SRP may outsource computer services

Salt River Project officials said they could outsource 40 to 50 information-technology workers’ jobs after already offering severance packages to nearly 100 employees this year.

Utility officials said they are considering the move to cut costs amid sluggish customer growth and that they have to pursue any reasonable option to keep utility rates low.

Regulators who oversee other utilities in the state are concerned with the outsourcing, particularly because SRP is a political subdivision of the state.

They said that outsourcing jobs to other states or countries would not likely be allowed at other utility companies.

SRP officials have been meeting with outsourcing companies to discuss how they would handle the utility’s computer services, and could request proposals from those companies to perform the work, said Kevin Nielsen, SRP’s information-technology services manager.

The employees who could be replaced do not deal with customer service, he said, and SRP or the outsourcing company could rehire some of them.

"We asked several vendors to come in and tell us how they would go about outsourcing," Nielsen said. "It’s a mixed bag. One has a data center in Tempe, one in Colorado, some are in the Philippines, Brazil or India."

SRP has been considering cost-cutting options for its information-technology division because an analysis by EquaTerra, an international outsourcing consultancy, showed that SRP spends more than the industry average on its computer services, he said.

Nielsen would not disclose what SRP spends on the division because he said that would tip off the companies bidding on the outsourcing work.

SRP spokesman Scott Harelson said the economy is to blame.

"Our revenues are down significantly, but our expenses remain relatively high," he said. "So we need to look for opportunities to save money and try to keep our rates low."

SRP is not subject to the same oversight by the Corporation Commission as other utilities such as Arizona Public Service Co. or Tucson Electric Power.

A 14-member board of directors governs SRP.

Nielsen said it’s unclear if the board will be asked to approve outsourcing.

Some board members said that outsourcing should be considered.

"If it comes up, we’ll look very hard at it and find out if it is really worth the savings," said board member William Arnett. "In this day and age, you have to look at everything that comes down the road."

Others said they trusted SRP management.

"I’m not there to micromanage because that is not my job," said board member Mario Herrera. "I feel very confident in the people that run these different departments."

Board member Larry Rovey said he was "not excited" about cutting jobs, but hadn’t made up his mind on the issue.

"I would expect the staff to look to economize any way we can to keep the rates low for our customers," Rovey said.

Commission Chairwoman Kris Mayes said that because SRP doesn’t have to report to her commission like other state utilities, the company faces less scrutiny over such decisions.

She would be concerned if one of the utilities under her oversight outsourced, "particularly in this down economy," she said.

The commission can influence utilities’ hiring through rate cases.

For example, when the commission approved an emergency rate increase for APS in December, commissioners directed the utility to cut at least $20 million in expenses and do it without layoffs.

"I would be very concerned about (outsourcing) at APS, TEP or UniSource (Energy Services)," Commissioner Gary Pierce said. "There would be quite a grilling over that. It would be very hard for the folks we regulate to outsource."

Pierce said he is curious if there are policies the commission or Legislature can address to eliminate the need for companies to outsource to cut costs.

"If not, and it is a significant difference in cost, I think we owe it to the ratepayers to make sure they are paying as low a cost for electricity as possible," he said. "But the savings (from outsourcing) would have to be significant."

SRP directors wouldn’t speculate on how much the company would have to save to justify outsourcing 40 to 50 jobs.

SRP has been affected by the weak economy. The company still is growing, but slowly.

As of March, SRP had nearly 40,000 fewer customers than projected, according to a report by Chief Financial Executive Mark Bonsall.

SRP reported a loss of $24 million in March alone, and reduced its planned capital expenses for the month by $22 million, according to the report.

Before offering severance packages to 99 employees this year, 83 of whom accepted, SRP cut contract workers, temps and unfilled positions.

Source: http://www.azcentral.com/arizonarepublic/business/articles/2009/05/21/20090521biz-outsource0521.html