A side-effect of Calif's power crunch: service cuts to businesses

By BEN FOX The Associated Press 1/1/01 2:06 PM

SAN DIEGO (AP) -- Rockview Dairies Inc. had a sweet deal on electricity, getting reduced rates in exchange for its agreement to reduce or turn off power use when state supplies fell below a certain limit.

But then the milk bottler's deal with Southern California Edison started to sour in the heat of summer as the first wave of power shortages hit the state.

Rockview Dairies was one of about 1,000 companies that accepted the plan, and for seven years it saved $50,000 annually as Edison rarely asked for cutbacks.

This past year, however, Rockview lost thousands of dollars in productivity as the utility, struggling to meet demand, told them on more than a dozen occasions to shut down for four hours at a time.

"It's become a real burden to me," said Amos DeGroot, president of the family-owned business in the Los Angeles suburb of Downey.

Hundreds of other businesses around the state are feeling the same burden and are watching closely as the Public Utilities Commission tries to reshape the so-called interruptible service program, which provided discounts of up to 20 percent.

The power crunch, blamed in part on the effects of California's deregulation of electric utilities, has brought the state perilously close to blackouts over the past few months. Utilities have faced a shortage of generating capacity, soaring prices of the natural gas used to fire many generators, and competition from other states meeting their own energy demands.

A wave of businesses petitioned the PUC to let them out of their interruptible service contracts after being hit time and again with requests to curtail power use. In October the commission, fearing more stress on the statewide power grid if it couldn't ask them for cutbacks, suspended the ability of customers to leave the program until March 31. Until that action, participants could opt out each November.

In February, the PUC is expected to release new guidelines, possibly providing new incentives to keep participants in the program. Given the power crunch, there's no guarantee regulators will allow those large commercial users to return immediately to normal service, commission spokeswoman Kyle DeVine said.

"We need these customers to remain in that interruptible program so we can keep the lights on for other people," DeVine said.

That could produce conflict between businesses and the PUC because no amount of new incentives will satisfy some participants in the program, said Jim Conlan, vice president of governmental affairs for the California Small Business Association.

"If you're a manufacturer running 24 hours a day, seven days a week, you can't afford even a blip in your power," Conlan said.

A business in the program that decides it can't cut its power use faces a steep fee. Edison increases the rate to a range of $7 to $9 per kilowatt hour, up from 5 cents to 8 cents per kilowatt hour.

"Clearly, this level of interruption is very difficult for customers," said Linda Ziegler, director of business and regulator planning for Southern California Edison, which supports allowing customers to exit the program or alter their agreements.

In addition to the roughly 1,000 businesses in the Edison program, San Diego Gas and Electric offers it to about 120 customers, and Pacific Gas and Electric has 168.

The PUC estimates the discounts have totaled at least $2 billion statewide since 1986.

Given that history, some companies are likely to remain as interruptible customers. Rockview Dairies, which paid $170,000 to buy an emergency generator last month, probably will stay now that it has an independent source of power, DeGroot said.

Even with the money for the generator and lost productivity, he still feels he's probably coming out ahead.

"I'm not complaining, because this did save me a lot of money," DeGroot said. "It was my risk, and I took it."

http://www.nj.com/newsflash/index.ssf?/cgi-free/getstory_ssf.cgi?a0509_BC_PowerWoes-Interruptio&&news&newsflash-national

-- Martin Thompson (mthom1927@aol.com), January 01, 2001