Available real estate and quality labor are understandably perched at the top of the site location criteria list for expanding and relocating companies. While perhaps not the driving factor, energy cost and efficiency figures prominently into site location considerations, as well.

“In today’s energy-conscious environment, electric and gas costs are always an important concern in locating and operating a facility,” said Robert Agnew, executive director of the Utility Economic Development Association (UEDA). “As energy use increases, companies become proportionally more concerned with these costs. In response, utilities customarily work with firms to improve efficiency and institute programs designed to reduce their overall energy costs.”

During the past several years, rolling blackouts (or controlled outages); major power outages, such as the one to hit the Northeast and Midwest in 2003; deregulation issues; and high-energy prices have invariably tossed the utility industry into the nation’s limelight on repeated occasions.

Perhaps more than ever, companies in the midst of growing their operations must pay close attention to utility issues, namely how reliable a power source is and how much that power is going to cost.

Reliability Is Essential

For most of us, power is a given. If the power does flicker or get snuffed out by high winds or a storm, the interruption is usually no more than a minor nuisance.

But for businesses operating in today’s time-sensitive, high-stakes environment, a power blip of any sort can wind up costing a company a lot of money and even more headaches.

“Reliability is especially critical for high-tech manufacturing operations, such as chip makers, computer, networking and communications dependent firms, pharmaceutical production operations, and a variety of other production and service companies that must avoid downtime because of the punitive operational disruption and cost loss of power creates,” Agnew said.

As companies consider their utility needs, they should ask their local utility provider about its energy capacity and infrastructure, the location of the nearest transmission line and substation, and for a history of the utility’s outages, lengths of outages and reasons for outages during the previous year.

Nebraska Public Power District is one utility that is especially focused on reliability.

“Nebraska is the only state in the nation that is served entirely by public electric utilities,” said Cory Fuehrer, technical solutions supervisor for NPPD. “That means we are ‘owned’ by all of the same people we serve. In doing so, we provide high reliability with a focus on low prices for a quality level of service.”

For Becton, Dickinson and Co., a medical technology company with operations in Columbus, Neb., reliable power is a must. The company has been very satisfied with the service it receives through Loop Power District, which purchases power at wholesale from NPPD.

“Reliability of energy is critical to our operation,” said Steve Bohnet, acting plant manager for BD Medical–Medical Surgical Systems. “We operate a highly automated process that produces medical devices. Any outages of power disrupts our equipment causing startup issues which equates to lost production.”

The company has had operations in Columbus since 1949 and is currently undergoing a $50 million expansion that will add 75 jobs to the work force. Two new production lines for syringes, along with a sterilization process, will result from the expansion.

The Price Factor

Is it possible for energy reliability and affordability to go hand-in-hand? The overwhelming response received from utilities is yes.

“High price does not necessarily equate to high reliability,” said Jim Rogers, director of economic development for the South Carolina service territory of Duke Power, a business unit of Duke Energy. “The two are certainly separate issues. Is it possible to have reliable utilities at a competitive cost? Yes. The challenge is the definition of ‘reliable.’ That varies from customer to customer.”

Dan Olmstead, community public relations manager with Idaho Power Co., Southern Region concurred.

“High price doesn’t normally equal high reliability unless a special price is paid for redundant grid systems or substations,” Olmstead said. “It is possible to have reliable utilities at competitive costs. In fact, that is the norm in the industry.”

All told, some utility industry experts said that price still takes a backseat to reliability.

“We have seen during the past few years that energy price has become a secondary concern to power reliability,” said Edward Sitar, economic development manager for Commonwealth Edison, an Exelon Co. “That’s not to say that price isn’t important; it’s just that having a reliable electric delivery system in place is critical to modern business success.”

He noted that businesses in Northern Illinois have been benefiting from a rate freeze that has been in effect since 1997.

An Evolving Industry

There are many variables that can impact how much electricity will cost and how reliable it will be.

One of those factors is deregulation, which is slowly taking effect around the nation. Illinois, for example, began electric utility restructuring in 1997 and since 2001, businesses in the state have had a choice among their electric suppliers.

Sitar said he believes that customer supplier choice has resulted in improved service as ComEd has focused on being a distribution company dedicated to safely and reliably delivering electricity.

He added that competition among the 10-plus alternative suppliers certified to sell electricity in Illinois has helped to contain the price of electricity.

Companies have a variety of other ways to achieve bottom line savings when it comes to energy.

“Firms that are able to perform on-peak to off-peak energy transfer — in other words, move production to off-peak times of the day — can also save money,” said Nancy Norr, manager of community and economic development for Minnesota Power. “Smoothing out the demand cycles is another key factor. Power usage that is highly cyclical (peaks and troughs), as opposed to fairly steady usage patterns, leads to high energy costs.”

Companies can also help to ensure power reliability by having a secondary point of service and/or backup generation for critical equipment. However, the cost of this equipment and related services needs to be weighed against the losses that could potentially occur during an electrical outage.

The fact remains that no utility can provide 100 percent reliable electric service because of severe weather, wildlife contact and equipment malfunctions, ComEd’s Sitar said.

That said, one thing that can be counted on at all times is that local utility companies stand ready to help growing businesses in any way they can.

The UEDA, as one example, is a tremendous source for companies to turn to.

“The UEDA offers members and their economic development allies networking and educational forums, advanced economic development education courses and special economic development-related studies,” UEDA’s Agnew said. “All of the association’s activities are designed to enable members to succeed in meeting the diverse objectives and challenges faced by utilities and communities they serve.”