No Reports of Big
Layoffs , Yet
James Ikeda knows he’s one of the lucky ones, although with today’s high utility rates, “lucky” is a relative term. He’s seen his electricity bill shoot up to $6,300 this month.
Ikeda, owner and franchisee of the International House of Pancakes in Oceanside, was expecting a jolt in electric prices in the summer, since it happens every year. But this time last year, he was paying only $3,500 a month for energy. That’s coupled with an increase in prices for natural gas. Ikeda just got a bill for $1,600 this month, when last year at this time he was paying about $1,000.
That takes a bite out of his profits, although he’s fairly certain he can weather it. The restaurant has done excellent marketing, and sales have been up. But Ikeda can’t reduce his air conditioning use, since that would reduce the customers’ comfort level and they’d go elsewhere, he said. If this keeps up, he may have to pass his costs on to his customers.
“I’m contemplating a price increase. Because everything I’ve put toward building my business, it’s just right down the tubes again,” he said. The place next door isn’t as lucky. Slugger’s Pizza has seen its electricity costs double, even as it reduced its energy use.
“It took all my profits,” said Michelle Lester, owner of the pizza place. “It took everything I made up until June, just to pay my electricity bills.” Lester and her husband are waiting on a refund check promised from San Diego Gas & Electric Co. to help get through the summer. She’s also watching to see if rates will be reduced soon. Survival Uncertain. Beyond that, she’s not certain what can be done. Her next electricity bill is due this week; Lester said she is not sure how she’s going to pay it.
“We can’t raise our prices any higher; we won’t get any customers,” she said. “We’ve been thinking about closing in the middle of the afternoon, keeping the lights off. Right now, we’re very frustrated. I don’t know what we’re going to do.” This is fairly typical. Small businesses are being squeezed by high rates, said Mitch Mitchell, vice president of public policy for the San Diego Regional Chamber of Commerce. “Most small businesses are seriously concerned about the situation in which their utility bills in some instances are doubling and tripling,” he said. “We have had phone calls from people who have stated that they are considering closing down for a month, if possible.” Businesses are faced with the choice of raising prices or cutting service. At this point, businesses have not gone so far as to lay off employees, but Mitchell sounds an ominous note.
No Layoffs , Yet
“We have not heard of any layoffs as a result of the increased price for electricity , yet,” he said. The high cost for electricity disproportionately affects small businesses, because large companies can spread the cost further. But small businesses tend to have small profit margins, said Anthony Bolanos, economic research analyst for the chamber.
As an example, Bolanos cites a hypothetical business that usually has a utility bill of $800 to $1,200 a month and clears $3,000 to $4,000 a month. Now that utility bills have doubled, that same business owner might now have only $1,000 a month to take care of himself and his whole family, Bolanos said.
Bolanos noted that 95 percent of the companies in San Diego have 50 employees or fewer. They’ll be feeling the crunch first, he said. Ikeda knows what that means for local business. Continued high utility rates will sock San Diego with a double-whammy , they’ll be forced to pass their increased costs on to the customers in the form of higher prices, while these very customers will have less money to spend as they deal with their own utility bills.
“If this keeps up, you’re going to have a round of recession and inflation that’s going to kill the golden goose for San Diego,” he said.
“Nobody’s ever said the word inflation or recession out loud that I can hear, but when those words start being said, I think that’s when the politicians are going to start taking notice.”
