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Energy Casualty Report Press Release
Stories 1 through 13 reflect companies that already closed facilities, laid off workers, canceled some production or stopped plans to expand 1 To the Men and Women of X For over 50 years, X has made California its home, and with all of your help and dedication, the Company has grown and been successful. However, for over 12 months now, we have been facing an uncertain future due to the power supply problems. As a means of controlling costs, X has for a number of years participated in an electricity program that has recently brought much risk and increased costs to our operation. Last year alone we paid heavy penalties to keep running in order to satisfy our customers and remain competitive. When we tried to leave the program last November, as our contract permitted, the State unilaterally changed the program so that we couldn’t. In addition to the severe financial penalties incurred by us and the impact on yourselves due to these repeated power “interruptions” at little or no notice, we now face huge increases in electricity costs of over 50%. Also, this year, we have seen an unprecedented downturn in the semi-conductor and computer industries, which together account for most of our sales, resulting in sales of less than half our original projections. Major multi-national semi-conductor manufacturers, computer manufacturers, and disk drive makers have all announced substantial cutbacks in demand for their products in the last few months. This has forced us to impose cutbacks of our own, with severe disruption and financial impact to us all. For these reasons, today, and with much regret, I have to announce the closure of X here in California. We will be phasing out our operations here starting at the end of September, and expecting completion by year-end. I would like to stress that this decision in no way reflects on your individual performances or the support you have given me and the Company, and you must bear no blame for it. We have chosen to notify you all as early as possible, so that you have time to plan your future. We will be visiting with you all over the next couple of days to discuss how this effects you. I am truly sorry that this decision has had to be made, as I know it will place new burdens on each of us. We will do everything that we can to help each of you through this very difficult period. 2 Company X is a steel mini-mill that recycles ferrous scrap metal into steel reinforcing bar (rebar) that is used in the construction of concrete structures such as freeways, stadiums, runways, bridges and buildings. We are the only steel mini-mill in California and we serve markets primarily in California, Arizona and Nevada. We produce and sell more than 500,000 tons of steel annually. We estimate that with the June electric bill (which comes in July) Company X cost for electricity will increase nearly 115% from last year. The 1 cent per kWh surcharge instituted in January increased our electricity bill by about 27%. We estimate that the most recent increase will raise our bill another 70%, for a total of about 115% (assuming we continue to use electricity as we have in the past). Our total annual cost for electricity in the future will exceed our total cost for salaries, wages and benefits for the 350 people we employ. To mitigate this increase, we are currently not producing product during the hours from noon to 6:00 PM and may continue to do so through September. Normally we run the plant 24/7, so we are not shifting load or production to mid-peak or off-peak hours; we can only curtail. At this time we have not laid off workers. Instead we are encouraging our employees to take vacations, reduce overtime, catch up on “house cleaning” and maintenance and we are not hiring much in the way of temporary summer help. Attempts to raise our prices in response to increased electricity and natural gas costs have been met with great resistance. Cheap imported steel has made increasing prices very difficult. 3 The (Plant 1) power bill increased 59% over the same period as last year. Our sister plant in Mass. can ship product into the west cheaper than we can manufacture in LA. Competition outside of California has just taken a large piece of our business in the west which will cause 28 people to be layed off at the end of August. The economy has affected our business as well as our competitors which means all our cutting costs and bidding on each others present business. Additional power increases will make us even more uncompetitive against out of state suppliers which will mean further layoffs and deciding if California is a place to stay in the future. Our equipment can be moved easily as we have done elsewhere when the location has become uncompetitive. (Plant 2) power costs have nearly doubled since January. From $0.055/kwh to $0.101/kwh. When running at capacity this represents an increase of ~ $115,000/month. This facility makes paper for gypsum wallboard. The primary raw material is 100% recycled paper. 