The states, and others outlined in the chart, came out on top after EEI analyzed electricity costs throughout the country using comprehensive, industry-wide surveys. The semi-annual "Typical Bills" report offers typical monthly electric bills and rates charged by investor-owned utilities.
There are several different categories measured - industrial, commercial and residential users.
While electric costs may not make up the majority of your project concerns, they still play into your expansion or relocation decision somewhere. Whether you run a distribution facility or an energy-intensive plastics plant, power costs factor into your bottom line - and any kind of bottom-line savings will make a company's day a little brighter.
The origin of power costs
Believe it or not, decisions regarding power generators that were made in the 1970s and '80's still impact the utility prices you are paying today. The cost of electricity to an end-user is heavily rooted in how that energy is generated and how expensive it was to build those generation facilities.
For example, nuclear-powered electricity will most likely carry a heftier price tag than hydroelectric power. Hence, the strong showing of Pacific Northwest states (which benefit from nature's contribution to power generation) in the "Top 15" chart. In the Southeast, coal and natural gas generators help shave cents off of electric rates.
However, this scenario is always subject to change. Load demands have increased, and a variety of new generation plants are currently in the works across the nation. In addition, deregulation is altering the marketplace and the way power can be purchased - and at what price. Electric costs are an ever-changing element everywhere.
And when considering these state averages, remember they are exactly that; averages. Even in the lowest cost state, there will be pockets of higher rates, and vice-versa.
A word about deregulation
Many businesses have no doubt been left wondering how current and impending electricity restructuring will affect their utility costs. The answer is never simple.
In a perfect world, competition gives the consumer the power to choose its electric provider. It will also, in turn, encourage the development of new products and services. As far as price, theories abound regarding whether deregulation will be apositive or negative.
Locations that have low electricity costs to begin with may not benefit significantly from a competitive marketplace. On the other hand, deregulation could bring prices down in high-cost areas as open market purchasing power becomes a reality.
Reliability is paramount
So what do lower energy costs really mean to your business? Quite honestly, nothing, if reliability is not also present in the equation.
Power outages and stoppages are more than just a nuisance - they can cost a manufacturing company thousands of dollars in a matter of minutes. Low rates don't mean a thing if operations aren't up and running. While price is certainly a critical concern, it's equally - if not more - important to inquire about your local utility's track record when it comes to stoppages, outages, consistent voltage and dual feeds.
Some companies can live with a modified or reduced power supply, but others cannot. Be specific in outlining your needs to the utility you are working with.
Incentives zap costs
Even if your state was nowhere to be found on the list of top 15 states with the lowest electric rates, there are plenty of other ways for you to capture some cost savings when it comes to your electric bill. If you happen to be located in a state with inherently low electric rates, then that's fantastic. If not, you can always look into the availability of special tariffs and riders - if you haven't already.
Many utility companies provide special rates to high-end users. Sometimes interruptible riders and off-peak riders are offered to firms that are willing to have their power supplies interrupted or modified.
Growing companies will most likely find that utilities are willing to work with them in any way they can. They are, after all, in the business of service.
There's no doubt that labor issues, proximity to markets and logistical advantages are usually the driving forces behind most relocation and expansion projects. However, the cost of power is another factor that warrants serious scrutiny in the site location process.
Of course, the bottom line is if a site doesn't meet all the requirements of your company's individual needs, then the price is never right.
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