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HomeMy WebLinkAboutRoplas Industries letter BIT17ECOUNTY ROPLASTADIMINISTRXIION INDUSTRIES ALIG 2 0 2015 INCORPORATED Ru"VI Butte County Board of Supervisors, 25, County Center Drive, Suite 200�, Oroville, CA 95965 August 20th'2 '% Reference:August 25th PowerButte Workshop Dear Members of the Board, OXXI ,CALAFORNAN I am writing to members of the Board of Supervisors prior to the Workshop on Community Choice Aggregation to be held on August 25`x. I will attend the meeting in support of the County's proposal to investigate further the possibility of establishing a Community Choice Organization which will have some control of the terms of the provision of electricity within Oroville. This letter is written on behalf of Roplast and the Manufacturers Support and Readiness Team (MSRT). The MSRT was set up by a group of manufacturers a couple of years ago to work with the Cities, particularly Oroville, the County and the State to establish priorities and encourage and support the growth of manufacturing in the County. First, Roplast's position: We have been working diligently to ameliorate the difficulties of working with the present electricity supply system for the, last 15 years. We see Community Choice Aggregation as a significant step towards a rational system with the potential of becoming a real solution which will enable us to expand production in Orciville beyond the next 4 years. Roplast employs about 140 people making and selling reusable plastic carrier out bags to major retailers and grocers nationwide. Production requires a lot of power. Electricity is our largest expense, after materials and payroll. We currently spend about$100,000 per month with PG&E for about 700,000 KWH and generate up to 500,000 KWH per month using a natural gas powered generator installed with the help of the State in 2001. Our usage being 24/7 is considered everywhere to be about the most attractive for any utility company. When we came to Oroville to investigate locating the plant here we were naturally concerned about the, cost, availability and reliability of the electricity supply. l remember the then Mayor of Oroville, Buzz Roberts,, pointing at the dam saying something to the effect that if you are sitting under one of the largest dams in the country which provides the least expense power anywhere, you can be sure that you will get a fair deal on electricity, At the time, I was managing a plant in Morristown Tennessee where there was a Municipal Utility District which was strongly supportive of manufacturers and responsive to their needs. It did not occur to me to doubt his answer. For 10 years we did get a fair deal on electricity. Then after the disastrous deregulation of the electricity system in the State, the cost of our electricity tripled. There was nobody with any influence to whom we could talk to about our situation. Our business was in jeopardy. I spent 6 months looking for a Roplast lndJtrie , n s South 5th 1A ie Oroville, CA 95965 (53 r} 532-9500 FAX (530) 532-9576 ' ic. 3155 n BU TE COUNTY ADMINISTRATION AUG 2 0 2,015 solution with regular visits to Sacramento. What I learnt was that there were special arraT1geRgAl ht5 fofORNTA the very large users,who were mainly based out of state, but that companies of our size were expected to pay up to 5 times the electricity rates prevailing in other states. The only solution appeared to be to invest in power co-generation and the State would provide grants for about a third the cost. We considered solar power.This could lower peak usage in the day but our peak usage is just as likely to be at night.To cover our full requirements even for several hours during the day would require some 25,000 panels and 5- 10 acres with a cost probably approaching$10 million. So we installed a natural gas powered co generation plant which supplied electricity while converting the exhaust heat into to chilled water for our process. This is about as efficient, at 55%energy capture, as a large scale gas fueled generator attached to the grid. But, the results have not been satisfactory. Initially,the price of natural gas increased from $5/mcf at the time of investment to $13/mcf so that generating our own power was only competitive during peak periods. When the price of natural gas fell back below$5/mcf a few years ago, the PG&E rate schedule was adjusted so that generating our own power remains uncompetitive most of the time. This was achieved by increasing the demand charges from $10-$15,000 per month to the current$40-$50,000 per month. We now pay$50,000 if we use the PG&E system for 15 minutes in each of the rate periods in one month and unfortunately generators do not consistently run 24/7. Our actual cost of power is thus 30%over the published energy prices. There was no authority to whom we could talk who seemed concerned about our situation. The CPUC does not have 'keeping electricity costs competitive for manufacturers in low income industrial areas' as part of its mandate and it sometimes seems that such communities are subsidizing the rich areas of the state—electricity in Palo Alto is about half the cost of electricity in Oroville. From 2001 until 2014, we were paying an average of 12c/KWH as opposed to 5-8c/KWH for manufacturers in other western States and in,for instance Redding and Vernon, where several of our competitors are based, where community controlled utility districts operate. In 2014, in part to compensate low income communities for the removal of the Enterprise Zones(EZ) and in, at last, recognition of the need to discourage the flight of manufacturing to other states,the State Government required PG&E to offer a 30%electricity rebate for 5 years to qualifying companies that had been covered by the EZ program such as Roplast. With the help of Audrey Taylor, Roplast and Graphic Packaging qualified for this program. We still pay around 10%more for electricity than manufacturers in the Californian Cities with community controlled utilities and in other western states. This program is helpful but it only lasts for 5 years (in our case until 2019) and our fate remains in the hands of the CPUC and PG&E who are not much concerned with manufacturing jobs in depressed areas. With the less expensive power available for 5 years we are pressing ahead with an aggressive 3 year expansion program to make sure that our costs will be competitive relative to other suppliers worldwide. But unless we become confident that our electricity costs will stay competitive, we cannot justify expanding the business in Oroville beyond the present building despite the fact that we have extra land. One of my top priorities is to do everything possible to ensure that industrial electricity rates in Oroville remain reasonable in the long term. Our enthusiasm for a community control is not based solely on the prospect that our short term cost of electricity may be lower. Rather, we believe that being supplied by a power company with a measure of local control will mean: BUTTE COUNTY ADM NISTRATI©N UG 2 0 2015 • There will be less chance that the rate schedules will be adjusted arbitrarily to ourrOde riment;tl(3RNIA • There will be more certainty about the future since industrial electricity charges will be to an extent based on a long term strategy for local industrial development—this is already the case in Redding; • We will not stand alone in seeking fairness from the Californian politicized electricity supply system—the Butte County Community Aggregation Organization and other community aggregation organizations will help; • There is the opportunity for us to work together to get the best value for the local community from local resources including locally generated electricity. The MSRT Position The dozen or so Butte County manufacturers that have associated themselves with the MSRT decided to put the development of programs that could allow them to be provided with competitively priced electricity with a rational rate structure top on their list of priorities for the growth of manufacturing in Butte County. To a greater or lesser extent they share the concerns of Roplast. Supporting the Community Choice Aggregation initiative was agreed unanimously at our last meeting. We hold ourselves available to help the County in any way we can. Attached is an article that appeared on the leader page of the Wall Street Journal on 24`x'August 2001. This shows that the uneven and irrational basis on which Californian manufacturers are supplied electricity has been a concern for the last 15 years. Things have got no better over this period. The State is allowing Community Choice Aggregation with the expectation that this will allow communities to have more influence over electricity supply which is an important part of their infrastructure. Itis encouraging that Butte County is taking steps to benefit from this opportunity. ae,clf u lly, , Robert Bateman President BUTTE COUNTY ADMIAfISTItATION, AUG 2 0 21x46, Article in the Wall Street Journal 8/24/01 OROVILLE,CALIFORNIA! Not so sure:about the politics but this shows that l have been fighting the battle for fair energy prices for a while and suggests that historically, at least since the aborted deregulation, it has not been prudent to rely on.PG&E. 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