Companies warn of fiscal chaos from rolling blackouts

By Seth Hettena The Associated Press May 26th, 2001

SAN DIEGO -- A broad range of companies has signaled Wall Street that the California energy crisis could seriously hurt their bottom line.

In quarterly reports filed this month with the U.S. Securities and Exchange Commission, dozens of businesses warned that the rolling blackouts forecast this summer could have devastating effects. The businesses represent a number of sectors of California’s $1.3 trillion economy, including medical suppliers, restaurants, banks, ice cream makers, computer companies and biotech firms.

In a sign that the crisis could send ripples across the country, some of those firms have facilities in California but are headquartered elsewhere.

"If people think energy is California’s problem, they’re sorely mistaken," said Sung Won Sohn, chief economist for Wells Fargo & Co.

The SEC requires companies to disclose any conditions that may adversely affect operations.

PE Corp., a Connecticut biotech firm, told the SEC that long or frequent power outages at its facility in Foster City could hurt the entire company.

Sierra Semiconductor Corp. said in its SEC report filed May 16 that it has no backup generators or alternate sources of power to keep operating in the event of a blackout.

"Any of which could substantially harm our business," the company reported.

The parent company of Union Bank of California said in its May 14 report that while the long-term impact of the energy crisis cannot be predicted, it could further spur an economic slowdown. That, in turn, could hurt demand for new loans and the ability of borrowers to make payments.

Christopher Thornberg, a professor who helps compile the UCLA Anderson Forecast at the school of management, said he’s skeptical of the profit warnings.

"There are some costs involved with these shutdowns, but there’s not going to be any overall effect on the economy," he said. "I have a feeling that a lot of these profit warnings have nothing to do with rolling blackouts, but they’re the easiest thing to blame,"

Sohn said California could manage the power crisis with minimal cost if the state schedules blackouts so businesses have time to plan ahead.

Gov. Gray Davis has said he will issue an executive order that requires grid managers to give 48 hours notice of possible rolling blackouts.

However, Sohn said, a hot summer coupled with tight supplies of electricity "could really be a very costly scenario."

-- pho (owennos@bigfoot.com), May 26, 2001