4 This does not directly address the impact of the rate increase proposals, described below, about which AMD is very concerned. But I think it does address the likely outcome in terms of cost to the AMD R&D enterprise in Sunnyvale, California of the current instability in electric power supply, resulting from the constant tweaking of the power supply system business model by the California legislature and California/Federal regulatory agencies. It describes AMD’s current response to the latest change in transmission service policy. AMD has embraced the OBMC plan as a way to continue operating R&D efforts in California. A key message is that now our survival is dependent on OBMC continuing to exist. AMD is continuing to invest in our California facility, hopefully with some expansion, with OBMC as critical to our operations. AMD’s production has already left the state of California. The current concern is that AMD does not want to loose our R&D capability as well. 5 The increase in electricity rates has had a major impact on the bottom line of the plant. In addition to the projected increase of $3 million for electricity this year alone, we have been forced to lease generators to ensure that our process is not interrupted due to blackouts or curtailments. The cost of these generators is over $2 million per year. In addition, countless hours were expended in engineering for the installation of these generators and plans for reducing electricity usage throughout our facility. The total cost is well in excess of $5 million to this facility alone. As a result, we are in a hiring freeze which does not allow us to replace anyone who retires or leaves the Company at this time. This has a detrimental effect not only on X as a Company and its profits, but also on the community with less good paying jobs available to the people of California. I hope the above information helps you in your quest to inform those individuals that the bail-out of Southern California Edison at the expense of business is the wrong decision. 6 We have a paper plant that is closing down, primarily due to increased power costs. Shasta Paper Mill, if it closes (it has a sale pending) will put 400 workers out of work. Trish Clarke, Shasta County Supervisor, who represents the area where the mill operates is quoted in the July 24 issue of the Valley Post, in Anderson (Article by Elizabeth West Editor) “The county as a whole would be deeply impacted. Our main concern is for those 400 employees and the impact on their families’ lives. Those jobs cannot be replaced in this area. We must do everything in our power to keep the mill running.” Quoting for Elizabeth’s West’s article again “Troubles escalated last winter when staggering natural gas and electrical energy costs forced the mill to shut down for a week in December. The mill was able to set up an arrangement with neighboring Wheelabrator Shasta Energy Company for steam and some power to eliminate the need for natural gas. Wheelabrator was unable to get out from under its total commitment to Pacific Gas & Electric to be able to provide electricity to the mill. During the shutdown, the mill laid off over 75 employees and restructured its product line. It is currently manufacturing 12,000-13,000 tons per month of coated, find grade paper. Continuing high electric bills have doubled in the last year. According to mill management, PG&E bills have gone from a typical $750,000 to over 1.5 million per month. 7 With the recent rate increases, our July bill for electricity more than doubled from the same time last year despite the fact that we were able to decrease our peak electrical demand by 17 percent in July 2001. (Total usage was down 4 percent for the month.) We’ve invested heavily in energy conservation measures to achieve these reductions – more than $70,000 this year alone and have budgeted another $1.5 million for energy efficiency capital improvements in the next year. We’ve closed one product line, shifted some portions of our production from daytime hours to the graveyard shift and received the active involvement of our 200 full-time employees in reducing energy usage. There is very little else we can do in terms of conservation—short of shutting down. We are not in a position to pass the higher production costs onto our customers. California food processors already are among the most vulnerable in the state to the impacts of higher energy prices. Our chief competitors are not in California, but in Texas, Utah (where our sister salt plant pays 2.9 cents per kw for electricity) and elsewhere where the production costs are much lower than in urban California. Cargill Salt Newark, CA 8 I have a plastics company that manufactures very low-margin plastics products as a client - I cannot divulge the name of the company at this point, because of confidentiality reasons. The company contacted me in November after they had experienced frequent interruptions of electric power service since they were on an interruptible rate. They asked me to find a site for them outside of the state of California to which they could move the energy-sensitive portions of their operations. We found them a site in Texas with a brand-new 100,000 square foot building. The long-term (5 year) energy