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As Losses Mount, Companies Work Around Outages


As blackouts moved from theory to reality, many Southern California businesses spent Day 2 assessing their losses and digging in for what they expect to be a long, hot summer.

An hour without electricity may be an inconvenience for most residents. But for manufacturers and many other businesses, even a brief loss of power can generate tens of thousands in losses.

Whether shaping metal or making salsa, businesses of all kinds complained Tuesday about the lack of warning of impending outages, even as they sought sometimes creative ways to work around the loss of power.

Rattled by news reports of Monday's rolling blackouts, Industry-based El Burrito Mexican Food Products started its Tuesday shift at 2 a.m. Workers had just finished cooking and packaging the last batches of salsa and masa when the lights went out at 10:20 a.m.

"We dodged a bullet," said El Burrito founder Mark Roth. "Losing a day's production of salsa would have cost me $15,000 to $20,000."

But other companies weren't so fortunate.

Long Beach-based Delco Machine & Gear was still totaling up its losses from Monday's blackout, which amounted to at least $30,000 in lost wages and production, said Nick Campanelli, vice president of manufacturing. The company, a division of Florida-based B/E Aerospace Inc., makes parts for the aerospace industry. The sudden loss of power caused its sophisticated metal cutting and grinding machines to crash, ruining precision parts in production.

But the losses don't end there. He said employees will need to spend hours resetting the equipment. Campanelli is particularly irked that the company received no warning.

"Five minutes' notice," he fumed. "That's all I needed."

Although businesses such as Campanelli's typically receive no warning that they are about to lose power, insurance companies count the rolling blackouts as "planned events," a determination that in most cases disqualifies a business from making a claim.

"I know it must be frustrating for businesses who have the power go off suddenly, but these outages are planned by the grid operators," said Pete Moraga of the Insurance Information Network of California. "That means it would not be a covered peril in a traditional business insurance policy."

Typically, business insurance covers loss of profit and damage from unforeseen events such as fires or windstorms. The component of the policy that covers interruptions in business kicks in after a given amount of time elapses, usually 24 to 48 hours.

Business polices can be written to include unusual coverages, Moraga said, but he has never heard of a policy that covers losses from a rolling blackout.

Some companies are taking measures not to get caught in a situation where a blackout can hurt them.

The region's largest steel supplier shut down for two hours Monday after Southern California Edison called to warn of tight supplies.

"We just can't take a chance," said Lourenco Goncalvez, president of California Steel Industries Inc. in San Bernardino County. "We have a lot of safety issues. People could get hurt."

Goncalvez said the plant has multiple 20-ton and 25-ton overhead cranes that operate with electromagnetic devices, which would fail if they lost power suddenly. Falling materials could injure workers below, he said. "We have been asking to be exempt from rolling blackouts," he said.

Goncalvez said he couldn't put a price on the lost production at the 24-hour plant and said he worried more about the long term.

"Two hours is nothing," he said. "My concern is this thing will start to happen almost every day. If it will be like this all summer, you can be sure it will have dramatic consequences for the entire economy. . . . We're going to have a shortage of steel products in California. Maybe the government does not consider this is serious. We'll see."

At Sport Chalet, a La Canada Flintridge-based chain of 22 sporting goods stores in Southern California, an administrative assistant monitors the state power situation, hoping to warn any stores that are in danger of losing power, said Craig Levra, the company's chief executive.

Levra said the assistant was assigned the monitoring duties last year, when rolling blackouts were still only a threat.

The chain put in place an emergency plan--similar to what it would do in a major earthquake. Backup power will kick on emergency lights and allow the cash registers to complete transactions. Employees are instructed to escort customers from the building safely, Levra said.

Other businesses, however, have plans to remain open during the 60- to 90-minute blackouts.

When power went out at two Cheesecake Factory restaurants in Orange County on Monday afternoon, the eateries switched to serving cold dishes such as sandwiches and salads, said Howard Gordon, senior vice president of the Calabasas Hills-based chain.

The restaurants had enough backup power to operate emergency lights and cash registers. Large windows provided the rest of the light, Gordon said.

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