Californians sweat as energy bill soars
Associated Press
LOS ANGELES — Sharply higher electricity rates for millions of Californians mean customers at Tom Creedon's seafood restaurant will be paying more for their Dungeness cracked crab or steamed clams bordelaise.
"When you add another 15 or 20 percent to the electricity bill, it is something we are going to have to pass on to customers," said Creedon, who already has seen the monthly natural gas and electricity bills at his San Francisco restaurant rise by $3,000.
Rising costs of food, entertainment and tourism are part of the expected ripple effect from an electricity rate hike approved Tuesday by state regulators.
The rate increase of up to 46 percent for millions of customers of the state's two biggest utilities comes on top of an average increase of 10 percent in January and a 10 percent rate rollback that will expire next year.
The increases are the latest fallout from California's failed bid at electricity deregulation and are meant to shore up its debt-ridden utilities. Southern California Edison and Pacific Gas and Electric say they are nearly $13 billion in debt, in part because the state's 1996 deregulation law barred them from passing along rising wholesale electricity costs to customers.
Natural gas bills already have more than doubled in many parts of the state.
Business leaders warn they will have to pass those costs to their customers, leading analysts to warn of inflation that could spread beyond the state.
"It is going to be painful," said Jack Kyser, chief economist for the Los Angeles Economic Development Corp.
California's $1.3 trillion economy accounts for 13 percent of the nation's gross domestic product and 16 percent of U.S. consumer demand.
"Remember that trends start in California," Kyser said. "I think this is definitely going to create inflationary pressures."
He said the most immediate effect will come from the bottom, with people spending less on eating out, going to the movies and buying at the mall.
State Controller Kathleen Connell predicted yesterday that California's government will face its own cash-flow problems beginning in October.
She said California has committed to spending more than $25 billion in the next 18 months to buy power for the Edison and PG&E. But she said Tuesday's rate increases, combined with $12.4 billion the state plans to raise through bond sales, will leave it about $7.4 billion short.
A Department of Finance spokesman disputed Connell's conclusion, saying she didn't take into account the state's efforts to reduce electricity costs by signing long-term purchasing contracts.
Some residents are already feeling the pinch. Frank Howell, who lives in Fresno with his wife and seven children, paid more than $800 last month for natural gas and electricity for his home, compared with $350 a year ago.
But Howell also owns a small air-conditioning installation business, and he is hoping that summer demand for his services will offset any need to save.
"You do whatever you have to do to make ends meet," said Howell, a PG&E customer.
Creedon said fewer regular customers coming to his Fisherman's Wharf restaurant are not his only worry. His Scoma's Restaurant is a draw for tourists, who Creedon fears will avoid California because of the rolling blackouts.
"It's the same thing as when we had the earthquake in 1989," said Creedon, referring to the Bay Area earthquake that killed 63 and caused $10 billion in damage. "People thought San Francisco was in shambles."
Small businesses are more at risk, economists said, because energy does not account for much of larger manufacturers' costs.
"Some people are going to wind up having difficulties, and some people who are on the margin, this will push them over," said economics professor Robert Michaels of California State Fullerton.
Intense competition in a slowing national economy could prevent some companies from charging higher prices and may force some to lay off employees or move.
"Right now we are examining our options," and relocation may be the only option, said Dick Campbell, who runs a plastic molding business in Corona, about 50 miles east of Los Angeles. The 50-person company serves Boeing and Procter & Gamble.
"My customers can easily go to someone who is not paying 40 percent more for power. That puts us at a distinct disadvantage because that is going to come out of the bottom line, and there is nothing we can do about it," he said.
While some businesses might move, the California Chamber of Commerce hopes the rate hike will help by forcing ratepayers to conserve and thus creating more stable energy supplies.
"Rolling blackouts are not acceptable to Silicon Valley," chamber vice president Kathy Fairbanks said. "No one wanted to see a price increase, but employers would say that reliability would be more important to keeping their businesses open."
