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Firms Drained by Energy Conservation

July 12, 2002|KELLY YAMANOUCHI | TIMES STAFF WRITER

Karen Caplan runs a produce distributing business in Los Alamitos that has seen its energy costs rise 38% this year, despite a series of steps to cut power consumption.

Utilities and state officials are urging conservation to help prevent blackouts and shortages during the current heat wave, but Caplan and other business owners say they already are doing all they can to cut usage.

Caplan said her workers turn down lights in the office during peak energy-use periods and cut the number of copy machines left on every day. The company also installed an energy-saving air- conditioning system.

Caplan tried turning down the cooling systems in temperature-controlled rooms, but the floors "sweated" and created a safety hazard, she said.

"We feel that we really exhausted the options with what we did," said Caplan, president and chief executive of Frieda's Inc. and the daughter of company founder Frieda Caplan. "We could move out of the state--that would save energy. [But] when you're in a building with a long-term lease, you don't have a lot of options."

Other companies echo Caplan's complaint, saying the only thing left would be to shut operations--which they reject as too costly.

"I think we've maxed out on conservation measures--unless we started using flashlights," said Victor Franco, a spokesman for the Miller Brewing plant in Irwindale. "We honestly feel that we are at our limit."

The Miller brewery, which employs 750, has energy-saving lightbulbs and shuts operations including steam-generating systems and cold storage when they are not necessary to keep production flowing.

But Miller pulled out of an interruptible-power program designed to help the utilities weather shortages. Under the program, customers that agreed to have their power cut during shortages got a discount price for electricity.

Franco said the power emergencies in 2000 and 2001 came much more often than many businesses expected, and for Miller Brewing the cost of shutting down was so high that the plant temporarily shifted some of its production schedule to other facilities.

"We decided that being on the interruptible rate was not the best business decision," Franco said.

Miller isn't the only company to back out of the interruptible-power program.

Southern California Edison won't reveal the number of customers that remain on the plan. But the utility, a unit of Edison International in Rosemead, says it has about 650 megawatts assigned to interruptible customers--compared with more than 1,000 megawatts last year. One megawatt fuels 500 to 1,000 homes.

Businesses Fear Outages

As bad as high prices are, most business owners seem to agree that unscheduled power outages are worse.

At Integrated Micromachines Inc., an optical switch manufacturer in Monrovia, the electricity bills soar higher than the rent during the summer, said Art Huskey, chief operating officer. This summer, he is expecting monthly electricity bills as high as $70,000, compared with $50,000 for rent.

But "the biggest concern I have is unplanned outages," he said, noting that an unscheduled interruption can shut operations for two days.

"It's very severe, especially for manufacturers," said Jack Stewart, president of the California Manufacturers and Technology Assn. "If you're a manufacturer in California, you either have to be more productive in your operations or you're not going to survive."

Overall, California has cut its energy use. Monthly peak electricity demand was 11.2% lower in June compared with two years earlier, said California Energy Commission spokeswoman Claudia Chandler.

But price remains an issue. Stewart said a recent study commissioned by the manufacturers association and conducted by the Milken Institute showed that California energy costs average 93% higher than the national average.

"When companies get those higher [energy] rates, they juggle them for a couple of months, and then they see they're unable to continue to be profitable," Stewart said. "What happens is they start laying off workers or they start moving plants to other states."

Rod Van Bebber, senior vice president of distribution at cooperative-owned wholesaler Unified Western Grocers in Commerce, also is concerned about higher electricity rates and signs of continued energy supply problems.

Tough on Smaller Stores

For independent grocers that compete with nationwide chains such as Albertson's Inc., Ralphs parent Kroger Co. and Vons parent Safeway Inc., "it can be a death knell to them," Van Bebber said.

"California's already a very expensive state to do business in," Van Bebber said.

Los Angeles Area Chamber of Commerce President and Chief Executive Rusty Hammer said businesses need longer-term solutions beyond conservation to stabilize California's energy market.

"We may dodge another bullet, but we're not going to dodge that forever," Hammer said. "Ultimately what's going to have to happen is there's going to have to be regulatory stability, and there's going to have to be a commitment to more capacity."

Still, some businesses are finding ways to cut energy usage.

Retailers including Wal-Mart Stores Inc., Sears, Roebuck & Co. and Target Corp. are receiving rebates from the California Energy Commission for replacing or resurfacing their roofs with paler, energy-conserving ones.

Wal-Mart, for example, is set to receive nearly $50,000 in rebates for two stores in Corona, the commission said.

Farmer John in Vernon is another company ready to make energy-saving changes this summer, by raising refrigeration temperatures in its pork-processing operations, said spokesman Ron Smith.

But Smith said Vernon's municipal utility has yet to call on Farmer John to cut energy usage.

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