Electric Costs Hammer Small Business

May 5, 2011

One of the biggest financial pressures on small businesses in Connecticut comes from the cost of utilities. The cost of electricity in particular puts Connecticut businesses at a severe disadvantage. The burden is affecting companies, but work is being done to address the problem.

From a small shop front on the corner of Albany and Garden in Hartford, sisters Monica and Hortense Ross and Precious Ross Ellis run two businesses. “People come, people go. Businesses come, businesses go." Hortense Ross says this North End neighborhood is under pressure. "It’s really been hard, the turnover from one person coming in with a new business, going out, coming in, and to be honest it’s been the grace of god has been keeping us.”

The sisters began with a medical temping agency, which they run from an office on the second floor of their premises, and branched out into a retail uniform supply shop on the first floor. They also own a small apartment above. Between the three floors they pay $900 a month in electricity costs, and more for gas.

“It really puts a strain on small business. Everything for commercial business is higher. Everything. Everything you think of. If it’s telephone it’s higher, if it’s gas it’s higher, if it’s electricity, it’s higher.”

High rates from Connecticut Light and Power drove the business to seek service from one of the state’s independent suppliers, but even then, Hortense Ross says it hasn’t solved their problems.

“One of the things that we find is that they would come and they would present to us a rate. Within the space of six months, that rate is going to change. And if I don’t keep track of when the rate is going to change and to call your company and say please continue with this rate for me, next thing I know I’m paying this enormous bill.”

Precious Ross Ellis says the bottom line is that it’s just hard to understand why Connecticut has some of the highest electric rates in the nation.

“I mean, electricity is electricity. I don’t understand the reason why our state has be penalized so much.”

“The way it works right now is that the most efficient, cost-effective generator gets paid the same amount on an hourly basis as the least efficient, most costly.”

That’s Senator John Fonfara, co-chair of the legislature’s energy committee.

“This rule costs Connecticut ratepayers mightily.”

Senate Bill One, currently making its way through the legislative process is yet another attempt to tackle the complexities behind Connecticut’s sky high electric rates. Regulators and administrators have always been charged with making the electric system reliable. Fonfara says the bill it will make lowering rates an equal priority for those regulators. Fonfara says the creation of the new Department of Energy and Environmental Protection, DEEP, which is another provision of the bill should provide leadership on the issue.

“We have not had a policy development team in place in the executive branch to look at how we can support that and grow that here in Connecticut.”

In the absence of any immediate rate relief, Connecticut’s utilities are turning to energy efficiency in an attempt to provide help for struggling small businesses.

“So for instance if it’s a machine shop or a small factory, if they can use less energy to produce that next widget, then that’s the best way that they can actually take control and manage their cost.”

Ron Araujo is manager of conservation and load management at Connecticut Light & Power. The utility’s Small Business Energy Advantage Program, partnering with the Connecticut Energy Efficiency Fund offers an energy makeover for commercial customers. Araujo says it can be a substantial investment, but the savings are worth it.

“The cost of upgrading, it will vary depending on what needs to be done at a particular customer site. On average most of our small businesses, probably around $14,000 is what the typical cost of a project would be. And we would pay in the neighborhood of 30-40 percent is what we would typically pay as an incentive.”

CL&P completed 1,500 upgrades under the project in 2010, but funding for the program could be threatened in the upcoming year by the state’s budget crisis. Another way that many small businesses attempt to cut their monthly expenses is in shopping around for an independent supplier. Kerry Breitbart, who runs North American Power, one of those independent suppliers, says deregulation can now been counted a success.

“The migration of customers from the native utilities to an alternative supplier is second only to the state of Texas.”

As of this year, a majority of small business customers in the state, 56 percent, are now getting their electricity from an alternative supplier.

“We know we’ve already saved Connecticut consumers millions of dollars on the energy side of their bill. The transmission side, which takes in a lot of different components including bond charges, has actually gone up a little bit.”

The energy market is so complex there’s not likely to be a quick fix for Connecticut’s rate woes anytime soon. And in the meantime, Connecticut’s small businesses continue to suffer, and in some cases close down. Pat Wrice runs Operation Fuel, Connecticut’s energy assistance agency.

“Many of these small businesses are paying 40 percent of income toward energy costs.”

Operation Fuel has traditionally provided help for households and individuals struggling with high energy costs, but this month the non-profit is expanding its mission with a new grant program for small inner city businesses.

“We think it’s still in keeping with our mission, because these are businesses that are struggling that employ people in the community, that money usually that’s earned from those businesses gets recycled into the community, and they’re the mainstay, they provide valuable services to these inner cities. So we think it’s really just an expansion of our mission.”

Many of those businesses will hope that the state can come up with a more comprehensive approach to bringing Connecticut’s rates in line with the rest of the nation.