High power costs sap Maine firms Rates hurt state’s ability to attract business

With energy costs continuing to rise, state officials and business advocates admit – though grudgingly – that it is becoming more difficult to retain existing businesses and entice new companies to come to Maine.

Among the many factors a business looks at before locating in a particular state are tax rates, the availability of skilled labor in the work force, and the cost of electricity and other utilities. With electricity costs in Maine among the highest in the nation, businesspeople said Thursday that the challenge of drawing new business into the state is becoming increasingly difficult.

“You can’t deny the problem,” of high electricity costs, said Dana Connors, president of the Maine State Chamber of Commerce. The organization represents 31 regional chambers and more than 12,000 businesses throughout Maine. “There’s no question it’s part of the formula,” for businesses looking to locate in Maine, Connors said.

But while higher energy prices in Maine may play into a specific company’s decision whether to locate in Maine, Connors said he is unaware of any business discounting Maine simply because of high electricity costs. “I’m not aware of any evidence of that whatsoever,” Connors said. “It does become a factor, but it hasn’t been a show-stopper.”

Gov. Angus King said Thursday that higher energy prices do make courting new business more difficult, but added that the cost of energy isn’t the primary criteria by which a state is judged. “Clearly, for the long run, lower electrical costs are better than higher costs,” King said. “However, most economic growth doesn’t come from attracting outside economic opportunities; it comes from expanding current economic opportunities.”

In discussions with companies looking at locating to Maine and other states, King said the primary concern of companies has been the availability of a skilled work force. A strong work force and a high quality of living, King said, are more important to many businesses than low electricity costs.

But others say those factors simply aren’t enough to overcome energy costs in Maine that are among the highest in the nation.

According to the latest U.S. Department of Energy figures, Maine is among the top five most expensive states for electricity in the country. Currently, industrial customers in Bangor Hydro-Electric territory pay an average price of 12.74 cents per kilowatt-hour for electricity. Industrial users pay as low as 6 cents per kilowatt-hour in other states.

In addition, a ruling Tuesday by the Federal Energy Regulatory Commission designed to promote the creation of additional electricity generation in New England will likely mean even higher bills for electricity consumers.

Donald Sipe, an attorney with the Industrial Energy Consumers Group in Augusta, said Thursday that his clients are concerned about the impact of the high price of power on their business. As a result, Sipe said, some industrial and manufacturing plants could opt to leave Maine – taking thousands of jobs with them – unless energy prices are eased.

“We’re rapidly pricing ourselves out of the competitive market,” Sipe said. “It’s getting more and more attractive to take plants from Maine to someone else who’s got lower energy costs.”

That concern is of particular importance in Maine, Sipe said, because the state has both some of the highest energy costs in the country and an economy which has a significant portion of its employment base tied to industrial companies.

In addition, Sipe said those employed by small businesses should worry about how rising energy costs could affect their employment. As energy costs rise, Sipe said small businesses will be less able to put together competitive salaries and benefit packages for employees.

Small businesses, Sipe said, “are not deep pockets. These are the people who are going to get hit the hardest. When’s the last time those people could afford to give [their employees] health insurance, or a raise?”

Sipe said he wants to see people from all levels of state government, including King, the Legislature and the Maine Public Utilities Commission, take an active role on behalf of both residential and business consumers. Those people, Sipe said, shouldn’t act to make decisions for customers but rather should “provide people with the tools to protect themselves” from higher electricity costs through advocacy work, educational campaigns and by empowering the state’s Public Advocate Office to become a voting member of regional energy boards.

Yet Connors said the Maine State Chamber of Commerce doesn’t want to see any changes immediately made to Maine’s deregulation law in response to recent price hikes in electricity. Doing so, he said, may be reactionary and could circumvent a process that he believes will ultimately result in savings. Deregulation, Connors said, “was an effort put forward in which the PUC worked through this process very carefully and very diligently. The repercussions of a change could be felt for a long time.”

King agreed with Connors’ sentiment, adding that the high prices of late are more to do with escalating energy costs than the effect of any regulations. “I think the long-term assumption is that a competitive market will be in the ratepayer’s best interest,” King said.

Tom Welch, chairman of the Maine PUC, said Thursday that industry may be turned off by the costs of Maine’s electricity, but said they will be attracted to Maine over the long run. Competitors will come here, Welch said, largely because it adopted a deregulation plan that avoided price caps and “honestly” opens up the market to competition.

“New England in general, and Maine in particular,” Ward said, “have opened their markets in a more honest way. Industries coming into Maine will take advantage of that as opposed to places like California.”