THE ENERGY CRUNCH

Other States Try to Woo Power-Starved California Businesses

George Raine, Chronicle Staff Writer Sunday, February 4, 2001

©2001 San Francisco Chronicle

URL: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/02/04/BU63700.DTL

Rolling blackouts throughout California got you and your business down? The lights are on in Tennessee.

Worrying about a drag on productivity from even a very brief electrical power interruption? New Mexico has exported its excess juice for 20 years.

Maybe you would sleep better in Richmond, Va., or Kansas City, Mo., or Phoenix or Salt Lake City, confident the power will be there for you when your business needs it.

Toss a dart anywhere on the the map. Economic development teams from states and cities around the nation have been aggressively pursuing California business owners during the past few weeks, capitalizing on an energy crisis that has left Californians frustrated and angry.

No mass exodus is under way, and many businesses make expansion decisions at glacial speed. Nevertheless, the collapse of electric deregulation and the reality that products need not be manufactured in California are not lost on the marketeers of the nation's heartland.

"The California energy crisis is not a natural disaster as is an earthquake or fire. This is a disaster of California business policy," said Alex Fischer, commissioner of the Tennessee Department of Economic & Community Development in Nashville.

"Therefore, I think it is very appropriate for us to outline for business the different policy approaches between our two states. California has a different mind-set as it relates to business, and we very aggressively intend to tell that story."

Fischer added, "Manufacturers in California are really in a crisis situation, and Tennessee now has an opportunity to capitalize on our plentiful power resources while aggressively telling our story of Tennessee's many, many other business advantages."

Tennessee hardball is also evident in a direct mail campaign now under way. The state -- targeting California automotive, technology and steel fabrication companies with more than 250 employees and $10 million in annual revenue -- has mailed flashlights to those firms' executives.

These are to be used, the message is clear, to find one's way out of the darkness of the Golden State to the land of volunteers and catfish -- as well as the Tennessee Valley Authority, America's largest public power company, which lights the way for 8 million people in the Tennessee Valley.

The flashlight is also the prop du jour of the Greater Richmond Partnership Inc., which promotes business growth in its region.

Gene Winter, the group's senior vice president, and several of his associates were at an exposition at the Santa Clara Convention Center last week distributing the flashlights to executives in the semiconductor and microelectronics industries -- prospective Virginians, he hopes.

"We are not trying to lure and steal companies from California. We are trying to help them expand. When those companies need to make strategic decisions, we want them to go to Richmond, not North Carolina or Florida," said Winter.

Richmond, in attempting to lure large fabricating plants, which can be investments of up to $2 billion, competes globally, with Singapore, Taiwan, Canada, Germany and many other locales. It can offer very low rates -- under 4 cents per kilowatt hour -- from Dominion Virginia Power, Winter is telling California business executives.

"We bring our flashlights and batteries to meetings, and the subject of power comes up," said Winter. "People take it well, but there are 7,000 economic development organizations around the country, and this work is very competitive.

"We offer what we think is a better business environment -- and rush minutes, not rush hours, in Richmond -- and we get a response from Californians," he said.

Utah Gov. Mike Leavitt created an office within his state's Department of Community and Economic Development called the Utah-Silicon Valley Alliance. Its mission is to cultivate and satisfy every need of venture capitalists, entrepreneurs, business executives and others who may want to expand operations in Utah.

Leavitt doesn't leave it there, though. He travels to the valley once a month, as he did last Thursday, bearing this message:

"There are some natural limits that Silicon Valley is obviously bumping up against -- such as the cost of housing. The average cost of a home in Utah is $165,000 for 1,500 square feet, and we're only an hour away by plane."

Leavitt also met with officials from Novell -- the softwaremaker employs 2, 200 in Provo, Utah, and 4,600 worldwide -- and others with major investments in his state to reassure them the power supply for now is adequate.

But he added that increased production and transmission service improvements should be expedited throughout the West.

This can occur not by "short-cutting the environmental process but by fast- tracking it," said Leavitt.

Of California's energy crisis, he said, "What we have here is not a failure of deregulation, because this is really something far less than deregulation," as it includes a cap on retail prices. "You have to deregulate the entire market," he said.

Hugh Martin, chief executive officer of ONI Systems in San Jose, manufacturer of fiber-optic equipment for use by telecom carriers inside cities, is a dream candidate for other states' economic development offices. He has 600 employees and expects to add 500 more this year. He's building a five-building center in San Jose and a facility in North Carolina's Research Triangle.

He's not threatening to uproot from California, but he has a business to run, investors to satisfy and a need to hire the best engineers. In the past month, as news of California's emergency spread, several candidates told Martin they were worried about moving to a place where reliable power may be a dice roll.

"We're used to questions about the cost of housing or whether kids have distorted value systems, and now they're asking about the power system," said Martin. "This is the straw that breaks the camel's back."

He added, "I tell them it's a short-term problem, that the Silicon Valley is too important to California for them not to figure that out. I tell them it will be figured out, and what I'm saying to myself is, 'I hope.' "

"As a CEO, what is frustrating to me is that the state is more than happy to have us here, building an industry, employing lots of people, adding to the tax base and contributing to California, but the state is not willing to do the advance planning that is required to make sure we have the resources required to create all that wealth," said Martin.

"Someone could have figured out what kind of power consumption growth do we have and chart that against the kilowatts being brought on line," he said.

Intel has so many visitors from afar bearing proposals that it has a team of people whose sole task is to assess opportunities for future locations, said Chuck Mulloy, a company spokesman.

Given the current energy tumult in California, "Realistically, there is no way the team doing assessments would run California up the flagpole for management because they would know what the answer is, and it is 'no,' " said Mulloy.

Mike Marando, a spokesman for the California Department of Trade and Commerce, recalls the recent history of earthquake, flood and fire, and said the state is confident it will survive this, too.

The Pacific Rim is too attractive a market to forsake, and when the tally for 2000 is in, it is expected to show that California exported a record $110 billion in goods.

"We offer excellent quality of life, a diverse workforce, and for many companies California is a marriage, not a short-term love affair," said Marando.

"The benefits of being located here far outweigh the negatives."

E-mail George Raine at graine@sfchronicle.com

©2001 San Francisco Chronicle Page D1

-- Swissrose (cellier@azstarnet.com), February 05, 2001