Businesses forced to raise prices, cut staff to meet increasing energy costs

Local companies are being forced to change the way they do business to survive the rapid climb in en
Working at a mixing machine he inherited from his grandfather, owner Tony Papa dumps a bag of flour as he makes bread dough at Perecca’s Bakery in Schenectady. He says he is doing all he can to reduce energy costs, such as installing mor
PHOTOGRAPHER:
Working at a mixing machine he inherited from his grandfather, owner Tony Papa dumps a bag of flour as he makes bread dough at Perecca’s Bakery in Schenectady. He says he is doing all he can to reduce energy costs, such as installing mor

Categories: Business

At Perecca’s Bakery in Schenectady, the ovens run on coal — 24 hours a day, every day of the year.

“Even on our days off, I go in and shake the fire to keep it going. We need to have constant heat. We can’t just crank up the heat, so ours is always going. It never goes out, ever,” Perecca’s owner Tony Papa said.

“Our bakery has been around since 1914 and we don’t have a [natural] gas oven. I guess my grandfather switched it over at one point and the bread wasn’t any good, so he switched it back to coal.”

Coal-fired ovens might be better for bread baking but they can’t be turned on and off like a gas oven. Papa said he is forced to continually buy coal for the ovens and pay for new delivery surcharges added to his bill by his suppliers, who are looking to pass on the rising cost of gasoline.

Businesses in New York state have long faced some of the highest energy costs in the United States and those costs are only going up. Record oil prices have pushed gasoline over $4 per gallon. Electricity in New York state is the third most expensive in the nation and nearly double the national average, according to the U.S. Energy Information Administration.

Local companies are being forced to change the way they do business to survive the rapid climb in energy costs.

Cost-cutting moves

Papa said his bakery is wed to coal for its ovens but he’s doing all he can to reduce energy costs in other areas, including installing more energy-efficient compact fluorescent light bulbs and changing his dough mixing schedule when possible.

“If I can mix twice instead of three times, instead of making three little ones I’ll make two big ones, just so I won’t have to run the mixer as much,” he said.

In a very different industry, St. Johnsville-based commercial foam manufacturer Cellect LLC is deploying the same tactic. Cellect makes foam products used in athletic padding, medical equipment, orthopedic footwear, automobiles and industrial gaskets. Cellect president and CEO Scott Smith said his company tries to produce as much foam in as few runs of his equipment as possible to combat propane fuel costs that have doubled over the last three months. He said he’s looked into ways to generate his own electricity but hasn’t found a cost effective plan yet.

“This is the most difficult economic environment I have ever seen,” Smith said. “We’re trying to become as efficient as possible and do everything in our power to generate more product with less energy.”

Cellect uses petrochemicals and plastics derived from oil to make its foam products. Higher input costs have forced the company to raise prices.

“Obviously we’re trying to pass our increases on in this difficult economic environment. Our raw materials have gone up on average 115 percent since last year,” Smith said.

Niskayuna-based chemical manufacturer SI Group recently announced price rises for its chemical products. Starting July 1, SI Group raised the price of its alkylphenols product from 12 cents per pound to 20 cents per pound due to “unprecedented rise in feedstock, packaging and energy costs.” On June 13, SI Group doubled the price of all grades of its phenolic resins from 4 cents per pound to 8 cents per pound, citing the same reasons.

“The chemical raw materials we buy have risen dramatically in cost. They are derivatives of crude oil,” SI Group Brand Marketing Manager Juliana Lam said. “We certainly have raised our prices to keep up with those increases. I wouldn’t say we try to pass as much of the [increased cost] on as we can. We only do what the market dictates. We certainly try to keep our partnerships with our customers. Of course, if we pass the costs to our customers, they in turn pass them ultimately to the consumer.”

Lam said one of SI Group’s biggest costs is the natural gas and oil it uses to power its plant in Rotterdam Junction. Company officials estimate SI Group’s local operations consume the second-largest amount of power in Schenectady County and the third most in the Capitol Region.

State grant

In 2006 SI Group received a $1 million grant from the New York State Energy Research and Development Authority to help pay for a 5 megawatt wood-fired boiler, which would serve as a demonstration model for other companies in the state. Once completed, the boiler is expected to reduce energy costs at SI Group’s Rotterdam Junction plant by 15 to 20 percent annually, while also producing 34 million extra kilowatt hours of electricity the company may sell back into the power grid.

