Most U.S. Small Businesses Have No Back-Up Power Supply

Most U.S. Small Businesses Have No Back-Up Power Supply

By Erika D. Smith, Akron Beacon Journal, Ohio -- April 25

Jon Munson wonders whether certain small business owners have short memories. Eight months after the worst blackout in U.S. history, the majority of the nation's small businesses have no back-up power supply, according to a survey conducted by St. Louis-based Emerson. Munson, president of Akron-based Generator Systems Inc., and other providers of power contingency solutions think these companies are putting themselves at risk. "Everybody thinks it's not going to happen to them," said Jim Berges, president of power technologies giant Emerson. "It's like life insurance. You don't necessarily think you're the one who's going to die. So it's a tough sell to some people."

As with all risk assessment, the value of such a significant investment has to be weighed against the threat. And, no matter how financially catastrophic August's blackout might have been -- one study estimated the outage had a $6 billion impact on the economy -- few small businesses' budgets are flexible enough to cover the costs of protecting against another one.

Still, cash-crunched companies don't have to leave themselves completely vulnerable to the uncertainty of the electric power grid. Organizations should conduct a careful analysis of their power needs, and of the potential loss in case of failure. From there, they can assess what sort of investment, if any, is justified. John Shields, regional manager of the energy solutions business for Cummins Power Generation, said there are options available for companies

looking for creative, cost-effective solutions. With cogeneration, continuously operating generators do double duty, recovering heat to produce hot water or steam when they aren't picking

up the main power-supply responsibilities. Another option allows companies that do not require significant amounts of power to share generator capacity -- and the costs -- with another company. Immediately after the blackout, commercial real estate management firms expressed interest in the possibility of installing generators in their properties so they could offer their tenants backup power, said Generator Systems Inc.'s Munson. But as time passed, those projects lost their urgency. "Very few developers or real estate managers have acted on (those plans)," Munson said. "And that has surprised us. Tenants would want that."

Steve Stoner, facilities director and on-site manager for Canal Place's property in Akron, thinks so too. The trouble is convincing those who hold the check book.

"Power is critical," Stoner said. "If the lights go out, and computers go down, companies lose thousands, millions of dollars. It's ironic because accountants say, 'We've lost millions of dollars because of this down time.' So you say, 'Hey, do you guys want to invest in a UPS (uninterruptable power supply) system?' And they say, 'How much? A half a million dollars? No, we can't spend that kind of money.'"

A survey commissioned by Emerson Network Power showed that, while 75 percent of small businesses see power outages as a threat to their businesses, only one in five believe they'd be protected if one occurred.

St. Louis-based Emerson makes power transfer switches and uninterruptible power supply (UPS) systems, the units that kick in and continue power when they sense a burp in the electric supply. Traditionally, Emerson's clients were critical facilities, like hospitals, and large corporations that didn't need to be convinced of the need for backup power. But as those large firms' businesses become more decentralized, the need for backup of giant computer rooms was replaced with a need for down-sized backup systems for local area networks.

Those systems have turned out to be suitable for smaller businesses, too. And since Aug. 2003, Emerson has marketed them as such.

"When the blackout happened last year, I was struck with all the stories I read about small businesses that were impacted, and it kind of triggered in my mind the curiosity of how many small businesses have never even considered backup power," said Emerson's Berges. "If they were able to think carefully about the impact on their business of being down for a day or two, they would think seriously about the affordability of backup power."

There are essentially two options for backup power plans: UPS systems, including battery backup systems, and generator sets, which use natural gas, propane or diesel fuel to create power. Generators can maintain power longer than UPS systems, but they take a while to get up and running. So when an electrical outage occurs, there would be a break in the power supply. Computer and other systems would shut down abruptly, potentially causing damage and losing precious time. So, unless they run continuously, most generators require some type of UPS system, or battery backup, that will switch on in the event of an outage and provide a bridge from the electrical power grid to the secondary power supply.

Berges estimated it would cost about $1,500 for a UPS system that would provide 30 minutes of backup power for a small office on a local area network. That would accommodate a lightening strike, power surge or "brown out."

In the case of a longer outage, it would be enough time to shut down equipment in an orderly, safe way. A generator system, which could provide power as long as its fuel supply is fed, would be priced somewhere in the neighborhood of $11,000. And that doesn't include maintenance and fuel costs. For small-business number crunchers, those figures are scarier than the possibility of the lights going out.

Charlie Connor, CEO of Alcon Tool Co. in Akron, said he never considered investing in a generator for his industrial knives manufacturing plant. The company is dependent on power, and lots of it. It uses electricity to power its furnace, which heats the metal. But the plant simply could not afford a generator system that would have the capacity to cover those needs.

"It just isn't economically feasible," said Connor, a member of the Greater Akron Chamber Small Business Council's board of directors and a delegate to the Ohio Small Business Council. "It's been, what, 250 days since the blackout happened, and it hasn't happened since. One chance in 250 isn't worth buying, so to speak."

Certainly, the investment might not make sense for every business -- manufacturers in particular. But for others, a backup power supply should be considered part of the cost of doing business, Munson said. "If your business processes information or requires a great deal of information to operate, it makes all the sense in the world to back up your ability to continue

to use that information," Munson said. He said his company is installing a $140,000 generator system for a client that learned a tough lesson last summer. The 200-employee company, which he would not name, issues $1 million worth of billings per day. During the blackout, Munson said, the company was unable to issue invoices for four days, creating a $4 million backup in cash flow.

"They believe the cost (of the outage) was just too great," he said.

-----

To see more of the Akron Beacon Journal, or to subscribe to the newspaper, go to http://www.ohio.com/bj