Your Money
Supermarkets struggle with high energy prices
10:30 AM EDT on Tuesday, July 29, 2008
Rep. Jim Langevin, in a visit to Dave’s Marketplace in East Greenwich yesterday, said the federal government can play a role in helping businesses in energy savings.
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The Providence Journal / Bob Breidenbach
Rising energy prices are rippling through the economy, forcing companies to get more efficient.
Retailers have been particularly hard-pressed this year to keep energy-related costs from spilling into their aisles and further dampening demand by financially stressed shoppers.
Dave’s Marketplace, a seven-store Rhode Island supermarket chain, is moving ahead with an array of efficiency efforts as it copes with a spike in energy prices announced earlier this month.
National Grid raised electricity rates 21.7 percent, the largest single rate increase the company has ever sought. The increase, which went into effect July 15, put rates at their highest level.
“If you see the bill at the end of the month, that’s incentive enough” to cut costs, said Bill Hogan, a general manager for Dave’s.
The chain’s utility bill will shoot up about $240,000 this year, he said, an increase of more than 10 percent in the $2 million Dave’s spent last year.
To keep price increases at a minimum, Dave’s is trying a number of tactics, including turning off some lights in its stores, experimenting with LED lighting that’s more efficient than traditional bulbs, and using refrigerated display cases that have high-efficiency cooling fans and insulating curtains.
“We’re looking at every single facet” of operations, Hogan said.
But changes take time and money, Dave’s managers told Rep. James Langevin, on a visit yesterday to the Dave’s store in East Greenwich
“That’s the tricky part,” Hogan said. “It’s not like you can do it overnight.”
A high-efficiency refrigerator fan, for instance, costs $120 versus $20 for an older model. But new fans may last only a year, rather than the decade-long lifespan of the older models.
Langevin said the federal government can play a role in helping businesses by creating tax credits or incentives for energy-efficient products. Credits and incentives could go to researchers to develop the products, to the manufacturers who would make the products and to the consumers who would buy them.
“You have to create a market,” said the congressman. “If you made it affordable, people will buy it.”
National Grid, Rhode Island’s dominant utility company, provides electricity service to 477,000 customers in 38 communities and natural gas to about 245,000 customers in 33 communities.
Since November, the cost of both natural gas and crude oil has increased by more than 60 percent, according to National Grid. The utility company also has proposed raising natural-gas rates by 10 percent.
Cost increases such as those squeeze profits, forcing Dave’s and other food retailers to raise prices.
Food prices in April took their biggest one-month leap in 18 years, according to the federal government.
Last year, the consumer price index for food rose about 4 percent. This year, it is expected to rise by 4.5 to 5.5 percent, according to the U.S. Department of Agriculture. By comparison, food prices had been rising about 2.5 percent a year for the previous 10 years, according to the USDA.
Food purchases, both for consumption at home and eating elsewhere, account for 13.8 percent of the basket of goods that makes up the Consumer Price Index.
“It’s not just about high prices at the pump, it’s trickling down to food prices,” said Langevin.
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