American Electric Power offers buyouts to employees in cost-cutting move

AEP to cut up to 10 percent of its workers

COLUMBUS, Ohio — American Electric Power Co. Inc., one of the nation’s largest power generators, will trim its work force by as much as 10 percent and take other cost-saving steps to cope with sluggish demand.

The utility is hoping between 1,000 and 2,000 of its nearly 22,000 employees will accept buyout offers, spokeswoman Melissa McHenry said Thursday. It also will look at cutting operations and maintenance costs.

If the utility does not get enough volunteers or achieve the necessary cuts through other measures, they may have to look at additional cuts, which could mean layoffs, she said.

In letter sent to employees on Wednesday, CEO Mike Morris said the measures are necessary to keep the company successful.

“We must realign our cost structure to the new economic realities we now face and find significant savings this year that are sustainable,” he stated.

Like other utilities, AEP struggled as power demand fell during the recession, particularly from industrial companies. Electricity consumption fell in 2008 and 2009, the first consecutive drop in 60 years.

Edward Jones analyst Paul Franzen said voluntary buyouts are becoming a trend in the industry as utilities cut costs to deal with weak demand.

Duke Energy Corp. said this week that about 900 employees have accepted voluntary buyouts under a cost-cutting program. That’s about 10 percent of the workers eligible for the buyouts.

Dominion Resources, a Richmond, Va., utility, said Wednesday about 8 percent of its work force, or about 1,400 employees, have accepted buyout offers that the utility made to about 4,800 workers last month as part of a cost-cutting program.

In 2009, AEP’s sales declined 6 percent, which included a 16 percent drop for industrial customers. Its earnings were flat at $1.4 billion, or $2.96 per share.

AEP, based in Columbus, Ohio, has 5.2 million customers in 11 states. Among the Texas cities AEP serves are Corpus Christi, Abilene, McAllen, Harlingen, San Angelo, Vernon, Victoria and Laredo.

The company set an April 30 deadline for employees to take its buyout offer and the job cuts will take effect by May 31.

AEP shares fell 15 cents to $33.75 in afternoon trading.