Mass merchants struggling to cope with Northern California energy crisis

doug desjardins, california - Skyrocketing energy costs and rolling blackouts in California have mass merchants cutting back on consumption and learning to cope with a power shortage that isn't likely to go away anytime soon. Repercussions from the state's deregulation-spawned energy crisis cropped up in mid-January when power outages swept through Northern California for three days, leaving shoppers in the dark and retailers looking for solutions.

"We had five of our stores affected in Northern California and they were down for about an hour Thursday and Friday [Jan. 18 and 19]," said Wal-Mart spokesman Tom Williams. "At this point, we haven't been hit too hard."

In addition to implementing its usual energy conservation measures-most stores in California have skylights that negate the need for indoor lighting during the day-Wal-Mart is stocking up on emergency supplies that shoppers will need if the power goes out.

"We're just making sure we have plenty of supplies like batteries and generators," Williams said.

In addition to inconvenience and uncertainty, retailers have to deal with escalating energy costs. Since deregulation went into effect last summer, gas and electric costs have increased sharply, even tripled in some areas.

President and ceo Jim Sinegal acknowledged the problem at the company's annual shareholders meeting on Jan. 25, noting that 37% of Costco's 252 U.S. stores are located in California. "The most difficult thing is that the cost of energy has gone way up and we're paying a serious penalty," said Sinegal. "So we continue to look for any means to conserve energy." He added that although some stores have been hit with blackouts they haven't had a negative effect on business. "Even when we had our service interrupted, it didn't last long and people just went on shopping," said Sinegal, adding that many Costco stores in California have skylights that minimize the effect of daytime power outages.

California-based consumer electronics chain The Good Guys is dealing with the energy crunch by turning off big screen televisions and other power-hungry appliances on display. "We've turned off 50% of our display sets, mostly those that are below eye level," said Kristin Lark, spokeswoman for the 79-store chain that has more than 50 outlets in California.

Circuit City has also shut down half of its television and computer displays in an effort to curb energy use. "We anticipate this will reduce our energy costs by 15% to 20%," said Circuit City spokesman Bill Cimino. "And we're evaluating any other energy conservation measures we can adopt to help us save more." Cimino said several of Circuit City's 84 stores in California have been hit by blackouts but that they caused no major problems. "We have emergency generators that provide us with enough power to give us light and keep our security system going," he said.

California is still trying to cope with deregulation, which has created a situation where demand for power routinely outstrips supply. Deregulation was designed to increase competition among state utilities and produce lower prices, but a shortage of power plants has created a reliance on suppliers outside the state, driving prices through the roof.

Utilities have been frantically trying to avoid a total collapse of the power grid by importing power from the Northwest and Canada at inflated prices. When supplies have run dangerously low, "rolling blackouts" have been imposed, where power is shut down for a short time region by region to preclude a widespread outage.

IMRA spokeswoman Edie Clark said the association is working with the California Retailers Association to lobby for solutions to the energy problems, which are expected to get worse when summer arrives and millions of air conditioners create a huge power drain.

"We support deregulation when it's done right, as it was in states like Pennsylvania and Texas," said Clark. "But we don't support it when a state implements deregulation in an environment where the supply cannot meet the demand, which is the case in California."

http://www.dsnretailingtoday.com/inthisissue/index.cfm#511

-- Martin Thompson (mthom1927@aol.com), February 05, 2001

Answers

That 'ol debbal "deregulation" again! Am I the only person who objects to the misapplication of that word? But, even more importantly, isn't the problem not enough power for the demand? How did "deregulation" reduce the power available?

-- Warren Ketler (wrkttl@earthlink.net), February 05, 2001.