Utah Power & Light Co.'s plan to eliminate 374 employees from its payroll and delay construction projects, if the utility's proposed merger with PacifiCorp goes through, could cost the state "a significant amount" of tax revenue, a state government economist said.
Cutbacks in employment and construction activity during the first five years of the proposed merger could cost the state a total $2.79 million or an average $558,501 per year in lost sales and income tax revenue, testimony filed with the Public Service Commission said."The loss of an average of $558,501 per year is a significant amount and given the fiscal shortages occurring throughout state government this revenue is badly needed," said Brad T. Barber, director of data resources for the Utah office of Planning and Budget.
Barber's testimony, filed by the state Division of Public Utilities, also downplays the impact that the merged utility's economic development programs and lower power rates would have on Utah's economic growth.
UP&L said average annual labor cuts of 75 workers during the next five years simply comply with public opinion that UP&L's revenues shouldn't go toward wages, but toward lowering rates and creating other jobs in the communities the utility serves.
"The direction we have received from customers and legislators for the past 10 years is they would rather have the money go into their communities to create jobs someplace else than in the company," UP&L spokesman John Ward said, noting savings from lower labor costs are passed on to consumers in the form of lower rates.
Employment reductions would take place through retirements and attrition, not layoffs, he said, and PacifiCorp plans to trim 500 workers from its employment ranks by 1992.
The two utilities announced their plans to merge last August, promising the union would lower UP&L rates as much as 10 percent in the next five years. The merger would make UP&L a division of Portland, Ore-based PacifiCorp and create one of the largest utilities in the West, serving more than 1 million customers in seven states. Utah regulators begin hearings on the merger May 2.
PacifiCorp claims an economic development program to be launched by the merged utility will create 6,356 new jobs in Utah within five years. But, Barber, noting that PacifiCorp has targeted the low growth area of manufacturing as the source for the new jobs, said the merged utility's goal to produce more than 6,000 jobs is unrealistic.
"If this level of manufacturing growth were to occur it would occur because of some comparative advantages in Utah which have been exploited," he said. "Many times it is market forces alone which create growth (or decline) and (it has) nothing to do with economic development efforts."
Even with Utah's myriad of economic development programs, Barber said, non-defense and non-aerospce manufacturing is lower today than in 1980.
"In other words if the level of manufacturing growth projected by UP&L/PacifiCorp were to occur, it may partly be the result of UP&L/PacifiCorp economic development efforts, or it may have nothing at all to do with these efforts."
UP&L and PacifiCorp's promise to reduce rates 10 percent over the next five years would have little impact on the state's ability to locate manufacturing facilities, the testimony said.
Based on industrial electricity costs, the rate reduction would improve Utah's national ranking from 29th to 17th in lowest cost per kilowatt hour. Regionally, Utah would remain sixth out of eight Mountain West states.
But, when considering all the factors going into selecting a plant site, low cost electricity wouldn't make Utah more attractive to manufacturers, Barber said. Utah would remain 33rd out 50 states, according to rankings by accounting firm Grant Thornton.
Barber said the rate reduction is welcome, it is a small cost of doing business and a small part of the overall business climate.
"Even if Utah's relative energy cost ranking were to improve more than shown (here), it is not likely to impact economic growth in Utah."