A lot of Potomac Electric Power customers are going to question the new contract Pepco signed this week with the International Brotherhood of Electrical Workers.
The new pact will mean at least a 25 percent wage increase over the next three years for most Pepco workers--an immediate 9 percent raise plus 8 percent both next year and the year after.
More than 40 percent of the IBEW members at Pepco--1,500 out of 3,500--will get an additional 3.3 percent raise this year, bringing their first-year increase to 12.3 percent. Sweetened fringe benefits will boost the economic gains to roughly 40 percent over the next three years, the union estimates.
That's a big raise, a lot more than most of Pepco's customers can count on getting in the next three years.
The average Pepco worker's $20,280-a-year income is already more money than the $18,839 average annual income of Pepco's customers in the District of Columbia. The customers pay for Pepco's raises through their electric bills.
At a time when the inflation rate has slowed to 4.5 percent, Pepco's raises will amount to twice that much. Some catch-up is probably justified. Pepco's last contract was negotiated under President Carter's inflation-fighting guidelines and provided raises of only 6 to 7 percent a year when inflation was raging at up to twice that rate.
IBEW supporters bristle at the suggestion the union members got an exceptional deal, pointing out that the new contract contains some "give-backs" and significant work rule and job classification changes that could ultimately cost workers their jobs.
Veterans with 12 1/2 year of service get what amounts to life-time job security under the new contact, the union says, but other workers can be laid off, furloughed or reassigned at will by the company.
In effect, Pepco bought its way out of restrictive work rules that narrowly defined every union job. The special 3.3 percent raise was given to placate a large group of workers who had filed grievances because they had been assigned new duties with no additional pay.
Perhaps because they don't want to rile up the workers, Pepco executives are reluctant to say to how they will use their new-bought flexibility to improve productivity.
Nor is Pepco VP Lowell Davis willing to estimate how much the company may save from work rule changes. "I couldn't put a price tag on that," he said.
Settling job classification disputes and simplifying the sick leave provisions are the most important gains in the new contract, he added.
Davis suggests the true cost of the contract is less than the 40 percent gain claimed by the union. While the union says boosts in benefits amount to 12 percent over three years, Davis figures the cost at 3 percent.
Utility officials also are reluctant to put a dollar value on the cost of strike preparations during the labor negotiations. Union estimates are that Pepco spent several million dollars.
Nor will Pepco estimate how the settlement with the IBEW will affect the pay of the company's non-union workers. Will they too get a 40 percent boost in wages and benefits?
Pepco spokesmen say their new contract is in line with those negotiated this spring by other utilities. They insist it's wrong to compare their 25 percent wage raise with recent union contracts in retailing, autos or steel that gave little or no increase in wages.
Those industries are suffering badly from the recession and the electrical utility industry is not, they point out.
But that is precisely why questions ought to be raised about the Pepco settlement. As a regulated public utility, Pepco is to a large extent insulated from economic realities.
Retailers can't give generous raises now, because there is no way they could pass those costs on to their customers. The customers would refuse to pay higher prices and would take their business elsewhere.
Pepco's customers can't do that. As a monopoly, the utility simple adds its labor rates in with the fuel bills and plant construction costs when it seeks a rate increase. .C. People's Counsel Brian Lederer predicts the wage settlement will lead Pepco to raise the rate increase application already pending before the D.C. Public Service Commission. In its original application, Pepco figured on an 8 percent increase in labor costs this year compared with the 9 and 12 percent-plus-fringes raise that workers will actually get.
Davis said Pepco has not yet calculated the effect of the contract on rates, but he noted that labor accounts for only 9 percent of utility bills.
Lederer points out that C&P Telephone has been able to achieve significant improvements in productivity in recent years and those gains have helped hold down phone rates.
Whether Pepco's new contract will result in similar productivity increases remains to be seen. If Pepco does seek an electric rate increase to pay for the settlement, the Public Service Commission ought to ask why the company was so generous.