Powerful Partner: Utility Company Joins Efforts to Keep Firms In-State

By Grant F. Thomas and Clara Potes-Fellow

The stories are strikingly similar: Rising labor costs and strict air-quality regulations prompt a Buena Park furniture maker to consider moving his company–and its 400 jobs–out of California. In Santa Barbara, a major aerospace company employing 292 people considers attractive relocation proposals from other states, including Arkansas, Missouri, and Kentucky, where officials are offering tax incentives–even land deals–to convince the firm to move. And in Costa Mesa, a Korean-owned food manufacturer with 138 employees ponders moving to Georgia, lured by government incentives, lower labor costs, and increased assembly-line space. Interestingly, all of the firms decide to stay.

What convinced the business owners to remain in California? For each firm, it was a mix of different factors. For some, it was intervention on a local level, an assurance that permitting would be made simpler. For others, it was a package of tax incentives and job training assistance designed to ease the burden of labor costs. But there was one constant for these and 570 other firms that made the commitment to stay and do business in Southern California during the last 5 years: the region’s utility company, Southern California Edison (SCE).

An Unlikely Partner

In the deregulated utility industry, SCE may seem an unlikely partner in the realm of economic development. After all, businesses currently have little choice over their rates or electricity provider, right?

Well, not exactly, according to Pamela A. Bass, SCE’s vice president of customer solutions. “With other states spending an increasing amount of time and money to lure businesses from California, we made a corporate-level commitment to help businesses remain profitable in Southern California,” she said. As Bass pointed out, when local businesses prosper, so does the region, and so does SCE. “We know that when businesses and communities thrive, the entire region’s economy benefits. That’s why we’ve concentrated our efforts on retaining and expanding existing companies and attracting new firms to the area,” she said.

The utility company’s efforts have not gone unnoticed. Since 1992, SCE’s economic and business development group has helped save approximately 127,000 jobs and assisted 570 companies within its Southern California service territory. And last May, SCE won the Los Angeles Economic Development Corp.’s EDDY Award for economic development excellence.

As a key player in the local business community, SCE takes part in regional teams designed to attract new firms and expand existing companies. For example, as a member of Team Corona, SCE helped that community lead the Inland Empire in terms of job creation, and as a member of Team Irvine helped the city experience a 5.5% increase in the number of businesses in 1995.

But for firms like Kushwood Manufacturing, Santa Barbara Aerospace, and Union Foods–where out-of-state relocation and significant job loss appeared imminent–SCE worked with state and local officials to assemble California Red Team. Along with local civic leaders and commerce associations, the utility company worked with the Gov. Pete Wilson’s office, the California Trade & Commerce Agency, and state legislators to develop strategies and incentives to keep business in the state. “In the case of Santa Barbara Aerospace, California worked quickly to show that our state is serious about retaining productive businesses,” said Barry R. Sedlik, SCE’s manager of economic and business development. “Retention and expansion of aerospace industry firms is vital to California’s economy.”

Flexible Utility Rates

When it comes to negotiating with companies considering out-of-state offers, SCE brings several useful tools to the table, Sedlik said. Chief among these are three Economic Development Rates (EDRs) included in the company’s package of flexible pricing options approved by the California Public Utilities Commission in 1996. “These new rates basically offer five years of electricity-rate discounts to eligible customers,” Sedlik said. Eligible customers are those with 200 kW to 4,000 kW of load at the time they apply for the rate, who are seriously considering relocating the load outside California or expanding by 50 kW or 10% (whichever is greater) and considering out-of-state locations for the expansion, or are start-up customers or are moving their load into California.

Union Foods, which qualified for the Retention EDR, will receive the five-year discount in exchange for agreeing to maintain a specified level of electrical consumption for seven years. “Union Foods was an ideal candidate for this rate,” Sedlik said. “Coupled with assistance the firm received from city and state officials, Union Foods will remain competitive and profitable in Southern California.”

Kushwood Manufacturing qualified for both the Retention EDR and the Expansion EDR. “SCE helped us develop a plan to manage our electricity rates that will allow us to remain competitive within our industry while still letting us accomplish our goal of expansion,” said Dan Kush, president of Kushwood Manufacturing.

Something for the New and Small

For entrepreneurs and start-up firms, SCE offers assistance in developing business strategies and earning much-needed capital. Through its noted investor forums held throughout the year, SCE gives company representatives training, mentoring, and the opportunity to present their business plans to an assembled group of investors representing more than $200 million in venture capital. “Post-event tracking indicates that forum participants have raised more than $9.5 million in venture capital,” Sedlik said.

For HIV Therapeutics Inc., a San Juan Capistrano-based biomedical company, participation in SCE’s Special Investor Forum in May 1996 resulted in $250,000 of valuable funding. At the forum, company president Richard Burstein outlined his work in developing a potential treatment for HIV, the virus that causes AIDS. “I attended SCE’s seminar hoping to spark investor interest in our work and raise development funds,” Burstein said. “The forum certainly allowed me to do that.”

To assist other start-up firms, the utility company has been instrumental in establishing six regional business incubators in Southern California, including one at Cal Poly Pomona that targets businesses in the materials recovery and recycling industries. “We helped fund the Cal Poly incubator because it concentrates on growing businesses in an important and necessary field–developing new recycling technologies and transformation technologies that will reduce the waste stream directed to Southern California’s landfills,” Sedlik said. “This is a perfect example of an innovative program that not only helps increase businesses and jobs, but also helps clean up the environment.”

Sedlik explained that business incubators provide skills training and support in the areas of finance, business development, and management to entrepreneurs and new businesses during their most vulnerable years. Such facilities typically provide space for a number of small businesses under one roof and offer such things as flexible spaces and leases, office services and equipment on a pay-as-you-go basis, an on-site incubator manager to provide business advice, and assistance with financing.

Targeting Critical Business Sectors

In recent months, SCE has concentrated its efforts on growing businesses in several critical sectors, including importing and exporting, the fashion and apparel industry, the food processing and manufacturing industry, and motion picture production, Sedlik said. In fact, the Retention EDR was designed to encourage film companies to complete production in Southern California.

To address increased competition between the United States, Mexico, and Canada under NAFTA, SCE provided a $50,000 grant to the California Fashion Association-Technology & Education Council to help upgrade technology, equipment, and workers’ skills among regional apparel contractors and manufacturers. “Many of these small businesses are under-capitalized and have limited access to capital for expansion and modernization,” Sedlik explained. “Our goal is for these companies to become more cost-efficient and competitive on a world-class level.”

Additionally, in partnership with Rebuild L.A., SCE formed the Food Industry Business Roundtable to bring together more than 30 prominent Latino and Asian food processing companies to address critical business issues. “There are many environmental and legislative issues that affect the food industry,” Sedlik said. “With so many ethnic and special food companies in Los Angeles County, we felt it was very important to nurture this vital, growing industry.”

For companies seeking business opportunities abroad, SCE also sponsors and hosts a variety of seminars and programs designed to educate firms about importing and exporting. And in recent years, the company has paid for several minority business owners to attend foreign trade conferences in South Africa. “It may seem that SCE is all over the globe when it comes to helping the business community, but we do it for a reason: to grow the economy locally,” Sedlik said. “There are many firms in Southern California that have valuable products to sell abroad.”

With its involvement in business retention, education, and assistance, “SCE now has a reputation as a key player and partner in the economic and business development community,” Sedlik said. “We’re involved on every level, and we know that our efforts come back two-fold, three-fold, and in some cases, ten-fold.”

[ital]Grant F. Thomas is communications manager for CSBU at SCE and Clara Potes-Fellow is project manager for Southern California SCE.[ital]