**W. Paul Bowers**

**President**

**Southern Company Generation**

**United States Senate**

**Energy and Natural Resource Committee**

**Topic: Domestic Energy Workforce Needs**

**Washington, DC**

**Tuesday, Nov. 6, 2007**

**Record Testimony of W. Paul Bowers on behalf of Southern Company**

> Thank you, Mr. Chairman, Ranking Member Domenici and other
> distinguished members of the committee. My name is Paul Bowers, and I
> am president of Southern Company Generation, a business unit of
> Southern Company, the largest electric utility in the United States.
> Headquartered in Atlanta, Southern Company owns and operates more than
> 42,000 megawatts of generation capacity and more than 27,000 miles of
> electric transmission lines. To operate, maintain and manage this vast
> electric energy infrastructure and to reliably supply electricity to
> our customers, Southern Company employs more than 26,000 women and men
> across four states.
>
> I am honored to have this opportunity to appear before you today on
> behalf of Southern Company and offer the perspective of the electric
> utility industry on the workforce requirements of our nation's
> domestic energy industry. These needs are an integral part of any
> discussion regarding the electric utility industry in the United
> States---both present and future---and it is my hope through this
> testimony to address the intent of this hearing by outlining several
> fundamental workforce issues that our industry faces as it continues
> to grow into this new century. First, I will describe the current
> state of the energy workforce and the demands facing the industry.
> Then I will discuss the future growth requirements expected in the
> region as well as short-term actions that have been taken to alleviate
> problems associated with current and anticipated industry workforce
> needs in the face of growing demand. Finally, I will offer suggestions
> for this committee to consider as it addresses these critical issues
> and recommends policy actions that will ensure the United States has a
> secure and abundant supply of energy.
>
> **I. The State of the Domestic Energy Industry Workforce**
>
> Recent data collected by the United States Census Bureau indicates
> that the national electric and natural gas utility sectors employ
> approximately 555,000 individuals. Half a million people, dedicated to
> keeping the lights of our country on, its homes warm, and its economy
> thriving. More than a quarter of this group, or approximately 120,000
> workers, serve the Generation (including nuclear) function of the
> sectors---namely producing the energy our nation needs. Another
> 260,000 people serve the Transmission and Distribution functions, and
> see that the generated energy safely and reliably reaches the people
> and businesses that require it. Both functions require a host of
> skilled craft personnel, who fulfill the critically important roles of
> technicians, power plant operators, lineworkers, and
> pipefitters/pipelayers.
>
> The energy demand served by the infrastructure to which these
> individuals tend has increased by an average of 2 percent annually
> over the last five years. In the Southeast, that demand growth has
> averaged 3 percent over the same period. In any event, according to
> the Energy Information Administration, the demand for energy in the
> United States is expected to increase 31 percent between 2005 and
> 2030. As this committee has recognized, such growth in demand
> necessarily requires a workforce to satisfy it. As this committee also
> appears to have recognized that, a shortage exists in the number of
> workers available to meet this demand.
>
> Internal Southern Company research indicates that the available supply
> of skilled craft industrial labor in the Southeast for 2006 was
> approximately 120,000 individuals.[^1] This figure comprises such
> service categories as operation and maintenance, environmental, and
> industrial, and includes both union and non-union workers trained as
> pipefitters/combo welders, boilermakers/tube welders, electricians,
> millwrights and iron workers.[^2] The 120,000 person number fell short
> of the demand in the Southeast for skilled craft labor in 2007 by
> approximately 20,000 workers. Moreover, that deficit is expected to
> more than double through 2011, as demand for skilled craft laborers in
> the Southeast grows to more than 170,000 persons.
>
> This demand growth reflects not only the expanding energy needs of the
> Southeast (along with the rest of the nation), but calls attention to
> an equally significant workforce issue the electricity industry must
> face: an aging workforce. According to a recent Center for Energy and
> Workforce Development (CEWD) survey, the electric and natural gas
> industries could lose between 40 to 50 percent of their Generation,
> and Transmission and Distribution employees within the next five
> years.[^3] In fact, more than 45 percent of the half million utility
> employees serving our country's energy needs are above the age of 48.
> More than 25 percent are over the age of 53. Only 13 percent of
> employees are below the age of 33. According to a fall 2006 Washington
> Post report, more than half of the entire electric utility workforce
> will be eligible for retirement within 10 years. Not surprisingly, an
> accounting for this demographic distribution of personnel results in
> projected losses in some skilled craft positions well in excess of 50
> percent.
>
> For example, more than 52 percent of Generation technicians may be
> eligible to retire by 2012. When that number is considered with the
> normal 8.4 percent attrition rate, the potential need for replacement
> Generation technicians exceeds 60 percent. Lineworkers likewise
> present a similarly significant workforce issue. In 2005, the
> Department of Energy concluded that the electric utility industry
> could suffer a shortage of 12,000 lineworkers by 2015 (assuming a
