July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
Looking for a Market Rate
Looking for a Market Rate:
Anchor Glass Tries to Shake JCP&L Stranglehold
By Joseph F. Schuler, Jr.
Why assume that a city or town
can't run a power plant?
It wasn't a demand for a $2-million rate cut. It was a request for a rate in line with neighboring New Jersey utilities.
That's how Walter J. "Wally" Schaffer, Anchor Glass Container's energy director, decribes his company's position at the start of the Aberdeen Township municipalization fight against New Jersey Central Power & Light (JCP&L). "We didn't say 'We want a 50-percent reduction,'" Schaffer explains. "We said 'We want a market rate. And by the way, when you calculate that out, it does come to around $2 million.'"
A semantic difference, but important, Schaffer notes. That and other unacceptable contractual provisions proposed by JCP&L prompted the bottle-making company to spend more than $70,000 to advance the cause of a municipal electric utility (em a cause it figured would cut its annual $4.5-million electric bill by more than half.
Anchor, selling more than $1.1 billion in bottles and glass containers each year, is headquartered in Tampa, FL, and has 14 manufacturing plants nationwide. It employs about 5,000 people, and its energy costs exceed $100 million annually. In 1994, its plants used 90 megawatt-hours of electricity. The plant in Aberdeen, NJ, called Cliffwood, uses 7,000 kilowatts each year. Anchor, in fact, accounts for more than half of the power load in the small township of 17,000 people. The 326 employees at the Cliffwood plant keep it running 24 hours a day, 350 days a year. Annually, the plant makes 750 million bottles for beer, soda, food, wine and liquor. It's a high-volume, low-margin business.
So low-margin that it recently conducted an "energy audit" of its plants in an attempt to cut costs further. The audit revealed that energy makes up about 12 cents of every dollar Anchor spends on manufacturing. Electricity averages 7 to 8 cents of that share.
"In an industry that's flat to shrinking, and where tremendous consolidation and competition are taking place, the only place we are going to generate revenue is by controlling our cost," says Schaffer. "We can't go to our customer and raise prices. There is an overcapacity of production capacity on the market of glass right now and the market is such that you can't get the price increases."
After the audit, at the end of 1994, Anchor looked at its high-cost plants, seeking the source of their energy costs. The Aberdeen plant was one of the top offenders, with electricity at 8 cents per kilowatt-hour (¢/Kwh), compared to a 5¢/Kwh average at the company's low-cost plants. Anchor heightened energy management programs, and at Cliffwood alone, has saved about $250,000.
Still, it wasn't enough.
Schaffer says that in early 1995 the company was involved in ongoing negotiations with JCP&L about costs and rates and its loss of competitive edge. "And the electric bill keeps going up and up and up," he adds. "And you look around and see what your competition is doing [and ask] . . .