Avista offering buyouts

Avista Corp. told about 900 workers Monday that it will offer generous buyouts so that the Spokane-based utility can cut about $14 million or more from next year’s budget.

The invitations are going to 919 of the utility’s 1,550 total employees.

Not included in the voluntary severance offer are about 600 union workers, said Avista spokesman Dan Kolbet.

The unusual cost-cutting measure is driven by spiraling operating costs that include huge increases for medical insurance and pension payments, the company said in a summary sent to many employees.

Avista provides power to 600,000 business and residential customers in Washington, Oregon and Idaho. Its 2012 operation and maintenance budget was $256 million; a $14 million cut would be just above 5 percent of the budget.

Avista officials say it will take the next two months to find out who will leave the company.

Kolbet said Avista hasn’t established a target for the number of buyouts it’s trying to get.

“Since we don’t know how many will take it, we can’t say what the impact will be,” he said. Avista intends to use other cost-cutting measures along with the severance deal, he added.

Not all those wanting the buyout package will get it. Avista officials said workers with skills not easily replaced will not get the severance deal.

Like many other utilities, Avista has a significant number of workers who are nearing retirement. Last year 60 Avista workers took retirement, Kolbet added.

The last time Avista offered a companywide buyout was in 1995, according to previous news stories.

The current buyout has no other intention other than cutting costs, Kolbet said. “At no time have I heard anyone else suggest any other reason,” he said.

Avista’s future is clouded by both external and internal budget problems. On Monday it released a preliminary earnings report saying its third quarter earnings would be 46 percent less than a year ago.

It also warned that its 2013 earnings will fall below analyst expectations.

At the same time revenue growth from its gas and electricity customers is nearly flat, growing just 1 percent per year since 2006, Kolbet said.

“The economy is just not moving forward,” he added, saying the expectation for 2013 is for little change in revenues.

Among other concerns, the utility is facing huge increases for medical and pension costs, Avista told its employees. Medical benefits have risen 50 percent since 2005, and pension contributions are up 193 percent since that same year.

While the goal is to cut costs primarily through reductions, Avista’s memo sent out Monday said it will review its options in 2013.

That will include “further scrubbing of budgets” and possible involuntary layoffs.

The roughly 600 union workers excluded from the offer include linemen, service crews, dam operators, and other units that provide customer response and power grid management. “Those areas of our operations are already lean and carefully managed,” Kolbet said.

Reductions in those units would possibly affect the utility’s ability to guarantee good service, he added.

Similar cost-cutting measures are not needed at Inland Power and Light, a spokesperson said. Inland, the second-largest utility in the Spokane area, has relied on worker attrition to help contain costs, said spokeswoman Jennifer Lutz.

Inland has 96 workers.

Avista CEO Scott Morris could not comment on the severance plan Monday because of federal restrictions on what he can discuss. Morris is scheduled to discuss Avista’s pre-earnings report with analysts by phone today, Kolbet said.