The following letter was sent to Calif. Gov. Gray Davis:
The California Film Extruders and Converters Association is a 501c6 nonprofit trade association that has been incorporated in the state of California since 1973. Our members have made California the No. 1 state for polyethylene blown film. Poly blown film produces plastic bags and unsupported plastic film of all kinds. We employ approximately 5,000 people statewide. The work force is very diverse, the majority of which are minority. We generate $750 million in annual sales volume and the majority of our members are typical of small to medium-size manufacturing businesses. Our work force is not seasonal, and we pay higher-than-average manufacturing wages. Many of our companies employ unionized workers.
Now that California seems to have enough power, I urge you to provide some relief for the 24/7 companies who are being so heavily hit by the present rate structure, despite the fact that they are the most profitable customers for the utility companies.
Our segment of the plastics industry is faced with a very large dilemma thanks to the electrical crisis. Many of our members do not know whether they can continue to manufacture in California. Thanks to the increases put through by the Public Utilities Commission to cover the debt incurred by the state to buy electricity, the electrical costs of our member companies have increased over 100 percent from July 2000 to July 2001. This increase comes directly out of our member's profit margins. It is not a cost they can pass along to their customers because those customers can simply turn around and buy from non-California producers who aren't taxed by excessive energy costs.
Unfortunately our member companies simply cannot endure years of higher energy bills. They must be competitive with the rest of the country on pricing and profits or go out of business. Right now, they are trying to do what they can to survive. They are cutting jobs, slashing capital spending, and looking to trim any fat they can find. But no one believes this will be enough. Many plastic film companies have to keep their processes operating around the clock; these companies have been hit with increases in power costs of 100 percent or more, as opposed to a more typical 50-60 percent for companies who do not operate around the clock. They cannot reschedule production to avoid peak usage without layoffs and indeed several of our 24/7 members are already laying off workers. We are all prepared to pay our fair share but unless there is some relief for 24/7 companies, jobs and companies will be lost. For 24/7 companies' high-energy bills are guaranteed.
That means many are faced with moving out of state or even shutting down. Already one company in our industry has closed a plant and moved to Texas and two others have purchased plants in Kentucky and North Carolina from where, because of the energy costs, they can ship product into California at a lower cost than producing here. Other members are making plans for immediate implementation. These alternatives mean fewer good paying jobs for California, not to mention a smaller tax base. For many, California has been a difficult environment for years. They've weathered worker compensation increases, rising wages, and tighter air-quality restrictions. But our member companies have endured. Now I fear many won't unless some action is taken to lessen the pressure of higher utility bills.
I know we are not alone among California manufacturers. I've spoken with representatives from many different industries. We are all shocked that increases we thought would be limited to the range of 50 percent have turned out to be more in the area of 100 percent. If California is to survive as a manufacturing center, something must be done soon. Electrical increases must be scaled back to a more manageable level.
The plastic film industry needs your support. Only with your proactive action will you demonstrate that the great state of California is still and will remain a great place to work and bring up families. Something must be done and it must be done now or we won't have the great state of California to live in and work in.
The California Film Extruders and Converters Association would welcome your efforts and be proud to work with you and your staff on behalf of CFECA members and the industry at large in California in making this industry and our state the leader again. Please contact me to see how we can work together. Please be quick, for I fear with inaction, we will loose another manufacturer to neighboring states. We all look forward to your response to this letter.
Norma S. Fox
California Film Extruders and Converters Association
Newport Beach, Calif.