contract is for 4.5 cents per KwH for a 6 Megawatt load. The community provided them with $2 million in cash to pay the relocation costs and wrote down the building costs by another $2 million. In addition the state of Texas is providing complete recruitment and training services. The company plans to hire 125 persons in the next three years and gradually reduce the size of its California operations while increasing the size of its Texas operations. If the energy crisis had not hit this company so hard they would have never started looking for a new location for expansion, but now that it has it is likely that this company will lay off over 100 California workers (workers who are at the lower end of the skills scale, by the way, in the most economically depressed socio-economic group). 9 We are a small furniture and custom wood panel manufacturer near South SF and with the downturn in the economy are struggling to keep our company solvent. We employ 45 people, have had to lay off 3, and are considering a number of others if things don’t change dramatically soon. We just got a 79% increase from PG&E and due to our dependence on machinery to produce our products, we are heavy electric users. Any help would be greatly appreciated. 10 Specifically, the hostile business climate in California regarding compliance, legislation, and now most recently exorbitant utility rates in all likelihood will result in a relocation of our operations to either Texas or South Carolina next year. This is unfortunate; however, I believe this rigorous climate is intentional in regards to the actions taken by government. This is confidential information regarding our potential relocation so please handle it as such. 11 X has decided to send production equipment to our other facility in Alabama. One reason is the higher cost of doing business in California for which electrical cost is a factor. Other area’s which have been affected: Hiring freeze Capital Investment We are working with SMUD to determine what if anything can be done to improve our situation and we are thankful that we get our electricity from them considering how much higher it might be if we got it elsewhere. If you would like to get more specific or have questions please feel free to give me a call. 12 Our company is going through a transition into lean manufacturing and all divisions are being measured on how efficient they operate. An immediate affect of the rate increase is that we are stressed to improve production efficiencies to perform as a profitable manufacturing division, and these production improvements are being consumed by the rate increases from PG&E., efficiencies that should be helping the bottom line. Unfortunately, we have also experienced layoffs in our efforts to improve plant efficiencies, which are again being eroded by utility rate increases. We do not even have the luxury of raising our product prices to help offset these utility increases, because that would hinder our competitive edge against our competitors. We have at this facility 180,000 square feet of production space that is air conditioned, and we haven’t been able to turn them on this year due to the rate increases and the need for conservation. We also have invested $85,000 in new lighting to help offset the power crisis, which will pay off in the long run, but we are feeling the pain of the cash outlay this year. I would like to think that this division is here to stay, but with the rates going out of control without any prospect of it getting better in the future, I couldn’t blame our corporate office if they did decide to consolidate this division into other divisions located elsewhere in the US where power is cheap and reliable. We already have a challenge in California with the highest facility cost per square foot compared to our sister divisions located in the Midwest and eastern United States. We also had to install a generator for our customer service department to ensure that we could take orders during rotating outages, outages that haven’t materialized. It appears generators and utilities have manipulated the market to jack the price up to where they will make windfall profits off of manufacturing now and into the future, not only with electricity, but also with natural gas. I don’t mind paying fair market value, but California is being crippled by this price gouging, and it is the end user that is suffering the most. If there is any way that we can help, please let me know. Recent Articles on Plant Closures Excerpt from Porterville Record PORTERVILLE - Porterville secured the Wal-Mart distribution center and Foster Farms poultry processing plant, but lost Jostens, Water Specialties and now Standard Register. Those losses are not good for a community that has worked hard to attract those kinds of businesses, said Porterville Chamber of Commerce President Daren Griswold. "That's going to have an impact on the community. We're trying hard to bring in well-paid, secure jobs. This is a huge step backward," Griswold said. The Standard Register plant, which closed July 20 after 30 years of operations, employed 210 people. They worked in three shifts, printing