Energy: Could Be Prologue To What’s in Store Locally
Businesses in Los Angeles County and the Bay Area are scrambling to find sanctuary from high electricity rates imposed last month by state regulators, with many firms considering relocation to areas serviced by municipally owned power utilities.
The scenario played out up north could be a prologue to what’s in store for San Diego County if state regulators approve San Diego Gas & Electric Co.’s request for a rate hike.
Immediately after last month’s approval of the largest electricity rate hike in state history, officials in the city of Los Angeles and other cities with reliable and cheaper power saw their phone lines light up with inquiries and requests from upset business owners wanting to move out of Southern California Edison territory.
Los Angeles, Pasadena and Burbank, all of which have city-owned utilities, are being increasingly viewed as sanctuaries from the high prices and blackouts suffered in areas such as Santa Monica and Long Beach serviced by investor-owned Edison. And those “sanctuary” cities are preparing to accommodate the influx.
“We have 2 million square feet of space under permit for future growth,” said Ron Davis, general manager of Burbank’s Department of Water and Power. “We can handle an influx of small businesses. Our concern is that larger industrial businesses would seek to move into Burbank.”
Davis said his department has been consulting with other Burbank city officials on how to price any influx of larger industrial companies to protect the utility’s small-business and residential customers.
Meanwhile, an aide to L.A. Mayor Richard Riordan confirmed city representatives are informing companies that the city is an attractive place to locate a business because of its reliable energy source.
“We are not poaching companies from other areas,” stressed Jeff Walden, director of the mayor’s business team. “(But), we would rather have these companies stay in California than move out of state. If that means moving to Los Angeles, we think that is better for all of California.”
Walden said the city is assisting an increasing number of businesses with questions about the reliability of the area’s energy supply. He added that DWP customers would not experience any rate increases.
Last month, the state Public Utilities Commission allowed Edison and Pacific Gas & Electric Co. to raise rates by as much as 46 percent.
The hikes come on top of a 9 percent to 15 percent increase the PUC approved in January and an additional 10 percent scheduled for next year.
A small company located in Burbank that uses 2,000 kilowatts of power per month would be charged $206.10, according to Davis. In Edison territory, that rate would be $242 a month, before last week’s rate increase. Today, that bill would be an estimated $320 a month.
Real estate brokers reported that, as a result of the increases, commercial tenants about to renew a lease or consolidate operations are expressing a strong preference for energy-friendly Los Angeles.
“We represent Clear Channel (Communications Inc.) in a relocation plan,” said Christopher Cooper, senior vice president of the tenant representation group at Jones Lang LaSalle American Inc. “They have asked us to find a location for all of their local stations within L.A. DWP’s service area.”
Clear Channel Communications Inc. owns eight stations in the Los Angeles area and nine in San Diego County.
“Several technology firms handled by our San Francisco office are considering relocating to Los Angeles, despite the (Bay Area’s) softening real estate market,” Cooper added. “Tired of high prices and blackouts, a big issue for many of our clients is, ‘Where can we find a favorable power source?'”
Companies in the San Gabriel Valley, in the middle of Edison territory, are equally frustrated.
“It’s too early to tell how many companies this increase will affect,” said Elaine Cullen, business assistance director for the San Gabriel Valley Economic Partnership.
“A lot of companies that at one point threatened to leave the state for one reason or another have called me concerned over this latest rate hike. I have a list of 15 to 20 companies that I have to call.”
Rafael Padilla, senior vice president at Muselli Commercial Realtors in Santa Monica, predicts the power crisis will have a greater impact on office and industrial space than on retail.
“(Office and industrial tenants) are not driven by location,” he said. “If they are a small manufacturing business, they can relocate into areas that can offer them better deals, making Los Angeles and other areas with city-owned utilities extremely attractive. And they will remain attractive until DWP screws up.”
Padilla added: “(The power crisis) reminds me of the Northridge earthquake. Until the earthquake, nobody knew about earthquake standards. Now everyone wants to be in earthquake-compliant buildings. Today, everyone wants a reliable supply of energy.”
Sieroty is a reporter with the Los Angeles Business Journal.
