BG&E freezes hiring in hopes of saving $26 million

November 15, 1991|By Kim Clark

Acting on predictions that the economy will continue to lag next year, Baltimore Gas and Electric Co. has announced it will attempt to cut $26 million in costs by freezing hiring.

The state's largest electric utility said yesterday that it hopes to use attrition to reduce its work force by more than 400, or more than 4 percent, next year.

The company also said that it would scrap plans to hire an additional 400 workers.

Arthur J. Slusark, a company spokesman, said that there would be no layoffs and that the company would not cut back customer services.

In addition, though the number of repair contractors would decline at BG&E's troubled nuclear power plant, Calvert Cliffs, the number of company staffers there may increase, he said.

BG&E has increased the number of employees at Calvert Cliffs to about 1,700 from about 1,100 two years ago.

Utility watchers and company officials said yesterday that while investors might applaud the move to cut costs, area residents could see the action as an indication that the local economy would continue to lag into 1992.

BG&E decided to reduce its costs because its sales of kilowatt-hourshave been up only 4 percent so far this year -- even though last summer was the hottest on record, Mr. Slusark said.

And as area industries cut back because of the recession, BG&E economists lowered their estimates of future energy demand, Mr. Slusark said. Now, BG&E believes sales next year will not increase from this year's level, he said.

"This is certainly an indicator" of economic stagnation, warned Barry Abramson, who watches utility stocks for Prudential Bache Securities in New York.

"Utilities do a lot of forecasting. They count everything. They look at housing starts, employment and the like. They have their finger on thepulse of the local economy," he said.

Mr. Abramson said that BG&E needed to take action to improve its profitability, which is lower than most utilities'.

He said that most earn a profit of at least 12 percent on the share of equity that stockholders hold in the company. But BG&E has been earning only 11 percent on its owners' shares, Mr. Abramson said.

"In the world of utilities, that is a significant under-earning," he said.

BG&E reported earnings of $192 million in the first nine months of this year, up more than 4 percent from the year-ago period. But last year's earnings were sapped by repairs to the then-shut Calvert Cliffs plant.

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