Andrew Maykuth Online
The Philadelphia Inquirer
September 24, 1995
Power to the users of power!
In New Jersey, a glass company has revoted against a utility.

CLIFFWOOD, N.J. - The forces impelling electric utilities to compete are evident here at the customer end of the power line, at the Anchor Glass Container Corp. plant where 2.5 million bottles are made each day.

Anchor has invested millions of dollars in recent years to automate this Monmouth County plant and to double production.

Those efficiencies came at a price.

The employee parking lot at Anchor is an expanse of empty asphalt. A dozen offices are darkened and cleared out, except for the coffee-stained carpet. There's no security guard at the front gate, only a television camera. Managers answer their own phones.

It is the lean, productive American workplace of the 1990s: About 400 people today produce more than 1,000 workers did seven years ago.

Still, Anchor lost money last year.

Now, the nation's second-largest bottle maker wants to cut the price of one of the only commodities it buys that is not subject to competitive pricing: electrical power.

"Something's got to give," said Walter J. Schaeffer, the energy director for Anchor, which is based in Tampa, Fla.

Anchor asked its electrical supplier, Jersey Central Power & Light Co., to cut its rates, to share its pain. But the Morristown, N.J., utility balked.

So, last month, the company enlisted local officials in Aberdeen Township to its cause. The township, which includes the village of Cliffwood, where the Anchor plant is located, agreed to put a ballot issue before voters in November asking whether Aberdeen should create a municipal electric utility.

A municipal utility would be able to buy power more cheaply off the grid from producers outside the area, bypassing Jersey Central, whose rates are high.

Everybody's rates in town would go down by at least a third, Anchor says. And it could save as much as $2 million a year.

Jersey Central, a subsidiary of GPU Corp. in Parsippany, N.J., disputes Anchor's estimates, saying it won't let the township leave the system without a fight.

"It threatens our interests," said Glenn Steiger, the utility's director of corporate affairs. He says other customers would have to pick up Aberdeen's costs. "We will have to take some action."

If Aberdeen defects, it would be a big deal because it is virtually unheard of for a municipality to leave an electric utility's service area. Anchor Glass is trying the same strategy at its plant in Salem, N.J., which is in Atlantic Electric Co.'s territory.

"JCP&L will go nuts," said Kent Taylor, a Boulder, Colo., energy consultant who is advising Anchor Glass. "This could have a serious effect on their operations."

The Aberdeen uprising is only one flash point in a revolution that is shaking the electric industry. Across the nation, big industrial users are demanding lower rates and deregulation of power monopolies.

Utilities say they, too, are cutting costs and laying off workers to compete. One, Peco Energy Co., the Philadelphia utility, has proposed a hostile takeover of Pennsylvania Power & Light Co., to cut overhead.

"We know we're going to be faced with this on an ongoing basis," said Steiger of JCP&L. "But Anchor has taken it to an extreme by taking the whole town down with it."

Anchor says that utilities have no idea what competition is all about.

Like any number of mature industries, the nation's glass business has gone through a rough time as it has struggled to maintain market share against upstart competitors.

The shift toward aluminum cans and plastic bottles has cut glass bottles' share of the rigid-container market from 32 percent in 1980 to 20 percent last year. During that time, half the nation's glass plants closed. Now two manufacturers, Owens-Illinois Inc. and Anchor, share two-thirds of the market.

Anchor is owned by Vitro S.A., Mexico's largest glass-maker. It had $1.1 billion in sales last year, but lost $98 million, including a one-time $79 million charge it took to shut three of its 17 plants.

To cut costs, Anchor asked suppliers to hold the price of the sand, soda ash and lime that go into glass. It replaced assembly-line inspectors with optic equipment that spots more flaws than the human eye. It conserved energy, though electricity and natural gas still account for about 10 percent of its costs.

"We're doing everything we can," said Reginald Garrett Sr., the human-resources manager at the Cliffwood plant. "We're recycling. We're recirculating our water. We've improved our preventative maintenance."

