Small Utility Power Play : Fillmore Firm Luring Farmers From Edison With a Cheaper Way to Run Irrigation Pumps
The dirty yellow engine planted in a lemon grove outside Moorpark looks like a piece of an auto assembly line somehow stranded among the trees.
But the incongruous machine, which uses both diesel fuel and natural gas to run well pumps for irrigation, has been luring local farmers away from their old electric motors, and away from Southern California Edison, the giant utility that for years had powered them. It’s a challenge Edison takes seriously.
The engine is part of a joint effort between a Fillmore-based business and a New Jersey company looking to compete in California’s power generation market. Together, the two businesses have installed their machines throughout the county, in fields and orchards belonging to some of the area’s biggest fruit and vegetable growers.
Zack Girges, manager of Hercules Energy Products in Fillmore, said growers are eager to cut their pumping costs. He said they are sick of the service fees they must pay the utility even in winter when the pumps rarely run.
“Especially in the wintertime, they don’t see the reason for the standby charges,” he said. “And with us, if you don’t use it, you don’t pay.”
Hercules President Mike Patten is more blunt about the core of his service’s appeal.
“It’s anger with the electric utility,” he said. “Or maybe not anger, but resentment.”
The service rests squarely on the bulky metal frame of its engines, manufactured by Caterpillar and Deutz Corp. By using diesel gas fuel as a firing agent--in essence, a liquid sparkplug for the natural gas that is the main operating fuel--the engine runs at far greater efficiency than those burning regular gasoline or diesel alone, Girges said.
Although the idea of utilizing the two fuels together is not unique, Patten said, it is rarely used in smaller machines.
Patten and Girges first toyed with the idea of using two-fuel engines to power pumps about five years ago. They tried selling the engines to farmers, only to find that few wanted to buy the expensive engines outright.
Then, Hercules Energy came to the attention of Robert Swanson, president of Ridgewood Power in Ridgewood, N.J. Swanson’s firm assembles investors to fund power generation projects and manages investments worth about $250 million, with gross annual revenues of about $40 million. Spurred by the state’s drive to deregulate its electric utility industry, Swanson was expanding the company’s investments in California.
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Ridgewood Power suggested a different approach. Instead of selling the engines, they would sell the service, charging customers only for the amount of power used. The company would retain ownership of the engines and be responsible for fuel and maintenance.
“It’s a deal that makes a huge amount of economic sense if, and only if, you know how to run the engines exactly right,” Swanson said. “No one else can come in and run them the way you have to run them, so we have a technological edge.”
Ridgewood now buys and owns the engines--which, depending on the size, range in cost from $40,000 to $90,000--while Hercules Energy administers the program and handles sales. Although Swanson would not disclose specific operating profits, he said the venture is earning about 20% on its investment.
So far, about 25 clients have signed up, including the Santa Paula-based citrus giant Limoneira and Boskovich Farms, which grows strawberries and vegetables on the Oxnard Plain. Several local water companies also use the engines.
Dave Schwabauer at the Leavens Fairview Ranch near Moorpark said the switch has probably cut his pumping bills by about 20%--down from $130 per acre-foot of water under Edison to $101 now. Since the pumps often run 24 hours a day from March to December, feeding the ranch’s lemons, oranges and avocados, the amount spent pumping water quickly adds up.
“Anything we can do to shave that is good as far as I’m concerned,” he said.
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Doug Wagner, who runs Poplar Berry Farms in Oxnard, started using the service in September and estimates his bills are about 15% lower than they were with Edison. In the past, he said, his annual charges often ranged between $6,000 and $7,000.
Wagner also sees another advantage to the engines--protection from power outages. It is a lesson he learned, literally by accident, last month.
As temperatures dove toward freezing Feb. 26, Wagner turned on his sprinklers to coat his strawberries with a thin layer of ice and protect them from getting any colder. The sprinklers were still running when, about 3:30 a.m., a car struck a power pole near his ranch, temporarily interrupting the electricity.
Had he relied on an electric motor, the sprinklers would have stopped, and his crop could have faced frost damage.
“That would have hurt me,” he said. “I would have been in a world of trouble, because we were making ice.”
Such accidents aside, Edison insists it can compete with the upstart service. Gary Pikop, an agricultural water supervisor at Edison, said many of the farmers Ridgewood Power is trying to woo have not fully examined the rate options Edison offers and could save money without switching systems.
He added that the company also has a rate proposal before the state’s Public Utilities Commission that would, if approved, lower rates for many customers by about 12%.
“Our rates are coming down, and we feel we can compete with most energy providers,” he said. “Let us have a shot at competing. . . . We’ll get a rep out there and make sure the rate’s right.”
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For his part, Swanson delights in taking on large utilities, which he sees as aging monopolies vulnerable to attack. Ridgewood and Hercules Energy, by virtue of their relatively small size and low overhead, have a built-in advantage when competing against Edison, he said.
Hercules Energy has just six full-time employees, Patten said. The company was originally formed in 1985 as part of Ohio-based Hercules Engines but is now independent. It also sells air conditioning and refrigeration systems.
Ridgewood owns about 40 power generation plants throughout California, including a station at Los Angeles International Airport that provides power for the airport and heat to cook meals for an airline food service.
Swanson wants to expand Ridgewood’s presence in a market that may soon experience a radical transformation. Under a proposal issued by the PUC in December, key elements of the state’s electric utility industry would face deregulation in 1998. The move is designed to encourage competition between power companies and give customers more options for buying electricity.
Although the deregulation drive has more to do with large-scale power generation and distribution than it does with small engines parked in fields, Swanson said his company’s Ventura County project is one example of how a deregulated market could benefit consumers.
“That a little upstart company can make a profit for ourselves and offer a 15% discount--that is what is exciting about deregulation,” he said.
