Saturday, July 20, 2013

Layoffs Possible at Vermont Yankee

Illustration of "Okuns Law"
A relationship between
GDP and unemployment rates 
Lay-offs Possible at Vermont Yankee

A few days ago, a reporter called to ask me if I had heard anything about layoffs at Vermont Yankee.  I hadn't.

However, within a day or so, a different reporter, Andrew Stein at Vermont Digger, had written an article about the (probable) impending layoffs: Vermont Yankee owner: 'Expect workforce reductions'. Using leaked internal documents, Stein concluded that Entergy workers were "essentially being asked to reapply for their jobs" including filling out an 18 page form.  Apparently, this is part of  Entergy's "Human Capital Management Initiative."  Stein  estimated a 10% reduction in force, which would be 65 layoffs among the work force of 650 people.

When the Stein article appeared, I also received an email from Entergy. It was apparently the same Entergy statement that was quoted in the Stein article. The statement included the words: "workforce reductions will be one result of this initiative."

So I guess layoffs will happen at Vermont Yankee.


For Vermont, this Vermont Yankee announcement comes closely behind an announcement of layoffs at IBM: the Essex Junction IBM plant is laying off 419 people. IBM is one of the state's largest private-enterprise employers.  In the Vermont Digger article on the IBM layoffs, Governor Peter Shumlin is quoted as saying that businesses in Vermont are desperate to hire the great workers now being laid off at IBM.  I hope that is the case.  However, to me, Vermont seems more hard-scrabble than Shumlin claims.

The Vermont Public Radio article on the Vermont Yankee layoffs quoted two people who are opposed to the continuing operation of Vermont Yankee.

  • The state is advocating against Vermont Yankee receiving a Certificate of Public Good from the Public Service Board. Geoff Collins is the state's lead lawyer in the hearings.  Collins said that the layoff  "would appear to have an impact on the magnitude of the economic benefit that they’re (Entergy is) claiming." He wouldn't speculate on the amount of effect the layoff would have on the economics for the state.
  • Ray Shadis, a long-time plant opponent, asked if Entergy was "asking permission to go ahead and lose money for another 20 years?"    

In Context

For once, I don't have cheery upbeat things to say.  I wish these layoffs weren't happening.  However, it doesn't mean Entergy is going to shut the plant down.  If anything, it shows a commitment to keep operating the plant.

Entergy's "Second Quarter Earnings Guidance" press release listed various reasons for revenue shortfall.  In my experience, companies almost always arrange a layoff when revenue drops.  They announce the layoff,  and then the company's stock usually goes up. A few months later they are hiring again.  That's my experience in working for big companies, anyhow.

In Context With Other Nuclear Plants

However, I think Entergy will try to continue to run this plant lean, and will not hire again very rapidly.  I tried to analyze plant staffing, and I came to the conclusion that Vermont Yankee has been at the high end of the staffing curve.

Vermont Yankee is a stand-alone plant, which means it has to have its own security, chemistry lab, and many other things. It cannot share these relatively fixed costs  with another unit.  For example, a chemistry lab needs about the same equipment and staff to serve a double-unit power plant instead of serving a single unit plant. So a chemistry lab is a higher overhead cost for a single-unit plant.

I did an ad-hoc financial review of plant staffing: how many people does a plant employ per MW?  With a short investigation, this is what I found.
Seabrook Station

Single or Double

The double units (two units on one site) have less than one employee per MW: they have closer to one employee per two MW.  Therefore, the double units have a clear cost advantage.  The single units run slightly less than one employee per MW. Vermont Yankee is running slightly more than one employee per MW, which is why I said it was at the high end of the staffing scale, as far as I can tell.

By the way, people knew about the economies of scale at the time these plants were built. Both Vermont Yankee and Seabrook were supposed to be one part of a two-plant site.  That didn't happen, unfortunately.

I am not happy writing about layoffs.  Getting a job is never easy, and losing a job is always hard.  But I decided to write this because I don't want to be Pollyanna.

Layoffs as Part of Business

There will be layoffs at Vermont Yankee.  I hate it and I hope that none of the people that I know are laid off. (That is selfish of me, but there it is.) However, from my analysis, these layoffs do seem to be a business decision, and will only bring the staffing down to the levels (employees per MW) at other stand-alone plants.  The "will they be able to run the plant safely?" and "are they about to go out of business?" stuff strikes me as just the usual negativity from people who hate the plant.

That said, I hate the fact that there will be layoffs.  I just hate it.

1 comment:

jimwg said...

I too sympathize both laid-off and new job-seekers in this climate. You can also bet your bottom dollar that the local media there is skunking around for that one or more ex-employee with understandable bitterness but uncalled-for sour-grapes to state that the nuke must be shut-down because I witnessed on the job...(fill in the blank).

James Greenidge
Queens NY