The factory now is the model of efficiency. Around the clock, orange gobs of molten glass drop like lava hailstones from furnaces into molds, emerging as glowing Coca-Cola, Michelob and Mistic beverage bottles.

Every second, a new case of bottles rattles down the assembly line, setting off a constant tinkling of glass like a legion of bartenders clearing a vast counter of empties.

There are just few people around.

Garrett, 43, has gone through two factory closings since he began working in the glass industry in 1979 after retiring as a wide receiver for the Pittsburgh Steelers. He worked at an Owens plant in Montgomery, Ala., that shut down in 1989. Then he got a job at Anchor's plant in Royersford, Pa., which closed in 1990.

"Going through those plant closings, looking people in the eye and telling them 'I'm sorry, this location is shutting down' - that is the worst feeling you can have in your life," he said.

Anchor has not threatened to leave Cliffwood, but Aberdeen officials got the hint when Anchor approached them and demonstrated that the Cliffwood plant's electrical costs were the highest of any of its factories. Anchor pays JCP&L about 7.8 cents per kilowatt-hour, twice the rate at its cheapest plants.

(Anchor's next-costliest electrical bill is at its Salem plant, where the city council last week voted to study municipalization but refused to place the issue on the ballot.)

James M. Fox, the township manager, said Aberdeen wanted to accommodate Anchor. "There's always that concern that they might leave, and of course, that wouldn't be in our best interests," he said.

Aberdeen is a middle-class bedroom community of 20,000 people, a suburb of tract homes, softball diamonds and strip malls along Raritan Bay. The factory is Aberdeen's sole industry, paying $668,000 in taxes, about 3 percent of township's total.

Anchor says that it has not hidden its motives about why it wants the township to build a municipal power system.

"The first thing we tell people is we're doing this because we're a greedy, avaricious company," said Taylor, the Anchor consultant. Anchor has offered to pay the township's costs for hiring its own consultant to study the issue.

The glass plant would save some serious money. It uses 53.6 million kilowatt-hours a year, about half the town's electrical load. Taylor estimates Anchor's $4.1 million yearly bill would drop by nearly half.

Anchor's experts say that the municipal power company would flourish even without the glass factory. They say Aberdeen's residential customers would save about $300 a year. The township would save $200,000 a year on street-lighting costs alone.

A municipal utility would construct a new set of distribution lines to deliver power to its customers. By building a second set of overhead wires, the town would avoid the need to condemn Jersey Central's system, which would be certain to provoke a protracted lawsuit.

Anchor estimates a new system would cost $17 million. Jersey Central says the cost would be closer to $29 million.

Aberdeen's flirtation with muncipalization is possible because of the 1992 Energy Policy Act. The law lifted restrictions on the sale of power between utilities, paving the way for towns to leave local utility systems and shop around for a supplier.

In a wholesale market awash in electricity, a municipal utility could pay 3 to 4 cents per kilowatt-hour for power off the grid.

Large industrial customers have been pressuring state regulatory agencies to take deregulation one step further and open distribution lines so that individual customers can choose a power company.

So far, no state has approved retail competition.

Utilities insist that, under any deregulation scheme, they must be compensated for the investments they made to produce and distribute power.

In Aberdeen, the unresolved question of who will pay for the utility's losses hangs over the ballot issue. If Aberdeen proceeds with the divorce, Jersey Central says it is likely to sue.

Jersey Central says it tried to strike a deal to provide Anchor with discounted power, though under such an arrangement Anchor's service could be interrupted at times. Anchor refused, saying its manufacturing process required a constant power supply.

Utility officials believed until recently that Anchor's campaign to build support for a municipal utility was only a bargaining tactic to extract a better discount.

Now the town council seems intrigued by the idea of breaking away.

"It's taken on a life of its own," said Steiger, the JCP&L official.

Epilogue: Cliffwood voters overwhelmingly rejected the proposal to form a municipal utility. home page   
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