Erie Plastics Co. is ecstatic that its electric costs dropped more than 10 percent this year, courtesy of Pennsylvania's newly deregulated market. Cambro Manufacturing Co., on the other hand, is so fed up with delays in California's electric restructuring that it seriously is considering spending several million dollars for a cogeneration plant to make its own power for its Huntington Beach molding plant.
Meet the two faces of electric power deregulation.
Nine more states passed bills to deregulate their markets this year, bringing to 24 the number that have passed legislation or have taken administrative action to deregulate.
Only a few of those actually have opened markets. In the places where companies can chose their power supplier, results are mixed.
Howard Nelson, chief financial officer for injection molder Erie Plastics in Corry, Pa., said the savings exceeded expectations. The transition has been "absolutely seamless," with no power-interruption problems since the company switched power providers in February.
"It was absolutely effortless to do," Nelson said.
On the other hand, California's efforts have been a "no-show," said Steven Thomson, vice president of manufacturing for Huntington Beach-based Cambro, which does blow, injection, compression and rotational molding.
"We joined a buying group expecting to get savings," he said. "The savings barely happened for us."
The company's power costs dropped less than 1 percent, so it decided to buy its own gas-fired turbine generator to provide all the power to its suburban Los Angeles plant, he said. Problems getting air-emission permits put that on hold, but if the picture does not improve, the company probably will get the permit and start making its own power midyear, he said.
The unit would pay for itself in seven years, he said.
California has not offered much savings yet because of how the state set up restructuring, according to John Hughes, director of technical affairs for the Electricity Consumers Resource Council, a Washington trade group representing industrial users of electricity.
California decided to give utilities a relatively brief period to charge ratepayers for so-called stranded costs — the cost of paying off expensive, inefficient power plants. On the other hand, Pennsylvania is spreading out stranded costs payments.
"California tried to do a little too much early on," Hughes said. "Pennsylvania had the benefit of California's mistakes."
However, that means that California will have steeper discounts once its utilities do pay off the stranded costs, he said. Pennsylvania's discounts will be more moderate, over a longer period of time, he said.
Gordon Fry, a member of the global climate and electricity team at the Chemical Manufacturers Association in Arlington, Va., agreed that Pennsylvania is probably the best example yet.
For many states, like Ohio, with its large chemical and plastics industry, it is too soon to make final judgment about restructuring, because the rules still are being written by the state public utility commissions, he said.
"There is so much that has been punted to the PUCs that, how do we know?" Fry said.
Rhode Island's deregulation has not worked well so far, and some would-be competitors that came to the state have left, according to business lobbyists and an official with Rhode Island's Public Utility Commission.
Janet White, vice president of economic development for the Greater Providence Chamber of Commerce, said competition "has been slow to happen, but the way the legislation is written, I do see it happening."
Michael Marra, president of Cowan Plastics Products Corp. in Providence, has been asked to join some electric buying groups, but "so far I have seen nothing that has come across my desk that is worthwhile to get involved with."
Full-blown competition also has been slow to develop in Massachusetts, because existing utilities gave customers immediate rate reductions, and rates are too low to attract competition, said Judy Silvia, vice president of energy programs at the trade group Associated Industries of Massachusetts.
But she said customers should have effective choice in the next year or two.
"I think in all due time, things will be straightened out, and I think this is a very positive thing we've done here," she said. "This is a 100-year-old industry, and you can't have change over night."
The savings promised by electric deregulation will start to give plastics processors more options to put factories in areas they might not have considered before, like upstate New York, said Dennis Donovan, principal with site selection firm Wadley-Donovan Group in Morristown, N.J. But the free market also will bring more risk.
Injection molder Courtesy Corp. in Buffalo Grove, Ill., got hit with dramatically higher short-term power bills in the summer of 1998. The company was in a pilot variable-rate program, and rates spiked up.
Power costs shot up 15,000 percent for a brief period, and it cost the company an extra $500,000 in June and July 1998.
So like Cambro, Courtesy also is looking at a hefty $2.5 million investment in a generator to provide supplemental power in particularly high-cost periods, said President Jerry Sommers.
"It's the uncertainty of the future as to power availability and controlling costs," Sommers said. "You don't want to be out on the open market with an open wallet."