Electric hikes worry business owners

By Jonathan Starkey
Staff Reporter

“It concerns me greatly,” Neville said. “Restaurants run on a very thin profit margin and that’s a huge increase.”

While residential and small business rates will increase incrementally — as of a Tuesday Delmarva Power meeting with the Public Service Commission — from May to June 2007, medium to large businesses’ will suffer a one-time increase from about 60 percent to 117 percent, according to their rate code with Delmarva Power

Most local restaurants fall into the medium business category and will suffer a 64 percent to a more-than-70-percent increase. Places such as hospitals and school districts fall into the large commercial category, and will likely experience an annual bill increase of more than 100 percent.

At a Tuesday board meeting, Indian River School District officials said that they expect their annual bill to increase from $686,773 in 2005 to $1.3 million.

The rising energy costs was one of the expenses that prompted the district to hold its March 28 referendum, which will ask district residents to pay an additional 16.5 cents per $100 of assessed value in the first year and an additional 9.5 cents in the second year.

And, “in no means will that solve all of the energy costs,” said Patrick Miller, the district’s director of Business and Finance.

Matt Likovich, a spokesman with Delmarva Power said that, in 1999, Delmarva Power decreased its rates by 7.5 percent just before its rates were frozen that year. Those rates remained frozen until earlier this year even as costs of fuel and other sources of energy increased, causing this spring’s hike in rates.

“Our people that crunch the numbers had to make a business decision,” Likovich said. “We know this is not easy, but the account managers have received understanding.”

Still, although local business owners might understand why the rates will rise, the transition to paying the higher rates will be tough to handle.

“People can’t shop around for electricity,” said Karen McGrath, the executive director of the Bethany-Fenwick area Chamber of Commerce. “That’s like a fixed price that you can’t control.”

Last week, McGrath served as part of a Sussex County focus group in one of the Delaware Economic Development Office’s three meetings statewide. Chamber of Commerce and state officials worked to devise solutions, and ways to help businesses prepare and deal with the rising electric prices.

Christine Serio, a spokeswoman for the state office, said that it will have a list of recommended solutions by next week, but McGrath said she is already looking into some of the ideas that emerged at last week’s meeting. Most, she said, dealt with simple preparation and conservation but she also learned how local businesses could possibly shop for a wholesale energy price.

If enough local businesses came together under a co-op, they could work with an aggregate to get wholesale prices rather than going through Delmarva Power. She said she doesn’t know how many businesses would have to join but she is researching the option.

“It’s definitely an interesting option,” McGrath said. “We’re definitely going to research it further. Our role is to help. That’s why we’re here.”

Mickey Walker, the owner of Bethany’s Mickey’s Crabs, said he is very interested in learning more about the co-op. Although Mickey’s is only currently open Thursday through Saturday, he pays about $500 in monthly electric costs. His rate will rise by more than 60 percent on the first of May, increasing his monthly bill now by almost $300. In the summer, his bill will rise from about $1,300 to more than $2,000.

“During the summer months, that’s a hell of a hike, but you can make it up by passing it on to tourists,” Walker said. “You can’t pass it on to the year-round people because they can’t afford it.”

Neville said that his only option will be to pass it on to the customers at the Cottage Cafe, as well, saying there will likely be a “significant price increase,” and not just because of his own raising electric rates. Most deliveries come with an extra charge now because of the rising cost in fuel, and local suppliers will also be dealing with rising costs.

Kevin Lynch, the owner of Selbyville Pet and Garden whose electric rates will increase by about 70 percent, said he will look into another option — installing technology that uses alternative sources on energy could save him money in the future

He said that solar power is an option for his business but the up-front costs to install such equipment would be expensive, although there are state grants available for using the “green” technology.

And since Lynch is not likely to utilize that technology right away, he will have to accept an about $7,000 increase in annual electrical bills, starting May 1. In an interview last week, he put what are likely every local business owner’s feelings about the situation into perspective.

“We’re stuck and it’s aggravating,” Lynch said. “We’re sitting her with our hands tied. (But) I guess that’s something we’re going to have to eat.”

The Phase-in

At a Tuesday meeting with the Public Service Commission, Delmarva Power agreed to raise residential and small commercial rates incrementally rather than all at once on May 1. Residential Delmarva Power customers will experience a 20 percent increase on May 1 followed by a 16 percent increase on the first of next year. A 27 percent increase on June 1, 2007 will be the final foreseeable hike for those residential customers. The three incremental increases will result in an overall 63 percent increase rather than the originally-proposed 59 percent increase. Likovich said that Delmarva Power added the extra four percent because it is deferring $60 million in revenue through the phase-in. Still, although the hikes will be lower at first than expected, people should take measures to cut back on the amount of energy they use, he added.

“People can take steps to be more energy-conscious,” Likovich said. “We’ve been urging people to use energy more wisely.”

Likovich encouraged customers to visit the Delmarva Power website at www.delmarva.com and click on the “Energy Know How” link on the bottom right-hand side of the page. There, anyone can find brochures called 85 ways to save and Energy Know which include tips on how to conserve energy. Anyone without internet access can call Sussex County customer service line at 1-800-898-8045 and request copies of the brochures.