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CNN Today

Power Crisis: California Rate Hikes Could Affect Consumers Nationwide

Aired January 4, 2001 - 2:07 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

NATALIE ALLEN, CNN ANCHOR: People in California are about to spend a little more money out of their wallets for power. Both business and residential consumers are complaining about a big rate increase for California's power companies. The action is part of a national trend toward deregulating the cost of power in many states.

Right now, the California Public Utilities Commission is debating a rate hike which could see bills go up an average 10 percent. For residential customers that could mean a 9 percent increase, 7 percent for small businesses, and a 15 percent increase for big business.

The California power crisis is more than just a West Coast problem, as well. Today we are taking an in-depth look at the impact this is having.

CNN's Greg LaMotte shows us why the high cost of electricity can eventually affect almost everyone's budget.

(BEGIN VIDEOTAPE)

GREG LAMOTTE, CNN CORRESPONDENT (voice-over): If you haven't been paying attention to California's energy crisis, you'd better. You may soon be paying more for clothes, food, even flowers, just to name a few. Energy sensitive businesses in California are getting hammered by skyrocketing energy prices, and somewhere along the line you know who's going to pay.

JACK KYSER, ECONOMIST: If California catches a cold, definitely the rest of the United States is going to sneeze.

LAMOTTE: Utility bills have tripled to $600,000 a month at this Los Angeles textile dyeing plant. The clothes produced from the fabric here could wind up in your closet.

Do you like dairy products? California is the largest dairy- producing state in the nation and second only to Wisconsin in cheese production. It is a highly energy-intensive industry. That's why you may see cheese prices start to climb.

California's No. 1 industry is agriculture. Fruits and vegetables grown here are shipped around the country. The price for refrigeration, among other things, is affecting the bottom line. It's the cost of heating greenhouses that's affecting the folks who help supply the nation's flower shops. Robert Echter's energy bill has doubled to $20,000 a month.

ROBERT ECHTER, FLOWER GROWER: It eliminates our product. We're now running in the red.

LAMOTTE: California's huge manufacturing industry, including aerospace, aluminum, and, of course, the state's Silicon Valley are all taking an economic hit.

JAKE STEWART, MANUFACTURERS & TECH. ASSN.: What's happening is that you're seeing companies shut down because they just can't economically operate under those conditions.

LAMOTTE: Kaiser Aluminum in Washington State decided if you can't beat them, join them. The company sent its employees home with 70 percent pay, and is reaping hefty profits selling its electricity rather than using it to make aluminum for far less.

SUSAN ASHE, KAISER ALUMINUM: For this month, I think we stated in our announcement that the proceed would be around $50 million.

(END VIDEOTAPE)

LAMOTTE: Just about everyone involved in California's energy crisis, whether it be the people who actually wrote the legislation for deregulation to people who work here in power plants like this one across the state, seem to agree that, so far, the deregulation of the power industry in California has been an economic disaster. And if paying more for a whole host of products isn't enough to grab your attention, maybe this will: Half of the nation, 25 states, are in the process of deciding whether they want to deregulate their utilities -- Natalie.

ALLEN: All right, Greg LaMotte. Thanks, Greg.

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