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Will energy rate hikes drain techs?
By Lisa M. Bowman
ZDNet News
May 16, 2001 5:26 PM PT
California's technology companies face skyrocketing energy bills amid their battle with a sluggish
economy.
On Tuesday, California's Public Utilities Commission approved the biggest rate hike in state history, an increase
that could raise nearly $6 billion. Small-business bills will climb about 37 percent, while large corporations could
see hikes as high as 49 percent. The increase affects customers of Pacific Gas & Electric and Southern
California Edison.
In January, many California companies predicted the rate hikes would not have a significant effect on their
bottom lines, but after months of prolonged shortages and so-called rolling blackouts, they are singing a different
tune.
Most companies say it is too soon to determine exactly how much their bills will rise. However, several
companies based in the San Francisco Bay Area, including eBay, Ask Jeeves and software maker Siebel
Systems, have already warned in federal financial filings that increased electricity costs could have an adverse
effect on their businesses.
Although the filings often portray worst-case scenarios that are unlikely to occur, many companies are warning
that their businesses could be disrupted by power failures, costs could rise as a result of increased electricity
bills, and partners and suppliers could be hamstrung by rising rates.
"If energy prices continue to increase, our operating expenses will likely increase, which could have a negative
effect on our operating results," according to a quarterly SEC filing by Emeryville, Calif.-based Ask Jeeves. The
company is in the process of expanding its facilities in Natick, Mass., a suburb of Boston, and said it may put
some facilities there that it had planned to build in California.
A hike in energy rates could have a ripple effect, as "server farm" companies pass on their increased costs to
their dot-com customers. Server farm companies maintain entire floors or buildings crammed with computer
servers.
"The rate hikes will hit them the hardest, and those rates are going to have to be passed on to customers," said
Dayne Sampson, vice president of information technology at Ask Jeeves.
In an SEC filing this week, San Jose, Calif.-based eBay warned that depletions in backup power at its
headquarters and at Web-hosting partners could harm its business.
Moving time?
Soaring energy bills could also force some California-based companies to move out of the state to places where
prices for light, air-conditioning and manufacturing are not nearly as high.
In a dire report outlining the potential gravity of the power shortage, the California Manufacturers and
Technology Association said the power crisis could cost the state's manufacturers $1.2 billion and translate into
a loss of 135,755 jobs across all sectors. The organization was one of the business lobbying groups that
succeeded in shifting some of the financial burden from companies to consumers, convincing the Public Utilities
Commission to adopt a rate hike that moved about $106 million from corporations to residential customers.
Yahoo, like many companies in California's Silicon Valley, has dimmed its lights and is asking employees to shut
down unnecessary equipment and turn off their computers overnight. The company has not disclosed any
material effect from the power crisis in its regulatory filings.
Some California businesses are taking the events in stride. Intel, for example, has its major facilities in Santa
Clara and Folsom, Calif., two areas served by municipal power providers, meaning their rates will remain steady
despite the hike.
"We have not been subjected to fluctuations in rates to date and don't expect to for at least a year," Intel
spokesman Chuck Mulloy said.
However, after the terms of those agreements are up, the big chipmaker faces the same constraints as other
companies dealing with the energy crisis. "The concern that we have is the overall impact this will have on the
California economy," Mulloy said.
Intel CEO Craig Barrett already told reporters that rising energy prices could put a crimp in any prospects for
expansion in California, although Mulloy said the company has no immediate plans to build in the state. California
is home to 14,000 Intel employees, the second-largest contingent after Oregon.
The biggest threat facing Intel is a blackout, which could damage some chips as they are being
manufactured--although the company has a sort of co-op arrangement with its energy supplier to help it control
where power outages take place.
Meanwhile, the rate hikes could give even more ammunition to those states and regions hoping to lure California
companies out of the Golden State. |
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