Factory Owners Urge Cap on Energy Prices

A coalition of small Southland manufacturers warned Thursday of serious economic fallout from exploding electricity and gas rates, calling on federal regulators to cap wholesale energy prices to head off a recession in the nation’s largest manufacturing center.

Members of the Los Angeles Manufacturing Networks Initiative signed a “declaration of a state of emergency” to call attention to the energy plight of the region’s bread-and-butter industries, which employ more than 1 million people in Southern California. Factory owners gathered at LAMNI’s Los Angeles headquarters cited lost profits, job cuts and business closures that already have beset the industrial sector. They expressed anxiety about a long, hot summer that promises more of the same.

“I understand the economists see this as a minor inconvenience,” said Mark Roth, owner of Industry-based El Burrito Mexican Food Products. “Tell that to my employees when I have to cut the payroll.”

LAMNI added its voice to a chorus of consumer watchdogs who have been lobbying for wholesale gas and electricity price caps and rate rollbacks, so far with no success. Its efforts underscore growing frustration among the state’s small-business owners, who increasingly are finding themselves aligned with consumer activists rather than mainline business organizations on the best way to stabilize California’s energy markets.

For example, the California Chamber of Commerce and California Manufacturers Assn. endorsed the hefty electricity rate hikes approved last month by the state Public Utilities Commission. In addition to helping investor-owned utilities cover their spiraling wholesale costs, the price hikes are supposed to curb energy demand and thus help the state avoid rolling blackouts, according to energy experts.

But LAMNI director Linda Wong said that many small firms don’t have the deep pockets to absorb such increases for long, adding that price-based conservation is a risky strategy that ignores how businesses really function. Though some manufacturers can adjust their shifts to off-peak hours or reduce summer electricity consumption, many can’t. She said her members’ biggest fear is getting stuck with whopping rate increases but remaining vulnerable to blackouts this summer.

She called on the state to develop a comprehensive energy strategy that would include a plan for orderly, prearranged factory shutdowns as an alternative to spur-of-the-moment blackouts.

Electricity isn’t the only concern of California’s small manufacturers. Industries such as textiles have been rocked by spiraling natural gas prices, forcing at least three dye houses to close, said Scott Edwards, president of the Assn. of Textile Dyers, Printers & Finishers of Southern California. Others have slashed their work forces, with job losses totaling at least 1,500, he said.

He and others are calling for caps on wholesale prices of natural gas and electricity to help the state’s small businesses weather the energy crisis.

Although small-business owners typically aren’t advocates of increased government regulation or price controls, Edwards said manipulation of California’s energy markets by profiteers requires a government solution.

“[Natural gas] prices have gone up sevenfold in a short period of time,” he said. “That’s not what the free market is all about.”