business documents at the plant. The company had announced in January that it was implementing a "renewal plan" that would reduce production capacity by 30 percent and eliminate 2,400 jobs nationwide. Although there was no prior warning that the Porterville plant would be among those affected, company spokeswoman Tara Henriksen said some of the Porterville employees may have anticipated the closure. Plant manager Phil Jones, who has worked for the company for 30 years, said Wednesday that he believed the business climate and the prospect of rolling blackouts in California contributed to the decision to close the plant. He said the profit margins were smaller in California than in other areas, like the Midwest, because of air quality permits, overtime guidelines and energy costs. Jones, 53, who managed the Porterville plant the past nine years, commuted from Hanford. He estimated that of the 210 plant employees, about 70 commuted from the Hanford area, coming here after the Hanford plant closed. All employees, he said, would be receiving severance packages based on the number of years they worked for Standard Register. In addition, they will remain on the payroll for the next 60 days. The severance packages would begin at the end of the 60 days. The company also is working with the state employment office to try to find new jobs for the workers. Hourly pay at Standard Register ranged from $9 to $19.50, he said. Those types of wages are not easy to find in an area that averages 17.1 percent unemployment. Statewide unemployment figures for June showed 5.1 percent seeking work. In Tulare County, the unemployment rate is 14.3 percent. |  | Stories 13 through 34 reflect companies that are in danger of laying off employees, moving facilities or canceling expansion plans in California 13 This is a correction from the first report. Libbey Glass has been moved from Casualty to Casualty Watch. They have not layed any employees off as a result of the rate increase. This letter addresses the recent huge electric rate increase imposed upon our business by the CPUC. We trust you and the CMTA will also take our comments, concerns, and passionate pleas back to the responsible people in Sacramento. The new electric rates recently established by the CPUC are disproportionately unfair to industrial manufactures. The new rates resulted in an overnight 85% increase in electric costs to Libbey Glass. I understand many other local businesses were hammered even worse. This is especially difficult for a manufacture as Libbey that operates 24 hours per day, 7 days a week since we can not move our load to an off peak power period. Over the past several years we have implemented many energy conservation programs and procured new energy efficient equipment, including low energy lighting and more efficient motors and controls just to survive in an international market. We have endured power interruptions, loss of production to other out-of-state Libbey facilities during shutdowns, and unbelievably high natural gas prices. We have even rented portable stand-by generators just so we can minimize layoffs to our 300 employees at the City of Industry facility. We continue to try to work through this energy crisis in California. But it is becoming more difficult, more costly and more frustrating. Some of the reasons for the energy crisis are a result from past mistakes or from others outside the State. But the current action by the CPUC to nearly double our electric rates appears punitive and is difficult for us to understand. We ask that the legislators review the new rates and compare the increases for manufactures to that of other groups. I’m sure they too will determine that the industrial rates are disproportionately higher, and we ask that they pass legislation to correct the problem. We need these rates reduced now so that we can be competitive and stay in business to service our customers and provide jobs to our people in California. On behalf of our Libbey associates, customers and suppliers we thank for your support and look forward to hearing from you on this and other energy issues. 14 We are a manufacturer of plastic injection moldings for the medical industry. We just received our June bill from SCE with sill included partial winter rates. May bill $25K, June bill $43K. June prior year $29K on approximately the same dollar volume of production. We definitely feel the pinch of this along with the minimum wage and insurance increases. Competing from off shore is bad enough, but they aren’t as difficult as our own government. Go figure. We are still in sticker shock at the 73% increase in our July electrical bill. This represents an increase of $23,000.00 in one month over prior usage at the same level. At this rate we will loose $250,000 off the bottom line. Because our competition in other states or even other parts of CA that are not affected by the energy screw-up ( ie LA City and Riverside), we can not pass along these costs. We have not had a change to figure out how we are going to cope with this problem. It is totally unfair that business shoulder this burden alone. We are currently working on a potentially large expansion project with one of our international customers for a new project and I have to sadly say, we are giving up on CA because the Leaders (and I use that term loosely) can not even demonstrate light at the end of the tunnel concerning this and other problems. Better to look where there is more stability. This is so frustrating, I’m almost at a loss for words. Add this to all the other bad legislation being considered or passed up in Sacramento and you have to wonder if our leaders weren’t hired by competing states to sabotage California. As the old saying goes, with leaders like ours, who needs enemies. 