Electricity Crisis Dims Firms’ Opinion of State

Four out of 10 small companies say California’s electricity crisis has dimmed their view of the state as a place to do business, and nearly two in 10 are exploring a move to another state, according to a survey released Friday by the National Federation of Independent Business.

The survey, one of the first to attempt to gauge the toll on business from the energy meltdown, follows other polls issued this week that illuminate vastly different views of deregulation and the retail competition that it is intended to spark.

Most California consumers said they still favor electricity competition, in a survey conducted by J.D. Power & Associates. More than half of the 750 people interviewed said they did not understand deregulation, but 64% said the state should continue to support competition in the electricity industry.

But another survey, by the Booz-Allen & Hamilton consulting firm, found that most commercial and industrial companies were “wholly unprepared” to take advantage of retail electricity competition around the nation and that few switched to new electricity providers. While most of those that switched saved money on their electricity bills, 10% paid the same or even more for power.

If nothing else, the three surveys underscore that problems in the electricity industry are confusing, expensive, frustrating and disruptive for all involved.

“This is a major issue, the No. 1 issue, for small business,” said Martyn Hopper, state director for the National Federation of Independent Business, an advocacy group for small companies.

Although California businesses have raised serious concerns about both energy costs and supply, the state’s economy so far has shown only limited damage.

Just more than 20% of respondents said they had been hit by blackouts since the beginning of the year, the telephone survey of 523 small businesses conducted for NFIB by Mason-Dixon Polling & Research of Maryland found.

But there clearly was some confusion among those answering the survey about whether these were the rotating blackouts that hit Northern and Central California on Jan. 17 and 18, or whether these were voluntary power outages under utility programs that ask businesses to cut electricity usage when supplies are extremely tight. For example, 9.4% of respondents in the Los Angeles area said they had experienced a blackout when no forced outages occurred south of Bakersfield.

For whatever reason the lights went out, more than half of the businesses were forced to severely curtail or terminate business operations for the entire blackout.

About one-third said they lost sales, nearly 21% said materials were damaged or destroyed, and nearly 40% had to absorb wage costs for work not done.

Businesses were almost evenly split on whether the blackouts would lower earnings, and nearly eight out of 10 were not planning any layoffs as a result.

But the electricity mess has damaged the companies’ views of California as a secure business home. Slightly more than 43% said the power problem had changed their views about California as a place to do business, and nearly 71% said it had shaken their confidence in the state’s political and business leadership.

But a whopping 69% said they have no intention of moving their companies to another state.

“Our members don’t have the option of moving to Texas or Colorado” in search of cheaper or more reliable power, Hopper said. “A lot of them are family owned and minority owned . . . and they want to do business in California.”

* POWER PLAN

Gov. Davis unveiled outlines of a plan to keep Edison from bankruptcy. A1

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Cost of Crisis

The National Federation of Independent Business surveyed 523 firms with fewer than 250 employees about California’s energy crisis. The survey asked how they plan to adjust to increases in the price of electricity.

Q. Will you raise your selling price?

Don’t know / no answer: 5.9%

Definitely raise: 25.7%

Definitely not raise: 29%

Probably not raise: 20.4%

Probably raise: 19%

Source: National Federation of Independent Business Los Angeles Times