As politicians and power companies continue to bicker about how best to resolve California's chaotic energy problems, several local manufacturers have quietly laid off hundreds of workers. If power outages and price spikes continue, thousands of more factory workers could lose their jobs, manufacturers and analysts said.
After halting production 12 times in January due to power outages, the Miller Brewing Co. plant in Irwindale announced last week that it would begin diverting 40 percent of its production to four of its sister plants out of state.
As a result, 158 of the plant's 750 employees have been laid off, according to Victor Franco, spokesman for the Irwindale plant.
"The layoffs are indefinite or until we get some sort of resolution to the crisis," Franco said.
Miller Brewing, which typically runs its plant 24 hours a day, seven days a week, is one of many local manufacturers that signed "interruptible" contracts with Southern California Edison, under which companies agreed to forced outages during emergencies in exchange for discounted electricity rates.
Franco said that Miller Brewing originally entered the contract with the understanding that it would save the company millions of dollars in utility bills. Instead, the contract has cost the plant more than $1 million in losses and penalties this month and may end up costing hundreds of more workers their jobs.
"It's killing us," Franco said. "The outages are only supposed to last for a maximum of six hours, but what (Edison) is doing is shutting power down for five and a half hours, reinstating it for half an hour, then shutting it down again for another five or six hours."
Franco said that losses to the plant during outages average about $70,000 an hour.
The situation is equally bleak at PolyTainer Inc., a plastics manufacturing plant in Simi Valley. There, 240 of the company's 300 employees were temporarily laid off last week.
"We've lost $100,000 this month because of the outages," said Paul Strong, the company's president. "We usually operate 24 hours a day, but last week we were shut down 18 hours a day for three consecutive days.
Strong said his company will go out of business in six months if the outages continue.
Things aren't much better at Fontana-based California Steel Industries Inc., the largest steel plant on the West Coast. Lourenco Goncalves, chief executive of the company, said that power at his plant has been shut off 12 times this month, forcing him to temporarily send 1,000 workers home without pay.
Another local manufacturer forced into large-scale layoffs due to power outages is Pocino Foods Inc., a family-owned meatpacking business in Industry, which permanently laid off 20 of its 120 workers in recent weeks.
Frank Pocino, president of the company, hasn't calculated exact losses the company has suffered because of the outages, but he said the figure is "horrendous," adding that he will move his company out of state before the crisis forces him out of business.
Manufacturers hardest hit by power outages and layoffs are primarily Edison customers that signed what are called "I-6" interruptible contracts with the utility years ago, with the understanding that the contracts would yield significant savings on utility bills.
But now that those contracts are resulting in millions of dollars in losses, those companies want out of their contracts.
Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said that it's too early to tell what the power toll will ultimately be, in terms of layoffs, but he pointed out that Los Angeles County is not the only region feeling the pinch.
"Boeing Missile in Huntington Beach, for example, is incurring huge losses. They're on an I-6 interruptible contract, but they're ignoring it and paying huge penalties to remain on schedule," Kyser said. "And there have also been major losses in the Central Valley, where the dairy industry has been devastated."
Strong, who signed his I-6 contract with Edison in 1994, said he was led to believe that he would have the right to "opt out" of the agreement every November if he elected to do so.
"We tried to opt out last fall," he said, "but the PUC unilaterally decided in November that none of Edison's I-6 customers' requests for release would be considered until March 2001 at the earliest."
By then the opt-out clauses would likely be moot because Edison would probably have exhausted its caps under law, a total of 25 disruptions a year per company or 150 hours, whichever comes first.
Franco, Goncalves and Pocino confirmed that their requests to be released from their I-6 agreements with Edison were also denied by the PUC.
"We're basically stuck," said Pocino, which means his company and others will may be forced to endure more power outages and possible layoffs.
"What's happening here is that we're being used as scapegoats," Strong said. "Because we signed contracts with SCE, they're willing to sacrifice us first before they sacrifice the general public."
But Tom Higgins, senior vice president of Edison, disagreed.
"We certainly don't see them as scapegoats," he said. "It's hardly their fault this crisis is taking place. It's a failure of regulations in California that has brought on the crisis and we are entirely sympathetic to their dilemma."
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