Energy Costs and Their Potential Impact on Small Business Relocations in New York, Michigan, and Pennsylvania

The electric utilities in New York, Michigan, and Pennsylvania rely almost entirely on coal and oil to fuel their generators. Fuel supplies are obtained from a variety of sources at varying prices, but the majority of the utilities contract with more tha one supplier because they believe that multiple supply sources are necessary to ensure supply reliability. There appears to be an increased interest by state utility commissions in more closely monitoring utility fuel costs. Although utility officials cite the need for reliable supplies and high quality of product as reasons why they prefer to negotiate fuel procurements, the effects of negotiated procurements compared with sealed-bid competitive purchases could not be determined. Utility rate structures have traditionally favored large industrial consumers, with commercial and residential customers paying higher rates. Since most small businesses fall into the commercial rate category, the burden of increased rates falls heavily on them. Studies of business relocations show that electric costs do not appear to be a major factor in the initial decision to relocate. However, once the decision has been made, electric rates and the availability of utility service can play a role in selecting a new site.