> modest 1.5 percent growth rate), or nearly 20 percent of the current
> workforce. For some organizations, lineworker retirements could
> approach 50 percent of total personnel. Vacancies of upwards to 50
> percent (and beyond) also are anticipated for power plant operators
> and engineering jobs generally as retirement eligibility grows over
> the next five years.
>
> The numbers at Southern Company vary little from national figures. Our
> 26,000 employees include 6,300 persons serving the Generation
> function, 2,500 serving the Transmission function, while the remaining
> 17,200 serve roles in Distribution, Customer Service and Support
> functions. Approximately 15 percent of Southern Company's employees
> are below the age of 33; however, more than 45 percent are above the
> age of 48. Over the next 10 years, Southern Company projects
> approximately 8,000 retirements, or 31 percent of its workforce, with
> approximately one quarter of those being skilled craft personnel such
> as plant operators and lineworkers. Retirement eligibility, however,
> will grow to 64 percent of the workforce, with approximately 46
> percent of the Southern Company Generation workforce between age 58
> and 61.
>
> Compounding these problems is a marked lacked of proficiency of
> personnel entering the workplace. Over the past two years, more than
> 2,000 potential employees could not pass entrance tests required for
> employment with Southern Company Generation. Although Southern Company
> has seen a slight increase in qualifying applicants between 2006 and
> 2007, only 37 percent of applicants qualified for employment in
> Alabama in 2007 (up from 30 percent in 2006), while 41 percent of
> applicants qualified for employment in Georgia in 2007 (up from 39
> percent in 2006). A number of sources can be blamed for the shrinking
> skilled craft labor pool. Most notable is a shift in cultural norms
> associated with skilled craft labor careers.
>
> Presently, parents, school counselors and students' peers emphasize
> the importance of completing secondary education with the goal of
> gaining acceptance to and attending a four-year college. To this end,
> some state government policies (whether organic or interpreting
> federal policy) have led to the elimination of many high school
> vocational and technical programs that previously served as
> introductory training for future skilled craft laborers. Over the past
> decade, the number of students in high school who are taking trade or
> industry-related vocational and technical courses has declined by 35
> percent. Moreover, many would-be candidates hold misperceptions about
> such positions. Once considered excellent career options, the
> high-paying skilled craft work is now seen as second class.
> Individuals also associate such work as seasonal and without adequate
> benefits, neither of which may be (and often is not) true.
>
> **II. Future Growth Affecting the Workface and Short-Term Actions
> Taken**
>
> The consequences of a skilled craft worker shortage cannot be
> understated. The North American Electric Reliability Corporation
> (NERC) found in its 2007 Survey of Reliability Issues that utility
> users, owners and operators ranked "aging workforce and lack of
> skilled workers" as the foremost cause of reliability risk. Moreover,
> a deficit of 50,000 skilled craft workers by 2011 cannot adequately
> sustain the industry growth that the nation expects in order to
> satisfy the corresponding increase in demand. The growing number of
> industry retirements that will invariably overlap with the increase
> for labor will only exacerbate the problems created by such a
> shortfall.
>
> Specifically, Cambridge Energy Research Associates (CERA) expects
> supply levels in the Southeast to fall over the next five years to
> levels that will require investment in new capacity.[^4] According to
> CERA estimates, the energy industry nationally will invest
> approximately \$900 billion in infrastructure projects over the next
> 15 years, with the South's share of such investment expected to exceed
> \$400 billion. The Nuclear Energy Institute estimates that the
> Southeast could host 26 new nuclear plants for which license
> applications are being developed. Moreover, NERC estimates the
> construction of 77 new generating stations in the Southeastern
> Electric Reliability Council (SERC) region through 2013, along with
> 3,500 miles of transmission lines as part of 183 different projects.
> Through 2025, Southern Company will require 17,000 MWs of new capacity
> to satisfy demand within its four-state control area, an amount that
> is more than 40 percent of our current capacity. In addition, Southern
> Company will be installing environmental controls over the next three
> years, for which we expect to expend \$4.6 billion and require 8.5
> million skilled craft labor hours, as well as other projects that we
> expect to consume more than 2 million skilled craft labor hours.
>
> Southern Company is not atypical in this regard. Across the Southeast,
> 55 new scrubbers to reduce sulfur dioxide emissions are planned over
> the next several years that will, in total, require an estimated
> 35,000 workers. The skilled craft labor required to serve these needs
> does not, however, exist for the utility industry alone. By way of
> example, Southern Company understands the new ThyssenKrupp steel plant
> in Mobile, Alabama will need skilled craft workers to satisfy
> approximately half of its 2,700 total workface, while the new Kia
> automobile plant in western Georgia will require a substantially
> similar amount of craft labor as part of its approximately 2,800
> workers. Additionally, reconstruction along the Mississippi and
> Louisiana Gulf Coast in the wake of Hurricane Katrina still consumes
> the time and availability of thousands of skilled craftspeople.
>
> It should thus come as no surprise that the spiking demand and
> plummeting supply make for an impressive increase in wage expectations