“We’ve received permits from the [New York state Department of Environmental Conservation] and the town of Rotterdam but we have not begun the project. We are still several months away,” Lam said. “The project itself should take about 12 to 18 months to complete.”

NYSERDA backed the wood boiler project because it uses a renewable energy source, wood chips and unadulterated wood waste, and should have environmental benefits by reducing SI Group’s carbon footprint.

Patrick Morris, spokesman for Schenectady-based nutrient premix manufacturer Fortitech, said his company has replaced all of its incandescent light bulbs with more efficient compact fluorescent bulbs. Fortitech is also building in energy efficiency measures to its new 48,000-square-foot warehouse in Glenville, including 90 skylights and sensors to turn off lights in areas that aren’t being used.

“The updates that we’ve made to our lighting will probably provide $60,000 to $70,000 per year in savings,” Morris said.

Energy efficiency

NYSERDA spokeswoman Colleen Ryan said energy efficiency programs are available through NYSERDA for companies with less than $75,000 in annual electricity costs. She said companies with electric bills of less than $25,000 pay a $100 fee for a complete energy audit aimed at pointing out ways companies can reduce energy costs. Businesses with annual electric bills of between $25,000 and $75,000 pay a $400 fee, but all fees are reimbursed if a company implements the energy-saving recommendations of the audit.

“Interest in the program has definitely increased. Energy costs are a large part of the budget of a small business,” Ryan said.

This year the average number of monthly applications for the energy audit program, as of April, was 73, up from an average of 43 applications per month in 2007.

NYSERDA contracts with Troy-based RLW Analytics to provide energy audits for companies in the Capital Region. RLW consultant Mark Adams said he often performs the audits.

“We’ll take a look at windows, lighting, insulation, [and heating and air conditioning],” Adams said.

Utility company National Grid also provides energy audits, but only for certified businesses located inside New York State Empire Zones, said company officials.

National Grid Principal Energy Manager Jim Stapleton said some of the benefits offered to Empire Zone companies include 10-year discounts on energy bills and 50 percent matching funds on up to $25,000 worth of energy efficient retrofits. National Grid recently submitted a proposal to the New York state Public Service Commission to expand its energy-efficiency efforts to homes and businesses outside of Empire Zones. The PSC has not yet ruled on the proposal.

Fighting gas prices

Some organizations are also trying to help their cash-strapped work force deal with escalating commute costs.

Kris Dzikas, the human resources director for Precision Valve and Automation, a 75-employee manufacturer located in Halfmoon, said her company recently instituted a four-day work week for the company’s 40-employee production team.

“We started it in June and they can work four 10-hour days instead of the typical five eight-hour. Many of [our employees] are coming from up past Lake George so it’s saving them quite a bit,” Dzikas said. “Half of the [production team] work Monday through Thursday and half of them work Tuesday to Friday.”

The Albany–Colonie Regional Chamber of Commerce has also gone to a four-day week schedule as a pilot program starting July 7.

“We determined we can maintain a high level of service to our members and at the same time provide some assistance to our employees,” chamber President Lyn Taylor said. “We have half the staff off on Friday and half the staff off on Monday. We’re at full strength Tuesday through Thursday. I have heard that many, many companies have considered changing employees’ schedules, perhaps closing one day a week, which some companies can do and some can’t.”

Some companies have also been forced to fire workers. Robert Treacy, the owner of Latham-based TNT Courier Service, said over the last six months he’s been forced to shrink his delivery service company from six vehicles and eight drivers down to three vehicles and three drivers. He said the cost of gasoline has also forced him to create a vehicle surcharge so his customers will be prepared for price increases.

“The increase to the customer definitely doesn’t take care of all of the increase in the fuel. We’re at about a break-even point,” Treacy said.

High gas prices have been good for bus route logistics software company Transfinder, which is located in Schenectady. Transfinder President and CEO Antonio Civitella, who owns all of the shares of the 20-year-old private corporation, said his company is seeing revenue growth because of school systems devastated by high diesel prices.

“So far we’ve had a record year. A lot of new customers,” Civitella said.

Transfinder’s software enables school districts to quickly plan the most efficient bus routes to save money on fuel. Civitella said his company has not yet expanded its routing software products into the private sector delivery market, but may do so in the future.

Treacy said he’s spent a lot of time combining his routes in an attempt to lower fuel costs. He said he’s also tried to eliminate any left turns on his routes so his vehicles will be able to take advantage of “right on red” intersections, and not have to waste fuel idling.

“I designed routes four of five months ago that are basically big loops with nothing but right-hand turns,” he said.

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