindsided.”

Many have viewed a videotape of the FERC proceedings, in which at least one commissioner said that hearings were the only way the merger could avoid flat rejection.

“It’s devastating,” Redmond said.

He said the only employees who will be allowed to depart with their incentive packages are those who can show their position can be left vacant when they depart.

That’s unlikely in a company that has undergone a series of downsizings, Redmond said. “We run pretty lean around here.”

WWP employs about 1,400 system-wide.

He said one employee had joked in the elevator that, given the time regulators are taking to review the merger, he may end up qualifying for the company’s regular retirement program.

The two companies announced their proposed consolidation in June 1994, and officials had expected to close the deal last fall.

At Sierra, which has not undergone major work force reductions, many employees who took early retirement or severance are being allowed to leave, he noted.

Redmond said the reorganization, which was disclosed to employees two weeks ago, will keep all hands busy while they await the outcome of FERC’s deliberations.

“It’s a big plate,” he said. “We can’t put our company on hold for any period longer than it’s already been.”

He said the plan will play to company strengths in customer and wholesale services.

For example, the utility is the most successful broker of electricity in the Northwest, Redmond said, capturing the largest share of sales to Bonneville Power Administration customers that have sought alternative suppliers for some of their load.

From about $115 million in 1995, the company expects wholesale revenues to reach about $180 million this year, and $220 million in 1997.

With FERC’s approval, a step Redmond ruefully said should be routine, “We’re going to implement a national strategy.”

He said the company’s reputation, along with that of Itron Inc., a former subsidiary, lends credibility that will help set it apart from the dozens of other brokers buying and selling energy in the increasingly deregulated marketplace.

Senior Vice President W. Les Bryan - “The pre-eminent powersupply executive in our part of the world” - will lead that expansion, he said.

Also, Redmond said, Chief Financial Officer Jon Eliassen will create Resource Link, a response to a trend among national chain stores, franchises and other businesses to remove energy-management decisions from local managers and put them in the hands of a consultant or broker.

“We don’t want someone from Ohio or New York or anyplace else coming in and representing one of our clients to us,” he said.

On the other hand, he added, “If we’re going to represent our clients in our area, we might as well represent them somewhere else.”

Although Sierra remains the only major merger candidate, Redmond said WWP will be on the lookout for smaller opportunities to expand its electricity and natural gas service territories.

Recent additions in the Wallace and Sandpoint areas have been very good for the company, he said.

Additional steps to grow the company will include:

Integrating WP Natural Gas operations in Oregon and California with those in the Spokane-Coeur d’Alene area.

Maximizing the value of its transmission system, which is in a critical position on the Northwest grid.

Upgrading generating plants as part of the federal relicensing process.

To support those initiatives, Redmond said WWP will also strengthen relations with regulators as the nature of utility oversight changes.

New types of rates that reflect the competitive environment may be proposed.

Employee training will be a major thrust. Redmond said WWP will expand the use of self-directed work teams like those assembled to work on such projects as the Rathdrum turbine.

He said a comprehensive review of information systems at WWP and Sierra is also under way to assure that everyone in the separate organizations or Altus will have the knowledge needed to make timely, informed decisions.

“We want to be the two strongest companies to come together,” Redmond said.

, DataTimes ILLUSTRATION: Color Photo

MEMO: This sidebar appeared with the story: UTILITY OFFICIALS, REGULATORS TO MEET Representatives of Washington Water Power Co. and Sierra Pacific Resources will be in Washington, D.C., Monday to begin discussions with federal regulators on some of the issues that nearly killed the companies’ proposed merger. WWP Chairman Paul Redmond said officials from the utilities hope the meetings will provide the background missing when the Federal Energy Regulatory Commission voted November 29 to require hearings on the merger instead of issuing a much-expected approval. FERC members, he said, are not familiar with a deal involving utilities separated by hundreds of miles of sagebrush. One commissioner likened the arrangement to a marriage in which the couple sleeps apart. Perplexed by the difficulty of identifying cost efficiencies, they challenged claims that the deal would save $450 million over 10 years, and questioned the justifications for pricing that would perpetuate the spread between WWP’s inexpensive power and the higher rates paid by Sierra customers. But, Redmond said, the two companies never heard from FERC in the 16-month period from the filing of the merger application to its being set aside for hearing. “They never asked us one question,” Redmond said. “It’s up to us to get back there and explain.” In contrast, the six state commissions that reviewed the merger asked hundreds of questions before finding the deal would be in the public interest, he noted. Redmond said the companies will have to walk a fine line between responding to the concerns of the federal regulators, and complying with the assurances given to the state commissions that no consumers will suffer as a result of the merger. Although he takes nothing for granted after the November 29 shocker, Redmond said he is optimistic that the utilities will be allowed to merge into a new company to be called Altus. “At this point, there’s no reason to believe Altus is not a doable challenge and that Altus will be a very viable company in the future.” -Bert Caldwell