CHICAGO — An industry survey suggests that the promise of electricity deregulation has not yet produced lower rates for most plastic processors, although the threat of deregulation may be holding rates steady for some of the industry.
More than 80 percent of 141 processors surveyed by the Society of the Plastics Industry Inc. said that rates either remained flat or increased in 1995 and 1996, with half of them saying that rates rose.
Eleven percent said their rates fell.
The survey also found that Midwestern companies reported the highest percentage of their costs — 6 percent — went to electricity. Northeastern companies reported electricity was 5 percent of costs, while Southern and Western states reportedly spent 4 percent of their costs on electricity.
Nationally, processors spent 4.6 percent of their manufacturing costs on electricity.
SPI Vice President for Government Affairs Lewis Freeman said the survey results should be considered cautiously because most efforts on electric deregulation are in their infancy.
It is also unlikely Congress will pass legislation in this session, although it may be a higher priority in the House than in the Senate, he said.
Deregulation is not a reality in most of the country but the flat rates indicate an ``awareness that we are moving to a deregulated environment,'' said John Cook, manager of national sales for plastics and industrial markets for Houston Lighting & Power, the monopoly electric power supplier for the city of Houston.
``It's not deregulation, but it's the anticipation of deregulation,'' he said in an interview at NPE, held June 16-20 in Chicago.
Freeman said he is not sure why electricity costs more in the Midwest, although Cook said areas with hydroelectric power generally have lower rates and the Midwest has fewer hydroelectric plants.
D.J. Yoder, the vice president of engineering and technology at Spartech Corp. in Clayton, Mo., said rates have been flat for the compounding and sheet extrusion company. But he said he was waiting to see if deregulation would result in dramatically lower rates.
``I think usually these things carry a lot of talk but I think we could see a small reduction,'' Yoder said. ``If it drops several percentage points of operating costs, I'd be amazed.''
Washington-based SPI conducted the survey in March, primarily to get a good estimate of how much processors spend on electricity.
Almost half of the respondents said being able to choose an electricity supplier is important, and 34 percent said it is very important. Specifically, the survey found:
Plants with less than $5 million in sales used 600,000 kilowatt-hours at a median cost of $47,000.
Plants with sales of $5 million to $25 million typically used 3.3 million kwh at a median cost of $210,000.
Plants with sales of $26 million to $100 million used 5.7 million kwh at a median cost of $485,000.