Utility Bills Are Just One Way People Pay for Energy Crisis

Do you depend on a dry-cleaner? Dine out now and then? Do you patronize a hair salon, pump iron at a gym, send flowers occasionally or plan to take a vacation this year?

If so, you’ll probably be paying an energy surcharge on those and many other goods and services. In some cases, you already are.

Visitors at the San Diego Zoo found a $1.50 “energy assistance fee” tacked onto the admission as of last week. The Water Grill in downtown Los Angeles raised prices about 3% last month. And the San Francisco Federal Reserve Bank predicts the average Californian will spend at least $750 extra over the next year on new energy-related costs.

Hotels were the first to pass on the pain of the state’s spiking utility costs, but now the practice is spreading. The result: Many Californians will get stung by the energy crisis multiple times: once through rate hikes coming next month, then again and again through special fees tacked on by businesses coping with their own power bills.

The surcharges aren’t popping up just on luxuries such as a stay at a beach-side inn or an hour in a tanning bed. Even staples such as milk could cost more.

Milk processors have asked the state Department of Food and Agriculture for a price adjustment, a shift that--if approved at a hearing late this month--could bump up costs at the supermarket. And gasoline prices--already about $2 a gallon--could be nudged further upward if summer blackouts shut down refineries and pinch fuel supplies.

For some Californians, the risks are more basic. Some businesses, reluctant to raise prices too high for fear of scaring off customers, will offset soaring utility costs by laying off employees, cutting wages or slashing benefits.

“We will see an impact on unemployment rates, we will see an impact on wages, we will see an impact on benefits,” said Shirley Knight, assistant state director of the National Federation of Independent Business. “When you’re a small business owner and your [power] bill triples, you simply have no choice.”

Four months after the energy crisis hit California full force, financial repercussions continue to multiply. The state is spending upward of $50 million a day buying energy for struggling utilities, and the sale of $12.5 billion in bonds to return that money to government coffers is clouded by politics and a legal dispute.

Summer Blackouts Threaten Economy

The state’s $1.25-trillion economy, while still strong, is already showing wear and tear as uncertainty about energy costs and supply endure, some economists say. A summer of blackouts, meanwhile, threatens to hurt business productivity, discourage new investment and push inflation rates up, they say.

“Elevated energy costs present a significant drag on the economy and can be expected to reduce growth and economic output and employment,” a study by the Bay Area Economic Forum said. The study said 42% of Bay Area businesses report that power problems have already hurt their profit margins and their competitiveness relative to competitors outside the region.

Steven Cochrane, a senior economist at Economy.com in West Chester, Pa., is not surprised: “There are strong downsides to this [energy crisis] for the state both short term and long term. Everyone is watching California.”

For most residents of the Golden State, the most visceral blow will be felt through rate hikes, beginning--but probably not ending--with the increase reaching as high as 46% for some that will show up in June bills.

But the effects go far beyond that, and some analysts are attempting to quantify them. The San Francisco Federal Reserve Bank study estimating a $750 annual hit for an average Californian figures $250 for electricity bill increases, $200 for additional natural gas charges and $300 for the indirect, day-to-day costs that will rise because of power-related surcharges and price hikes.

The report’s authors emphasize that their figure “would rise substantially” if the full increase in wholesale electricity prices borne by the state was taken into account.

Even so, $750--representing 1.5% of the average Californian’s annual income--is a very real bite, especially for the poor. Already, community organizations report increases in calls for help from people forced to choose among keeping their power on, buying food or paying for day care.

“It’s that whole fixed-income thing,” said Dennis Osmer, who runs a nonprofit organization in Santa Cruz County that helps the poor pay their energy bills. “If they’re living on Social Security and just getting by, any kind of increase in anything can push them right off the edge.”

Extra Outlay Just ‘Sunk Down a Hole’

Veterans of the state’s consumer groups warn that the consequences of the energy crisis for Californians--and the fiscal health of the state as a whole--are staggering, and not yet fully known. Harry Snyder, a senior advocate for Consumers Union, likens it to “a 7.0 earthquake that hits everyone, everywhere.”

“Wherever you turn, there’s an impact,” Snyder said. “The cafe owner around the corner said his utility costs doubled in the last year and are now the same as his rent. A friend who owns a bakery says his suppliers have added a 20% surcharge. This all gets passed on to us, and it’s just money sunk down a hole--it’s not spending that advances our well-being in any way.”

California business owners say they have little choice but to tack on costs to help with their own ballooning bills. And they say that along with the rising natural gas and electricity bills, they have been hit with a jump in the minimum wage--by 50 cents in January--and high gasoline prices. Workers’ compensation rates are up as well.

Hotels, which spend about 3.6% of their revenue on energy costs, led the charge in passing on the extra expense. In January, most began adding fees ranging from $1 to $4. Stay at the venerable Westin St. Francis on San Francisco’s Union Square and you’re looking at $2.85 extra per night, per room. At the Quality Inn in Mammoth Lakes, it’s $2.50.

In San Diego, the zoo added the energy charge Thursday. Though many visitors might not think of the zoo as a big energy gobbler, public relations director Ted Molter said many exhibits consume lots of kilowatts.

Reptiles, for example, require warm temperatures and lighting, while pumps and filtration systems run constantly to keep water clear in the underwater viewing portion of the hippo enclosure.

Molter said the zoo, a nonprofit organization, experienced a 290% increase in the amount it pays per kilowatt hour during the last year. “We don’t take this fee lightly and look forward to the day when we can roll it back,” he said.

At the Calistoga Village Inn & Spa near Napa, Manager Gisela Schaefer said the natural gas bill has risen 500%--to $7,000 in March--making a price increase at the 41-room compound inevitable. The spa includes numerous energy-guzzling Jacuzzis, pools and saunas, and its natural hot springs require pumps to draw water from underground.

But Californians need not travel to the wine country to experience energy surcharges. At Foasberg Cleaners in Long Beach, owners in February posted signs announcing a fee--about 3% per item--to account for spiking utility costs.

Vice President James Foasberg said the cleaners’ natural gas bill has tripled in the last year, and he expects his June bill from Southern California Edison to show a 40% increase in his electricity rate.

“We hate to do this, but we have no choice,” said Foasberg, who has also been pinched by high gasoline prices that cost him more for deliveries. “Some of our smaller competitors are afraid to raise prices, so they’re just closing down a few days a week. It’s terrible.”

Restaurant owners also are getting hit from two sides: reeling from higher utility costs and getting squeezed by linen, dairy and produce suppliers who are raising prices because of the energy crisis. Signs advising customers of surcharges have begun popping up next to the cream pitchers at coffee shops, while managers of some restaurants are reluctantly opting to charge more for meals.

Jeff King is chairman of a company that owns 11 restaurants from Calabasas to San Diego, including the Water Grill in Los Angeles and iCugini and Ocean Avenue Seafood in Santa Monica. King said energy costs for the eateries rose by $150,000 during the last four months, prompting him to raise menu prices about 3% last month.

“The last thing you want to do is charge the guests more,” King said. “But this is a major hit. And unfortunately, I think it’s just the beginning.”

Economist Cochrane agrees, predicting the energy debacle will cause a 2% increase in California’s inflation rate overall, showing up in price hikes for every conceivable product and service.

“Power is such an essential component of production, so for most businesses there’s no escape,” said Cochrane, who studies California for his economic forecasting company. “These rate increases are so large, and they’re hitting so quickly, that those businesses that don’t go under have no choice but to raise prices.”

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Times researcher Patti Williams contributed to this story.

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