SAN DIEGO -- As the Food Marketing Institute convenes its annual Energy and Technical Services Conference here this week, it is gathering at ground zero of perhaps the nation's biggest energy battlefield, where supermarkets are on the front lines.
In several states, supermarket operators are enjoying the deregulation of utilities, a move that in some cases has increased competition and lowered expenses. For example, Giant Eagle, Pittsburgh, saw an 8% savings in the first year of deregulation.
However, in California, power costs doubled this summer. Deregulation, combined with hot weather and a population boom, have produced a state-wide power shortage, officials say. Southern California and the San Francisco Bay area have periodic blackouts, and many grocers have agreed to follow an energy-conservation plan developed by their state association that calls on them to reduce store lights and air conditioning when necessary.
In the San Diego area, the price rise has been particularly steep, a result of both hot summer weather and the early end to a rate freeze.
Dirk Stump, vice president of Stump's Market, San Diego, said his company's power costs have soared from about $10,000 per store, per month, to about $22,000 a month by mid-summer.
Although San Diego officials are lobbying state legislators and the governor for assistance, the prospects for an immediate solution are bleak. "The politicians are just trying to handle the residential folks: they think they can let the business people hang out for awhile," Stump said.
The chain cannot raise prices fast enough "to recoup that kind of money," according to Stump, who said it already has the most energy-efficient equipment in place.
During power alerts, Stump's Market stores turn off half of their lights, which Stump says makes customers think the units are going out of business. "Light sells. It provides a feeling of cleanliness and wholesomeness," he said.
Although customers have no problems viewing the products with half of the lights off, the lack of light makes the meat and produce look dull, he added.
All California grocers will eventually be faced with this problem, according to Stump, San Diego County is just the fist area to be hit. "Some retailers are turning a blind eye. They've got to start planning," Stump said.
Many retailers are beginning to plan and are getting involved in the Sacramento-based California Grocers Association's Emergency Energy Conservation Program. Members of the program, including Safeway, Pleasanton, Calif., and Albertson's, Boise, Idaho, have agreed to reduce electric power consumption by 10% when the California Independent System Operator declares a Stage 1 Alert, which typically takes place on very hot days.
Some of members of the CGA program have reduced store lighting by as much as 50%, cut down on air conditioning and reduced or restricted the use of certain store equipment, such as battery chargers and packaging machines, during the alerts.
"We're trying to be a model to other industries that could also do something to cut power," said Carolyn White, spokesperson for Raley's Supermarkets, West Sacramento, Calif. Although Raley's stores have not experienced "dramatic" increases in energy costs increases like grocers in the San Diego area, chain officials want to cut back on energy during alerts.
When temperatures go over 100 degrees, store lights are dimmed, and the air conditioning temperature is raised to 78 degrees, between 4 p.m. to 6 p.m. Customers have not complained about the temperature or the lights, White said.
"When you're coming in from 100 degrees, no one complains about 78 degrees," she said. The dimmed lights also give the stores more of a "serene" atmosphere and customers tend to slow down, White added.
Shoppers see the example the stores are setting and believe they can cut their home power use as well, White observed. "Supermarkets are so much out in the community and close to their homes, that people really relate this to their home," she said.
Save Mart, Modesto, Calif., has been working to conserve energy for years, said Sally Sanborn, director of marketing, because it is one of the chain's biggest expenses. "On an ongoing basis, we reduce the lighting in our stores by 25% [after dark]. The customers do not notice this, because they are coming from night into a lighted store," she said.
During the day, Save Mart reduces its light use by 10%. "The reduced lighting has the effect of reducing the air conditioning use because, with less lighting in the store, we have less heat," Sanborn said.
Meanwhile, as Save Mart builds new stores or remodels existing units, the company equips them with an automated energy management system that allows the chain to reduce lighting inside the store and in the parking lot as needed.
In addition, the chain has installed a sub-cooling device for refrigeration, which pre-cools the refrigerating fluid before it enters the freezer, reducing the power needed to cool the cases.
California retailers will have to wait until the 2001 legislative session to seek relief for high bills, because recently passed rate-rollback legislation in the state only eases the burden on residents and some small businesses.
"It is disappointing, but what we expected. It might help some very small convenience stores or very small mom and pop [grocery stores]," said Sandra Duval, director of state government relations at CGA. The group's lobbyists are determining whether CGA can take other actions before the next session.
The rate-rollback legislation streamlines power plant approval and construction, but experts predict the energy shortage in California will last at least two more years.