> for the skilled craft laborers. And while perhaps obvious, it bears
> remembering that the work performed by these skilled craftspeople
> cannot be outsourced. Rather, it must be performed on site.
> Accordingly, in the coming years, union wages are expected to increase
> 4 to 6 percent annually. Additional compensation, such as subsistence
> (per diems, stipends) and other incentives, may become required to
> attract union labor to specific projects. Non-union compensation is
> not expected to be any different, as wages and benefits packages for
> open shop employees currently coincide with that received by union
> workers. Although the skilled craft workers certainly benefit from
> higher wages, the increased costs ultimately result in higher
> electricity rates for customers.
>
> Furthermore, the reduction in qualified skilled craft personnel
> increases the potential for quality and safety issues, and a
> corresponding lack of productivity. For example, one of Southern
> Company's Alabama plants has approximately 1,400 skilled craft
> employees on site. Over the past year, the turnover rate at the plant
> has increased to 28 percent. Additionally, the plant has seen an
> increase in the failure rate of certain quality control metrics. Such
> failures cause delays in repairs and ongoing maintenance, which
> necessarily impact productivity and result in an increase in plant
> costs. In this time, Southern Company also has witnessed an increase
> in the percentage of skilled craft workers who are either less
> familiar, or unfamiliar, with working on industrial sites. Here too,
> quality and safety concerns are implicated.
>
> Southern Company is taking steps to address the issues that it has
> recognized. In 2001, Gulf Power (one of the Southern Company operating
> companies) began its first academy at West Florida High School of
> Advanced Technology in Pensacola, Florida. Through this academy, Gulf
> Power was able to develop a feeder pool for important positions such
> as entry-level power generation and power delivery, as well as degreed
> positions such as engineers. Each incoming junior is paired with a
> Gulf Power mentor who holds a career of interest to the student.
> Incoming seniors who meet certain criteria are placed in a program
> where they report to Gulf Power during certain school hours for
> completion of their curriculum and work obligations. Since its
> introduction, the program has expanded to two other Florida high
> schools, and has produced 62 graduates, 30 of whom have been hired by
> Gulf Power or other utility or related companies (with another 26
> enrolled in college).
>
> Southern Company also provides a Summer Energy Career and Leadership
> Academy for incoming freshmen in Burke County, Georgia; facilitates a
> Summer Educators Forum at its nuclear plants Vogtle and Hatch for area
> high school and technical school educators; provides a leadership
> conference for junior students in the Mobile County, Alabama School
> District to raise awareness of careers in the energy industry; and
> partnered with technical schools in Georgia to develop a Technical
> Certificate of Credit, the goal of which is to increase the passage
> rate of individuals taking the Edison Electric Institute
> pre-employment test (and thereby increase our qualified pool of
> candidates). Southern Company also is partnering with Georgia
> technical schools to develop an electrical lineworker program from
> which our Georgia Power operating company can hire new personnel. An
> additional, but by no means final, effort undertaken by Southern
> Company involves collaboration with technical schools to develop a
> power-plant operator course that introduces students to the
> responsibilities of a plant mechanic at our Southern Nuclear
> facilities.
>
> Southern Company also has taken operational steps to address workforce
> shortage. One short-term method we have adopted in an effort to manage
> the labor demand issues is scheduling. For example, when possible,
> Southern Company plans its plant outages to coincide with
> environmental-controls construction projects in an effort to optimize
> the skilled craft labor on our plant sites. In other situations,
> Southern Company has changed the timing of its installation of
> environmental controls. In this way, we avoid having too many skilled
> craft workers at a particular location at any one time (which often
> creates high turnover, as well as quality and safety issues).
>
> Through partnerships with other industries, workforce investment
> boards, and state governments across our service territory, as well as
> active membership in community, state and national organizations,
> Southern Company also is endeavoring to increase the supply of skilled
> craft professionals. For instance, in 2004, Southern Company began
> evaluating the workforce needs in our region through the CEWD. A
> partnership among utilities and industry associations such as the
> Edison Electric Institute, the American Gas Association, the Nuclear
> Energy Institute and the National Rural Electric Cooperative
> Association, as well as contractors and unions, CEWD seeks to expedite
> the creation of educational programs, improve the skill levels of
> graduates, improve their awareness of opportunities in the utility
> industry, and increase the number of diverse qualified applicants who
> want to work for utilities.
>
> **III. Suggestions for the Committee in Development of Policy Action**
>
> Despite these and other efforts by Southern Company and others in
> industry, there remains much to be done to address the critical
> shortfall of skilled craft workers the domestic energy industry faces
> in the coming years. Resolving this challenge will not be accomplished
> without attention and support from Congress and distinguished leaders
> such as yourself. In an effort to assist the committee in this regard,
> Southern Company offers the following suggestions.

