AUGUSTA – Maine’s cost-of-doing-business ranking soared higher from last year to 17th-highest in the nation as measured by the Milliken Institute, a California-based think tank.

The big jump, from 28th in the nation last year, is driven by sharp increases in the cost of electricity. “I have been hearing the complaints about higher energy bills all summer,” said Dana Connors, president of the Maine State Chamber of Commerce. “It is truly a major issue that must be addressed.”

Connors said Maine businesses already are paying higher rates than the national average, but the size of the one-year increase was “incredible.” Electricity rates for Maine businesses last year were 6 percent above the national average, and this year they are 43 percent above the national average. That reflects an increase from 7.2 cents per kilowatt-hour to 10.6 cents.

Gov. John Baldacci said he is concerned about the major shift in Maine’s ranking, but said all of New England has high electricity rates and higher than average business costs.

“It is the best in New England,” he said. “It is cheaper to do business here than any other New England state, including New Hampshire.”

The Milliken Institute Cost of Doing Business index measures wage costs, taxes, electricity costs, and real estate costs for industrial and office space. Maine had a slight decrease in the cost of office rent, but saw small increases in the other measures as well as the large increase in electricity costs.

“We are working on this, “Baldacci said. “We have to find a better energy deal.”

Connors said finding a way to get cheaper electricity is “crucial” to Maine companies and said the one index in the study that clearly is going in the wrong direction is electricity costs. He said other measures are closer to national averages.

“We have to move forward and address the issues,” he said. “We can’t just talk about doing something to address this problem. We have to do something.”

Baldacci said his administration is seeking to change energy policies to lower electricity costs. He said Maine is exploring forming a market with New Brunswick and leaving the New England system. He said there are also efforts to increase electricity sources that do not rely on increasingly expensive fuels.

“We are serious about wind power,” he said.

Baldacci said the state needs to rethink the decade-old decision to deregulate the electricity market. He said the PUC used to regulate both the cost of distributing power as well as the cost of generating electricity but now regulates only the distribution costs.

“I opposed this when I was chairman of the [Legislature’s] Utilities Committee and I don’t think it has worked,” he said.

Kurt Adams, chairman of the Public Utilities Commission, said the increase in electric rates is “crushing” both Maine businesses and consumers. He said the most frustrating thing he does as a commissioner is try to explain to business owners and consumers that there is little the PUC can do to lower rates.

“We have no authority over the supply rates. We don’t set them,” he said. “We have supply rates that are more than twice what they were five years ago. It is a crisis in Maine, no doubt about it.”

Adams said that instead of a free marketplace of electric generation, state regulation has been replaced by federal regulation. He said the state does regulate the cost of distributing electricity, which he said has gone down over the last several years.

He said the only tool the PUC has to address higher supply rates is the energy efficiency programs for consumers and businesses. He said an individual can significantly reduce consumption of electricity by taking advantage of the coupon program for compact fluorescent bulbs.

“We also have programs for commercial and industrial users that help them with the capital investment needed to reduce use of electricity,” he said.

Public Advocate Richard Davies agreed that reducing demand through efficiency is part of the approach to making rates more competitive. He said the Legislature already has taken steps to encourage more generating facilities in the state and ordered the PUC to explore joining a different power market.

“There is a big push for renewables,” he said. “We don’t want to trade one expensive fuel for another.”

Baldacci said the issue had his attention before the Milliken report was released. He said the issue is “on the front burner” of his administration and there will be proposals ready for the January session.