California business hit hard by electricity rate increase

Recent electricity rate increases disproportionately affected California businesses compared to residential consumers and some businesses are being forced to shut down or scale back, said the California Manufacturers and Technology Association of Sacramento.


By the OGJ Online Staff

HOUSTON, Aug. 1 -- Recent electricity rate increases disproportionately affected California businesses compared to residential consumers and some businesses are being forced to shut down or scale back, said the California Manufacturers & Technology Association of Sacramento.

After receiving the first electricity bill following the California Public Utility Commission mandated increases in June, many companies complained to the trade association their businesses face shutting down. The association has asked the legislature to correct the allocation of the rate increase imposed by the PUC.

"The 3¢/kw-hr rate increase shifted the costs from residential to business," said Jack Stewart, president of CMTA in a release. "Many businesses first month bills reflect rate increases of more than 100% even up to 190%."

Business complained they have borne the brunt of the rate hike to save consumers from huge rate increases. But that strategy will ultimately back fire on the consumer because layoffs will increase and communities will lose tax support, Stewart said.

The impact on business of the first big rate increase is just now being felt on the bottom line. One semiconductor manufacturer reported higher power prices were simply the straw that broke the camel's back. Richmond Technology, Redlands, Calif., said its electricity costs increased by 50%.

"For some months, we have been facing an uncertain future due to the power supply problems," Peter Willis, Richmond's general manager wrote the association. "With the unprecedented downturn in the semiconductor industries and the increase in electric bills, we will be phasing out our operations here starting at the end of September."

Libbey Glass, a unit of Libbey Inc., Toledo, Ohio, also wrote to the legislature and the trade association. "The new rates resulted in an overnight 85% increase. Our electric costs are projected to increase from $686,000 to $1.271 million annually. The industrial rates are disproportionately higher and we ask that legislation be passed to correct the problem."

Shasta Paper Mill, a unit of Shasta Paper Co., Shasta County, said in a letter to the CMTA that its electric bills have more than doubled to $1.5 million/month.

"We continue to try to work through this crisis. But it is becoming more difficult, more costly, and more frustrating," the company said.

The problem threatens to worsen if the legislature imposes the burden of servicing a multibillion bond issue to recover state power expenses on business. The trade association is lobbying the legislature to try to prevent making a bad situation worse.

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