-   Increased awareness is needed on issues related to skilled craft
    labor and workforce initiatives in order to support economic
    development. As I have discussed, the domestic energy industry is
    approaching a significant demographic cliff in its skilled craft
    workforce. Addressing the problem posed by this reduction in
    available labor should be a priority for Congress, as the growth of
    the nation's electric infrastructure generally, and Southern
    Company's region of the country specifically, depends upon the
    development of a workable solution to this problem. By increasing
    awareness of these issues, the confidence of all business sectors in
    the South will improve, as will the quality of life of those working
    in it, and dependent upon it.

-   National curricula and related standards for middle and high schools
    are needed that raise awareness of careers in the energy and
    construction industries and enhance the ability of qualified
    students to enter skilled craft positions immediately from high
    school. A possible model would be Florida's Career and Professional
    Education Act. Developed through a partnership with the state
    workforce and led by Andra Cornelius, vice president for business
    relations at Workforce Florida, the act requires all school
    districts to have at least one career academy that prepares students
    for high-wage, high-skill jobs within the local economy. The act
    also requires industry certification to receive enhanced full-time
    equivalent weighted-funding, and it requires the rigor of
    articulated coursework with post-secondary institutions. In this
    way, a functioning pipeline of skilled workers can be established
    that industry can rely upon to serve its growing workforce needs.

-   Flexible teacher-qualification standards are needed that would
    permit domestic energy industry personnel to teach in the public
    education system. Additionally, career and technical education
    courses should be developed so that they meet specific quality
    standards---such as completion rates and industry and instructor
    certifications---in order to receive enhanced funding.

-   Industry-certification programs are needed in secondary and
    post-secondary schools. Current academic mandates do not award
    credit to students who participate in career technical education
    programs, nor do they provide the time necessary for students to
    participate realistically in such programs. The credit systems must
    be modified so that technical credit is awarded as part of a
    curriculum, thus allowing students who participate in such classes
    to accrue sufficient credits toward graduation. Technical education
    programs help students become immediately employable with high
    starting salaries that often exceed state averages. Such programs
    also instill technical skills in such students, and the
    certification would be portable and nationally recognized. Industry
    certification should be a component of all career technical
    education programs of study.

-   Lastly, school systems need counseling programs to encourage
    students and their parents to consider these career academy
    programs. The image of the domestic energy industry as a career
    should be one of excitement and opportunity, and not anything
    negative or second class. To facilitate this change in perception,
    school systems must educate students and their parents about the
    potential inherent in the energy industry, and how they can pursue a
    career in which they could earn a good wage.

> In summary, Chairman Bingaman, Ranking Member Domenici and other
> distinguished committee members, your support and action is needed.
> Southern Company and its employees greatly appreciate your commitment
> to this issue. On their behalf, I hope that you will carefully
> consider the matters I have raised and the requests that I have
> outlined.[^5] In the meantime, thank you again for the opportunity to
> speak with you today, and I welcome any questions that you may have.

[^1]: [See]{.underline} Exhibit 1, Southeast Industrial Craft Labor
    Demand Chart, Southern Company Generation.

[^2]: [See]{.underline} Exhibit 2, Southeast Work Force White Paper.

[^3]: [See]{.underline} Exhibit 3, Gaps in the Energy Workforce
    Pipeline: A 2007 Workforce Survey Report from the Center for Energy
    and Workforce Development, Executive Summary and Summary of
    Findings.

[^4]: [See]{.underline} Exhibit 2, Southeast Work Force White Paper.

[^5]: A copy of my biography is attached for your convenience at Exhibit
    4.