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“Shocking figures”: Energy costs in Calif. make it harder for ports to compete

Businesses in California pay significantly higher prices for energy than businesses in other parts of the United States making it harder for them to compete.

LOS ANGELES, CA – The effect of high energy prices and other challenges to the competitiveness of California ports were discussed at the Dec. 5 meeting of the Port of Los Angeles Harbor Commissioners.

Commissioner Diane Middleton pointed to what she felt were “shocking figures” in a recent article in the November issue of the West Coast Trade Report of the Pacific Merchant Shipping Association  (download report below) that reported the average price of diesel fuel in California in October was 37.8% higher than the average for the rest of the U.S.

The disparity in electrical prices was even higher. The article said that California’s average commercial price for electricity in the 12 months ending in August was 16.56 cents/kWh, 63.6% higher, and the average industrial price in the same period was 13.25 cents/kWh, 102.9% higher than the average for states other than California.

Infographic showing relative prices of diesel fuel and commercial electricity  in California versus the rest of the United States

“When I looked at those numbers, particularly on energy, that’s a tough factor in terms of attracting (cargo),” said Middleton. “No matter how much you talk to someone about what great a port this is and how they should come here.”

The average price of diesel fuel in California in October was 37.8% higher than the average for the rest of the U.S.

Gene Seroka, the executive director of the port, told Middleton said “as we move forward to our goals and aspirations of being a zero-emissions port and having zero emissions heavy-duty trucks, the energy numbers you have quoted are going to be a strong deterrent to reaching those aspirations.”

He said the port does not “sugarcoat things” when discussing the competitiveness of the port, saying that has been called into question for a generation.

READ: “Tariffs threaten millions of U.S. jobs”. Gene Seroka tells it like it is

The 2002 lockout of longshoremen at the port aided momentum for cargo owners to look at port diversification, where cargo is routed through multiple ports. In some cases, shippers have opted for a “four corners” strategy — continuing to move some cargo through Southern California, but also through ports in the Pacific Northwest, U.S. Southeast and the Port of New York and New Jersey.

Before 2002, West Coast ports managed 80% of trans-Pacific cargo moving to the U.S. That percentage has fallen to 60%, he said.

READ: East Coast ports continue to grow cargo volumes impressively

“The criticism around what we do is that we are very pricey, we tend to be overregulated and some people believe that the folks that go to work here every day are a little bit finicky,” said Seroka. “That’s unfortunate, but that is the perception today.”

Seroka said the port is trying to reverse market share erosion and improve efficiency with the help of labor, private-sector businesses and companies that decide how to route cargo.

READ: Port of Los Angeles spending almost 60% more next year on capital improvements

“All of that is a work in progress and I will attest to you today that it is like moving mountains on some occasions,” he said. “We’ve got supply chain participants that compete fiercely with each other, but we are asking them to work together. We have a labor force that is absolutely the best in the world, but they have their own politics and their own issues they must solve.”

READ: PORT OF LOS ANGELES: Maersk gets go-ahead to bring automation in despite ILWU concerns

He said the presidents of International Longshore and Warehouse Union locals have done outreach to cargo owners and other stakeholders and have committed to working with the port on areas such as digitization and supply chain efficiencies.

“We’ve not had a major congestion issue in three years here and that is because everyone has pulled together,” he said.

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