July 3, 2011 in City, Idaho
As rates rise, so does workers’ pay
Company rewards employees when goals are met
Wages for Avista Corp.’s rank-and-file workers grew by an average of 2.5 to 3 percent this year.
The workers also collected about $8.4 million in bonuses through a program that rewards all Avista employees when the company achieves set goals related to customer service, operational efficiency and cost savings.
Nearly 1,500 people work for the Spokane-based utility, which provides electricity and natural gas to customers in Washington, Idaho and Oregon. Information on Avista’s pay raises and incentive bonuses is outlined in documents submitted as part the company’s latest request for a rate hike for Washington customers.
• Union employees, nearly half of the utility’s workforce, got 3 percent raises this year. Their contract also provides for 3 percent wage hikes in both 2012 and 2013.
• Non-union employees received an average raise of 2.5 percent this year, and Avista anticipates 2012 raises for non-union employees to be at least 2.5 percent. The company uses a pay-for-performance system, so individual pay raises vary.
• The amount paid in bonuses averaged about $5,700 per worker, but amounts vary by department. Union workers averaged $817 in bonuses.
Wage increases at Avista have caught the attention of the Washington attorney general’s Public Counsel Section, which advocates for residential customers and small businesses in rate cases. In other industries, workers aren’t getting raises, said Sarah Shifley, an assistant attorney general.
“I know at least in the public sector, there isn’t anything along those lines,” she said. “We’re all under wage freezes, and next year we’re taking cuts.”
Wages paid by utilities get scrutinized during rate cases, said Mike Parvinen, assistant director for energy at the Washington Utilities and Transportation Commission, which regulates how much Avista can charge its customers.
Most utilities are highly unionized, which influences wages, Parvinen said. In addition, many utility workers have specialized skills and companies compete for them, he added. Avista and other utilities typically submit detailed salary surveys and industry statistics to support their wage levels.
But why, said Parvinen, are “utilities able to give increases year after year when everyone else … is getting (wage) cuts?” That’s a question that the commission staff is asking, he said.
Karen Feltes, Avista’s senior vice president for human resources, acknowledged that the company’s pay hikes and bonuses look generous during the current economic downturn. But she defended Avista’s pay raises and bonuses as consistent with other utilities, both nationally and in the Northwest. Avista aims to be in the 50th percentile for wages among its peers, she said.
Avista executives have mulled freezing wages and ending the bonus program, Feltes said. But company officials figured that the long-term costs would outweigh short-term savings, she said. “There really are perverse consequences to wage freezes,” Feltes said.
When the economy rebounds, good employees leave for other jobs, and the company has to train new people to fill vacancies, said Jessie Wuerst, an Avista spokeswoman.
Eventually, Avista would have to catch up with market-rate wages for the utility industry, Feltes said. In the meantime, wage freezes lower employee morale, she said: “You’ve lost their hearts along the way.”
While Avista prides itself on providing living-wage jobs, Feltes said, the utility has contained payroll costs by keeping its workforce lean. The number of customers served by Avista grew by 51 percent between 1993 and 2010. During that time, Feltes said, the number of Avista employees grew by only 8 percent.
She also credited the incentive bonus program for spurring efficiency and innovation at the company. Bonuses are only awarded when Avista meets certain benchmarks.
The $8.4 million in bonuses paid to rank-and-file workers this year was the highest amount in six years. Feltes said the bonuses reflected a $10.9 million savings in Avista’s operations- and-maintenance costs in 2010, compared with the amount budgeted for the year.
Although Avista ratepayers pay for the majority of the bonuses, Wuerst said the cost of the incentive payout is recovered through efficiency gains and cost savings.
Seventy-five percent of the bonus depends on Avista lowering its per-customer service costs during the prior year. Another 15 percent of the bonus is tied to customer satisfaction ratings. Avista must receive ratings of 90 percent or above, as measured by an independent firm, for employees to qualify. The final 10 percent of the bonus is tied to the utility’s reliability of service, including the number and length of power outages.
Incentive pay programs are common in the utility industry, said Marilyn Meehan, a spokeswoman for the Washington Utilities and Transportation Commission. The commission allows them as long as the programs benefit ratepayers. However, the commission doesn’t allow incentive programs that boost corporate earnings to be included in customers’ rates, because those programs benefit the utility’s shareholders, she said.