PUC has growers, ag firms seething

By RICHARD T. ESTRADA BEE STAFF WRITER (Published: Saturday, May 12, 2001)

San Joaquin Valley food processors and farmers say they are the unfair targets of a proposed electricity rate hike that could send PG&E rates soaring 50 percent.

Processors and farm groups are seething after analyzing the California Public Utilities Commission's plan to recoup $5.2 billion the state has spent buying power in recent months.

"Food processors are going to be shopping for other states to do business in," warned Jeff Boese, president of the California League of Food Processors. "If that happens, you'll see the crops follow them. It would be devastating."

Food manufacturing is a $42 billion-a-year business in California, and farming generated $26.7 billion in revenue in 1999, according to government statistics.

Both industries are concentrated in the San Joaquin Valley, forming the foundation of the region's economy. Both also face increasing pressure from domestic and foreign competition.

Many of California's food processors would be slapped with a 50 percent increase in electricity costs under the PUC proposal, while farmers' rates would jump up to 30 percent.

Some of the valley's food processors and farmers are shielded from higher rates because they buy electricity from the Modesto and Turlock irrigation districts.

PUC President Loretta Lynch said Wednesday that her proposal provides $5 billion in the next year to pay the state Department of Water Resources for money it has spent buying electricity.

The San Francisco-based PUC had no comment on the proposal.

Residential users who don't reduce consumption during peak daytime periods also face higher rates. Processors and farmers, however, say they can't pick and choose when to use electricity.

That's because fruits and vegetables must be processed quickly or they spoil, and cows won't wait until evening to be milked.

Nancy Slater, executive director of the Merced County Farm Bureau, believes the PUC is catering to the urban majority.

"The voters are in the Bay Area and Southern California, and no one wants to make them angry," Slater said. "The political reality is it's easier to hit processors and valley farmers with higher rates."

The PUC proposal would add from 1 cent to 4 cents a pound to processors' costs, according to industry estimates.

That could be a $1 million expense for a company such as Patterson Frozen Foods, which handles about 100 million pounds of food annually.

"We can't pass that large of an increase on to our customers," said Paul Fanelli, vice president of human resources for Patterson Frozen Foods. "We're competing with processors from other states and other countries who aren't burdened by these higher rates."

Patterson Frozen Foods is Patterson's largest employer, with 700 employees freezing broccoli, cauliflower, peas and other crops.

"That's $1 million that they can't use to pay employees, reinvest in their facility or put toward additional workers compensation expenses," Boese noted.

The proposal also has ominous economic implications for farmers already struggling with high costs and low prices.

"It's not appropriate to force agriculture to pay these extra costs," said Michael Marsh, chief executive officer of Modesto-based Western United Dairymen. "We've already seen rising costs drive dairies from California. This will only increase the flight."

The dairy industry's health would be at risk if the PUC approves its plan, Marsh said.

"The parlors need electricity to milk the cows, then more electricity is required to keep the milk cool until it is picked up by the processors," Marsh explained. "The processors face the same situation, needing electricity to process the milk and then to keep it cool."

The PUC has scheduled a meeting for Monday to approve a rate design that could appear on customers' bills as early as June 1.

http://www.modbee.com/metro/story/0,1113,266025,00.html

-- Martin Thompson (mthom1927@aol.com), May 12, 2001

Answers

I guess all the city and 'burbs have figured out how to eat with no food production. I sure wish I knew how they were going to do it. Save me a lot of money!

-- Taz (Tassie123@aol.com), May 12, 2001.

And so it begins. Expect to hear more of this from every industry group and consumer activist group and tax payer group in the state. It's not just a liberal thing - the conservatives are whining, too. It is now time to pay the piper. We have to pay back the state for buying those $2000/mw contracts, right? After all, the fiscal year ends June 30 and our state constitution requires a balanced budget each year. We will have to get the money from SOMEWHERE (she said with a toothy grin, throwing the fox in among the chickens).

I wonder what will happen if PG&E customers see that Turlock Irrigation District customers don't have to pay that higher rate, or, if TID and MID customers ALSO get higher rates, will they blame PG&E and its customers for driving up their costs when they are not even members of the ISO? Expect a lot more finger pointing and gnashing of teeth.

The sad thing is, San Joaquin Valley farmers are really getting it in the shorts this year (more than they already had been) and the higher electric rates will just drive more of them out of business. Say goodbye to cheap food.

On a separate note, I wonder when the gummint will decide that home- grown food is a national security issue.

-- Margaret J (mjans01@yahoo.com), May 13, 2001.