15 We are one of P.G.&E.’s largest customers. Our electricity bill has doubled since March of this year which is about a $200,000 premium per month! Future economic decisions will definitely be affected. Add to this the difficulty in this state to install on-sight power (i.e. gas turbine generators), and it is apparent that doing business here is becoming impossible! Our business is seeing a 10 - 20% drop in shipments compared to last year. Combined with this slowdown is an increase in production costs from energy for our operation (noted above) and energy surcharges to us from our suppliers. We have explained to our 250 employees and hundreds of suppliers and customers, how serious this is. 16 On an annual basis, we spend <$700,000.00 for our power needs and with the new rates are expecting to spend >$1,200,000.00 to meet those same needs. This has forced the company to take a hard look at the operation and start economic analysis of all of the California operations. Not only due production facilities operate against an enormous environmental disadvantage, now we must try to be competitive with the increased power costs. It won’t take long if it keeps going. 17 We have not yet received an official bill but SCE has run our last 12 Months of usage through their billing model and as our load is very steady it Will be quite accurate. Also I have done it by hand and gotten the same results. As compared to calendar year 2000 our new electrical costs will be 156% higher for the same usage. From 4.3 cents/kWh to 11 cents/kWh. (Note - Calendar year 2001 will be in between these as it is a mixed rate year. A small amount, about 0.8 cents, of this difference is from a shift to a higher amount of firm but we still consider it part of the increase as it was required to achieve equivalent reliability.) 18 We have not yet seen a power bill reflecting the new rates. Should see next week. Some counter-measures we are taking or considering: Have installed a backup generator at one facility to burn produced gas to generate power to allow our oil production to continue unabated. The problem with this is that the gas we are burning has a higher sales value than the electricity replaced. The price of electricity still does not reflect the cost of its production. Evaluating a cogeneration unit at another site. Economics look meager due to the very low price ($0.04/kWh) we would get by selling excess power back to grid. Also, due to regulatory land use constraints, we cannot install and operate the cogen for longer than about 4 years. Furthermore, the power and waste heat can only be used by ourselves or immediate neighbor due to regulations, so any excess power we generate goes to SCE at substantially below market rates and the excess heat cannot be utilized. If we could get market rates for power sold to the grid and/or sell waste heat and power beyond immediate neighbor, we could make this an economically viable project. Construction of a cogen unit we had begun installing two years ago at an LA area site, was stopped when the adjacent neighbor who was to buy heat and power from the unit, breached the contract. The neighbor was a local school district who has recently sued us for failing to provide them with affordable power. 19 We are on interruptible rates and have incurred a total of 17 power interrupts since the first of the year. Each interrupt causes and additional 6-8 hours of production losses due to phased “soft” start-up operations. Taking our facilities off line for the usual 4 hour period of the interrupt plus another 6-8 hours during start-up operations, lessens the amount of in-state (Southern California) natural gas supply by about 6 million cubic feet (enough gas to supply about 30,000 homes) for each interrupt. 20 Our subsidiary which is on PG&E suffered a significant increase in electrical charge in the latest billing as follows: Period Ending 5/18/01 $0.0977/kwh Period Ending 6/19/01 $0.1452/kwh This “little” 48% adjustment added $12,284 to our monthly cost. 21 Our rates increased no more than fifty percent in total. However, we have reduced overall consumption ten percent while increasing manufacturing capacity – essentially we rigidly kept up preventative maintenance and reduced lighting loads, and promoted energy conservation, coupled with an unusually lower overall temperature for the hot season. The above is an estimate in comparison to our prior years rates under I6 before “failure to interrupt” penalties. 