Firms Search for Ways To Sidestep Blackouts

Los Angeles-area businesses, staring down the threat of rolling blackouts this summer, are concocting a vast array of strategies in a bid to keep their operations running.

Companies large and small are racing to buy extra generators, install energy-efficient equipment, shift their production hours and mulling a host of other steps to avoid getting caught flat-footed.

“There is some very serious planning going on right now in board rooms and control rooms across the region, as companies look to change their operations,” said Leila Mozaffari, vice president of the California Manufacturing Technology Center in Torrance, which assists small and mid-sized manufacturers in improving operations.

Mozaffari’s organization just completed a survey of 50 local manufacturers that indicates that 53 percent of companies plan to alter their operating patterns in anticipation of frequent rolling blackouts this summer, while 22 percent say they plan to relocate their operations.

This planning is in anticipation of a potentially severe power shortage this summer. The California Independent System Operator, which is charged with ensuring that the state’s consumers have enough power, is projecting that power supplies will fall about 3,000 megawatts short of demand in May and 6,000 megawatts short in June. (A megawatt of electricity can power up to 1,000 single-family homes at times of peak power usage.)

Gov. Gray Davis has announced plans to close most of that gap by bringing an additional 5,000 megawatts of power supply on line by June 1, mostly in the form of smaller “peaker plants.” But there is considerable doubt that those plants will be ready in time; then there is also the risk of a heat wave or unexpected plant closures.

As a result, power industry watchers have two scenarios for the supply situation this summer. Under the optimistic scenario, a combination of cool weather, increased conservation and new power plants coming on line as scheduled would allow the state to skirt by with only an occasional Stage 3 power emergency (where reserves dip below 1.5 percent).

But a growing number of experts are tending toward the worst-case scenario, where power plant construction delays and reduced hydropower supplies combine with warmer-than-normal weather to produce repeated episodes of rolling blackouts. This scenario is made even more likely by the state’s scrapping of penalties for companies that signed up with the state’s interruptible power program, where firms get lower rates year-round in exchange for shutting down their operations when power supplies become dangerously low. Many companies have since opted out of this program.

While a lot of the focus in recent weeks has been on the prospect of higher energy rates for consumers, it is the threat of repeated rolling blackouts that could wreak real havoc on the state’s economy. That’s because businesses would be forced to shut down their operations for an hour or two at a time, with little or no warning.

At Boeing Co.’s C-17 cargo plane manufacturing facility in Long Beach, managers have been meeting on a daily basis, trying to come up with a strategy to deal with rolling blackouts this summer. That facility paid out $1 million in penalties in January alone for failing to comply with orders to shut down their operations.

“We’ve rented three generators and are looking at delaying our second shift from 3 p.m. to 6 p.m. this summer to avoid exposure to rolling blackouts,” said Larry Colshan, senior manager for facilities at the C-17 plant. Colshan said the delay in the second shift would enable the manufacturer to avoid the most likely time for rolling blackouts: late afternoon, when air conditioners really crank up.

Meanwhile, executives at Miller Brewing Co.’s Irwindale plant are now lobbying local air-quality officials to allow them to operate eight diesel-powered generators they recently rented from Australia-based Agreko Generator Rentals. The company is paying $170,000 a month for the devices that can provide up to 8 megawatts of power, but they are now sitting idle.

“If we’re not able to get those generators up and running by this summer, we may have to transfer production to other facilities out of state,” said Victor Franco, spokesman for Miller’s Irwindale operations.

Last month, Miller Brewing, which was one of the companies that had signed up for the interruptible power program, transferred production to four plants in the Southern and Eastern portions of the United States rather than pay penalties 100 times above the market cost of electricity. As a result, 168 workers were laid off for the week that the operations were transferred.

“It was cheaper to produce and package the product at these other plants and them ship them back out here than to produce them here,” Franco said.

In the meantime, Miller Brewing is considering rescheduling some operations to off-peak hours, which in the summertime is usually from 2 p.m. to 6 p.m.

At Simi Valley-based PolyTainer Inc., a mid-sized manufacturer of plastic containers, President Paul Strong said he is looking at purchasing or renting generators. But because of a shortage of generators on the West Coast, he is now scouring the East Coast. He said he would decide by the end of next month whether or not he will purchase generators.

Strong is also mulling another step: shutting down a few of the company’s 48 separate production lines.

“That may cost me some money, but if the energy saved helps avert rolling blackouts, then it’s preferable,” Strong said.

Large manufacturing plants like those of Boeing and Miller Brewing have the capability to buy generators or switch to other back-up systems to gain independence from the strapped power grid. Smaller companies, though, generally lack the resources to make such purchases and must instead rely primarily on switching around their work schedules, if they can even do that.

Indeed, in a survey released late last week by the state chapter of the National Federation of Independent Business, which represents small firms, fully two-thirds of the 500 companies surveyed had no contingency plans for rolling blackouts. That’s despite the fact that two-thirds of the companies surveyed expect a series of blackouts this summer.

“People are just confused,” said NFIB assistant state director Shirley Knight. “They know there’s going to be a problem, but they’re not sure what, if anything, they can do about it.”

At family-owned Flanigan Farms, a Culver City packager of trail mix and nuts, executives are looking to see whether they can shift their operating hours to avoid getting shut down during a rolling blackout.

“The trouble is, there’s no warning when these blackouts occur,” said President Patsy Flanigan. “Our production line finishes around 4:30 p.m., which allows us to get the product out to our distributors for overnight and early morning deliveries. We could shift our production time earlier or later, if only we knew when the blackout would occur.”

In fact, officials at Southern California Edison said they are working on improving advance warning through the media.

“When a rolling blackout is imminent, you will see us very aggressively team up with the electronic media in town to get the word out,” said Lynda Ziegler, Edison’s director of business and regulatory planning.

Ziegler also recommended that companies monitor the California Independent System Operator Web site (www.caiso.com), particularly on hot days this summer.