Public Service denies that any age discrimination was involved in the layoffs. Stutz calls Rust's lawsuit "an unfortunate aspect of downsizing" and says many employers who go through large layoffs see a spate of lawsuits from workers who are let go. "We feel it's a natural outcome of any job reduction that you see these kinds of suits," he adds.
The company has eliminated 1,700 positions since 1994. Public Service now has about 4,800 employees, and hundreds more will lose their jobs after the merger goes through.
The downsizing is essential for the company to stay competitive, Stutz says. Many consumers may find it strange that Colorado's largest monopoly power company worries about competition, but Public Service is convinced that the days of guaranteed profits and captive customers are coming to an end.
Although the time when a typical homeowner can choose what company supplies him with electricity is still a long way off, companies like Public Service have reason to be concerned about losing their largest customers. A nationwide grid of power lines has made it increasingly easy to move power from one part of the country to another, and some industrial users have found ways to buy cheaper power from utilities hundreds of miles from home, a practice known as "retail wheeling." Many large companies and institutions are also producing their own power independent of Public Service, including Coors Brewing Company and the University of Colorado.
"Deregulation is coming for the utility industry," says Stutz. "We can't operate in the same manner we used to. We're going to go from a monopoly industry to one that is market-driven. We have to be the low-cost provider in our area. Downsizing was necessary for us to streamline our operations."
And the downsizing continues. Public Service employees, who are now bracing for the post-merger round of layoffs, resent the package deals for top PSC managers. "You're getting laid off with a minimal severance package, and they get beaucoup bucks," says one employee who asked not to be named. "Del Hock said nobody has a right to lifetime employment and then gives himself a multimillion-dollar bonus."
While employee anger at the bonuses wasn't unexpected, the vehement protests of Public Service shareholders, who will all get stock in the new company, took PSC execs by surprise. "The shareholders feel the golden parachutes are unneeded and outrageous," says Gerald Armstrong, a longtime Public Service stockholder. "Why do they need golden parachutes when they're automatically rehired for the new company? The shareholders have never had any benefit from golden parachutes."
Adding insult to injury, those who own stock in the company will be paying for the bonuses, since Public Service has already told Colorado regulators that it won't pass that cost on to ratepayers. Many shareholders say they feel helpless to stop the $20 million in executive bonus payments. "I think it's obscene," says Harry Methner, another Public Service stockholder. "There's no call for it. It's un-American to milk the company like this. I don't care if its Public Service or US West or Storage Tech; it's not needed for these people to draw this kind of dough."
According to Methner, most of Public Service's stock is owned by mutual funds that don't care about huge executive bonuses as long as the value of the stock is rising. As a result, he says, "there's very little you can do but grouse."
Public Service insists the payments are necessary to keep its executives from jumping ship during the merger. After the deal, while both Public Service and Southwestern will continue to operate under their current names, they'll be run by a new Denver-based parent company known as New Century Energies Inc. That means some of the current executives may see their jobs eliminated.
"We want to give some assurance to these executives that they'll be compensated if they stay," Stutz says. "You want to make sure you retain your top-level executives through a difficult time."
The $20 million compensation package for nine Public Service executives was approved by the company's board of directors. The fourteen-member board includes Public Service chairman Hock and president Brunetti. Others on the board are well-known in Denver business circles, including Tom Stephens, chairman of Manville Corporation; Barry Hirschfeld, president of A.B. Hirschfeld Press; and Will Nicholson, chairman of Rocky Mountain BankCard System Inc.
Members of the board receive $30,000 a year to attend monthly meetings; vacancies are filled through nominations by board members. Methner describes this closed system as a "CEO's union," and he and other critics complain that corporate board members often spend their time trying to feather each other's nests. "The board members are all CEOs of other companies," Methner says. "The board of directors will vote for anything. The fairness of America is suffering in the boardrooms of America's corporations."