22 This proposed business rate increases unfairly burden California business at a time they can least afford increased costs. At present, our Company has taken all possible means to hold down our electricity usage. We compete in a world market, most of which does not suffer unreasonable energy cost increases and certainly not increases to bail out incompetent legislation and energy provider greed. Certainly, we can hold the line with prices on our products for only so long. We are over 700 people here, making (products) respected throughout the world. Our manufacturing competition in Asian countries does not carry any electrical cost of the nature that SBX2 78 will impose unfairly on us. Our brand name has a wonderful history and being a California manufacturer is a tremendous part of this heritage. The rising energy costs X is faced with in our (other) facility are creating more and more problems as we try to compete in a global manufacturing environment. Even with the strength of the X brand name in our industry, we are battling competitors with products made in Korea, China, Indonesia and other parts of the US. In order for X to continue as an industry leader, we must always offer our retail dealers and end user the best value possible with all our products. The rising energy costs make this more and more difficult....and as prices for our US made products increase, we can track a proportional reduction in sales and overall company income. Please do not punish the business community (manufacturing plants with significant energy consumption) for the current financial distress of Edison and PG&E. Companies like ours are the heart and soul of what make California a great place to produce world-class products. 23 We have reduced our energy usage January 2001 - May 2001 about 11% with no decrease in energy bill compared to last year. In June we made a concerted effort to reduce usage (primarily in the peak hours) and have succeeded in reducing it about 18%. Our bill for June is $47,488 vs. $20,355 last year. We have seen a 133% increase. This increase is neither fair nor justified. I must justify our company’s continued presence here to our management back east and the State of California hands us this! Our people are doing an outstanding job working with us and making substantial operating improvements but are being sabotaged by the state. 24 This information relates to three production facilities located in PG&E service territory in the greater Oakland Bay Area. - Avg. increase in cost per Kwh - June 2001 vs. June 2000 - 113%. - Estimated annual increase in electrical costs - $10.7 million (from $12.2 million to $22.9 million), or 88%. - $10.7 million increase in electrical costs reduces our Earnings Before Interest and Taxes (EBIT) of the 3 plants by 26%. - Combining the effects of actual natural gas prices and electricity (assuming all increases took place 1/1/01) for the first 6 months, our EBIT for the 3 plants would be reduced by 69%. 25 Monthly energy cost has doubled—in fact it went from $7,000.00 per month to $14,000.00 per month. This is ludicrous. How can we compete with companies in Nevada, Arizona, or in fact Maryland? This impacts all companies in California. How is California to compete in the national or world market? 26 The energy costs at X Pittsburg California site doubled in 2000 compared to 1999, and they doubled again in 2001 compared to 2000. The net effect was an energy cost increase of $6.5 MM in 2000 and almost $9 MM during the first 6 months of 2001. We shut down most of our site for 30 days in January 2001 due to the high energy costs. 27 You can definitely forward the impact on our company to wherever needed. Ceram-Tek employs about 20 people and is one of the only manufacturers of technical ceramics on the West Coast. Due to the current business climate, we cannot raise our prices. With China and Mexico exporting ceramics to the U.S., we do not have the freedom to increase our prices. In fact, we have been reducing prices while our electricity costs have been going up. To offset the increases, we have looked into new manufacturing methods. But, this can only go so far. If we really do want to compete with our larger competitors, we could import ceramics and resell them, thereby reducing the number of people needed. My responsibility to the company is for it to make money and to protect it. If businesses are the only entities receiving the increases, it will affect the “consumer” directly in layoffs. I would urge the decision makers to do some math, talk to businesses about our current reality, and then make a decision. 28 Some months our energy costs have been 15% of sales. Coupled with drop in sales we are headed for the tank unless we see a positive picture with new orders. We initially levied a $.03 per pound energy charge; then with recent hike by PGE we raised the energy charge to $.06 per pound. One of our largest customers has decided to leave us and move their patterns to foundries outside of California. It is always a guessing game with PGE to know what our gas and electric bills will be. Sometimes they are wrong and other times they have been late. It is next impossible to plan your business and to properly structure pricing to your customers. Who is to blame? PGE for sure is not innocent; Obviously things have happened outside their control. But for PGE to petition for authority to pay millions in bonuses is beyond ridiculous. The companies I have worked pay bonuses only when there is profit!! 