Merger would cost jobs: Utility plan calls for trimming 295 positions

ILLINOIS - WPS Resources Corp. told regulators in Illinois recently that it expects to eliminate 295 jobs by the end of 2008 at both WPS and Peoples Energy Corp. if it is permitted to proceed with the $1.5 billion deal it announced in July.

In a filing with the Illinois Commerce Commission, the company said its consultant has identified 230 corporate and administration jobs as well as 65 back-office support jobs that could be eliminated.

The companies would not say in which communities the cuts would be made, or in which proportion they would come from Peoples or WPS.

Most of those jobs would be eliminated by the end of 2007, if the deal closes early in the year, the utilities said in the filings.

Jim Schott, vice president of regulatory affairs at WPS, confirmed that the company will look to cut those positions and added, "We will do our best to achieve that through attrition."

The two companies announced in July that WPS Resources, the parent company of Wisconsin Public Service Corp. in Green Bay, would acquire Chicago-based Peoples. Under the deal, WPS and Peoples say they will combine to become "a Midwest energy leader." The parent company would move its headquarters to Chicago from Green Bay, but the Green Bay area would retain headquarters for two WPS subsidiaries.

WPS wants to become bigger to spread out the high costs of operating a utility across a bigger customer base. Chairman and Chief Executive Larry Weyers has been candid about his desire to increase the size of his company during a period of national industry consolidation. WPS acquired natural gas utilities in Michigan and Minnesota earlier this year.

The parent company would operate under a new name, which the companies have told employees would be selected by the end of August.

In filing their application, the utilities asked that the ICC approve the deal by Dec. 28 so that the sale can be completed "on or shortly after" Jan. 1.

Schott said the companies' timeline for the regulators to act on the deal is "super-aggressive" but "achievable."

"There are genuine reasons to get it done by January 1st, but we think that's achievable," he said.

The 295 jobs amounts to 6% of the 5,000 workers for both companies, excluding employees in both companies' competitive energy businesses, Schott said. That is less than the 8% of jobs typically cut following a utility merger, according to a review of mergers by the companies' consultant Booz Allen Hamilton, a filing says.

In addition to the Illinois Commerce Commission, the deal must be approved by the Federal Energy Regulatory Commission and the Federal Trade Commission. The state Public Service Commission of Wisconsin also will review the deal. In addition, the shareholders of both companies must still vote on the deal. Votes are expected between Oct. 1 and Dec. 31.

The job cuts are linked to the $77 million in merger-related savings over five years that the companies said would be provided to ratepayers in Illinois. Another $80 million in merger-related savings over five years would be derived from the companies' Wisconsin utilities.

Asked whether Wisconsin ratepayers will see some of the savings, Schott said the company plans to tap merger-related savings to hold its costs down and prevent Wisconsin Public Service customers from seeing a price increase in 2008.

The company plans no increase in utility operating costs from 2007 to 2008, he said.

For its Wisconsin customers, Wisconsin Public Service has asked the Public Service Commission to increase rates by 14% in 2007. Under a plan filed recently with Wisconsin regulators, the 2007 increase would remain in effect for two years with no increase foreseen in 2008, Schott said.

In Illinois, Peoples' natural gas utilities proposed recently to delay a rate increase from 2007 to 2008, and then delay their next rate increase until 2010, the companies said.