California isn't suffering from rolling blackouts this summer, but the newest wrinkle in the state's disastrous utility deregulation is almost as bad.
This year's problem is higher prices. Many manufacturers say their electric bills have more than doubled in recent months, thanks to a rate increase approved by the Public Utilities Commission that took effect June 6. (The price hikes vary wildly, of course, and some parts of the state saw no increase at all).
Many processors are willing to stomach higher fixed costs, including power, in order to be near their customers and their talented, trained work force in the Golden State. But 100 percent rate hikes? Enough is enough.
Among the worst hit are the manufacturers that, to maintain peak efficiency, must keep their machines running 24 hours a day. The Public Utilities Commission made the politically popular choice to pile on charges to these industrial customers. Faced with the same problem, most other states would do exactly the same thing. But in this case it reinforces the anti-business stereotype of California government.
The message it sends: This is a cost of doing business in California. If you don't like it, find a new location.
Many processors will do just that.
Picking up and moving is an option for some — after all, plastics processors aren't like steel mills or coal mines. Most of the equipment can be relocated in a matter of a few weeks.
Firms that already have plants outside California will shift work to those other plants. Expect to see more of that in the coming weeks, especially in light of the economic slowdown. If power prices don't drop soon, many California processors simply won't be able to keep up with out-of-state competitors.
The Newport Beach-based California Film Extruders and Converters Association is pleading with Gov. Gray Davis and the PUC for quick relief. The group has suggested increasing the so-called economic stimulus credit, which CFECA claims would reduce the rate increase for around-the-clock manufacturing operations to 60 percent, down from 100 percent.
If that relief will make a difference, then by all means it should be adopted right away. Despite what some in Sacramento might think, the state needs these manufacturing jobs.
Meanwhile, there are plenty of folks to blame for this mess, starting with former Gov. Pete Wilson, state Sen. Steve Peace (D-El Cajon), the rest of the state legislature and the power companies and electricity brokers who rushed the state's phony deregulation legislation into law back in 1996. Add Gov. Davis to the list, for failing to deal with the problem last year when natural gas prices shot up and power wholesalers declined to live up to the terms of their contracts.
Above all, the state needs to reopen the issue and bring real deregulation to the market — or else return to the days of true government control. Because if one thing is clear now, the half-step that California took to deregulation turned out to be a stumble.