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California power crisis sending businesses to greener pastures

As power-starved California struggles each day to keep the lights on, the trickle-down effect of the energy crisis may be compounding with indirect consequences on the state’s business.

There’s the sheer lack of supply, exacerbated by low water levels from a half-of-normal snowpack to help run hydroelectric power plants – with no new plants expected to be operational anytime soon.

Then, there’s the threat of bankruptcy from two of the state’s primary utility companies, Pacific Gas and Electric and Southern California Edison.



In addition, the California Trucking Association has voiced fears of diesel shortages if the state’s main fuel artery goes down from rolling blackouts.

Also, tourism officials are afraid the continual blackouts will give California a black eye as a destination attraction.



With blackouts closing companies for the day or the afternoon or even the threat is leaving companies jumpy.

But now, other states are seeing green in the Golden State.

From Tennessee to Utah, state tourism boards and executives are seeking to exploit the internal crisis by trying to woo California businesses out of the state.

Utah Gov. Mike Leavitt created an office within his state’s Department of Community and Economic Development called the Utah-Silicon Valley Alliance, the San Francisco Chronicle reported Sunday.

The mission is clear. The alliance aims to cultivate venture capitalists into one of California’s neighboring states.

“Over the last couple of weeks, we’ve heard stories of businesses like Intel putting their expansion plans on hold,” California Chamber of Commerce spokeswoman Kathy Fairbanks said of the large semiconductor manufacturer headquartered in the Bay Area.

Fairbanks said it’s too soon to tell how many businesses have moved out of the state or are planning on doing so, but she’s well aware of the threat.

“Businesses have been very impacted and are very concerned,” she said.

For companies that choose to stay, they may end up having to opt for the worst of three evils in dealing with the crisis: cutting back benefits to their employees, holding off on investing in their companies and implementing layoffs – making matters worse for an already layoff-stricken January.

The state’s chamber calls the energy crisis “the state’s largest economic challenge since the recession of the early 1990s.” The concern intensifies for small businesses, which may close or leave the state if the right solution isn’t put in place.

To the chamber, this means limited government involvement.

“A state-run energy system is not the answer,” Fairbanks said from her Sacramento office.

Still, the chamber commends Gov. Gray Davis for signing into law Friday a bill that encourages energy conservation and authorizes the California Department of Water Resources to enter into long-term contracts to purchase and sell power.

The state will therefore sell power directly to the ratepayers with the investor-owned utilities like PG&E collecting and returning a dedicated portion of rate revenues to the state.

Consequently, the chamber fears that business will bear the brunt of having to subsidize electricity for a state hungry for power.

“Our concern is we think the burden of the rate increases will fall disproportionately on the business community,” Fairbanks said.

However, the chamber of commerce supports the idea to get the state’s power crisis in check but warns that a government-run system stymies competition, which was the intent of deregulation. Its point – prices would have gone up anyway, with or without a move toward deregulation. At the outset, California users were already paying prices 50 percent higher.

“We thought deregulation was a way to lower electricity prices. What people didn’t foresee is a huge population demand,” Fairbanks said.

And critics warn California hasn’t reached its peak season for energy consumption yet, with summer’s sweltering heat prompting many users to crank up their air conditioners.

From Sacramento to Washington, D.C., ideas are being generated at a rapid pace with no fine-tuned solution yet in sight.

The latest – U.S. Sen. Dianne Feinstein, D-Calif., is calling for full deregulation, allowing rate increases on use above basic levels to force extreme measures in conservation. Feinstein also wants to hold an energy summit and to use the state’s 30 closed military bases as sites for new power plants.

A strategic game of chess over buying and selling power plants in Nevada may ultimately affect the power supply in Nevada, which includes Lake Tahoe electricity users.

More than 50,000 customers getting the service through Sierra Pacific Power based in Reno are experiencing minimal rate increases that average between $6 to $13 a month, as Nevada ponders deregulation without following in California’s footsteps.

U.S. Sen. Harry Reid, D-Nev., introduced an energy incentives package that provides federal tax credits for the use of renewable energy such as wind farms and geothermal means.

That sounds good to John Hill of Sierra Solar Systems in Nevada City. His business has been booming since talk of the energy crisis began.

Meanwhile, Americans are worried California’s energy crisis will rub off onto other states. But more than half oppose exploring for oil in the resource-rich Arctic National Wildlife Refuge in Alaska, according to a recent Associated Press poll.


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