29 Our Manufacturing Facility located in Torrance, has been effected by the inordinate power rate increases as follows: ---Reduced lighting and air conditiong to lower power consumption has impacted employee efficiency and comfort ---Rental costs for back-up generation equipment due to power interruptions has negative budget impacts ---Escalated electricity costs will add $1,000.000 to company overhead, directly effecting bottom-line profitability 30 I would like to bring to your attention a critical situation that threatens our business, an aluminum smelter named X located in Fontana, California, and the jobs of the approximately 150 people our business employs. We have been in business for over 32 years. It produces aluminum alloys destined for customers located throughout the United States, but also located throughout the world who manufacture parts that have, among others things, important aerospace and automotive applications. Ours is very energy intensive process. Electricity is a critical element of the process used to melt the aluminum and other raw materials necessary to manufacture our aluminum alloys. Developments in the energy industry during the past number of months threaten our ability to stay in business. Soaring energy costs put us at a competitive disadvantage both in our domestic and global markets. We compete with companies outside of California as well as like companies around the world. We are unable to remain competitive and pass along these increased energy costs. Typically budgeted monies earmarked for expansion and growth are now used to offset energy costs and to pay for programs that minimize our exposure to blackouts. Like many other businesses in Southern California we have, at great expense to our process, reallocated our labor to more effectively utilize the TOU tariffs. We believe that this matter requires the continued attention of yourself as well as all other concerned governmental representatives because it threatens the viability of many businesses and thus the California economy. 31 We are in the cotton ginning business, which is very energy demanding during the inning season. It is simply unreasonable for our law makers to think that the business community can absorb these exorbitant costs. I realize the bill has to be paid, but the message has got to be sent to the legislators that, if the sector that employs a large number of California citizens is put out of business due to energy costs, everyone in this State will suffer tremendous financial hardship. They may think that they are protecting the voting public from higher energy costs, but what will the benefit be if unemployment soars due to business’ closing their doors for good? 32 We are a design firm in Chico, California. Our rates have significantly increased. So much so, that we have had to increase our cost basis by 20%. We have seen a sharp decline in the amount of business due to manufacturing costs raising. A large portion of our business is in the economic development arena. Companies relocating to California during this crisis has dramatically changed. They are calculating the cost of doing business in California as a negative due to the cost of electricity. This crisis is affecting our growth. Please help. 33 X has realized a substantial increase in electricity cost because we opted off of the I-6 tariff and now participate in the TOU-8 tariff. I guess you could interpret this as a compound fracture because we experienced an estimated 190% percent mean increase for 2001. OUCH!! Another moderate increase to subsidize non-industrial rate payers for SCE under collections would certainly create significant financial burdens for all industrial rate payers. 34 We have gone on a stringent energy conservation plan and have reduced our usage a lot. Our bills currently are running about 20% ahead for the YTD but last month were actually 1% less than the previous year, due to conservation methods put in place at all locations in Marin, San Francisco and San Mateo. We have over half of our locations receiving the 20% rebate from PG&E and are offering a contest to the all to beat the 20% between now and September. We have been more impacted by worker’s comp rises and health insurance premiums than energy so far this year. Hope that helps. By the way we don’t manufacture but just distribute and sell as well as have a vocational training school. 35 Although the City Offices have not been that impacted, one of our local largest companies, has been hit very hard by the energy crisis. Nothing drastic yet, but it is definitely impacting their bottom line. The City itself may be in dire straits in another 6 months, if things don’t get better. We will be finishing a $20 million Wastewater Treatment Plant, that is very energy-intensive. We estimate electrical usage at $250,000 per year, and that was before the energy crisis! |