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Massachusetts’ Commercial Energy Costs Are Among Highest in Nation

September 16, 2015 By Cheryl Kaften

A report released by the Massachusetts Taxpayers Foundation on September 9 reveals that business costs in the Bay State – especially, expenditures for electricity and health insurance –rank among the highest in the nation.

Founded in 1932, the Massachusetts Taxpayers Foundation is widely recognized as the state’s premier public policy organization dealing with state and local fiscal, tax, and economic policies. Its newly released study, Stalled Progress – the fourth report in a series of business cost studies since 1993 – reveals that Massachusetts has made little progress in bringing the cost components of doing business into line with other states and, in some instances, has fallen further behind.

That’s bad news for competition – and the future outlook is not looking any brighter, the researchers said. In the foundation’s previous studies, the state’s electricity prices were among the ten highest nationally – with the only exception being commercial rates in 2003, which were the 11th highest. In 2015, Massachusetts remains one of the costliest states for electricity for both industrial and commercial ratepayers, despite reform efforts more than 15 years ago, the researchers have found.

Today, the retail price, or the total cost of generation and distribution, for industrial ratepayer averages 13.18 cents per kilowatt hour (KWh) – nearly twice the U.S. average of 6.84 cents per KWh – an enormous difference and the largest divergence from the national average of any cost in this study.

Commercial ratepayers fare a little better – with the average price of 14.23 cents per KWh – about 40 percent higher than the national average of 10.28 cents per KWh.

Problematically, the report establishes that “the gap between Massachusetts and competitor states is growing.” In the 2003 report, which was based on FY 2000 prices, the commercial rate in Massachusetts was 35 percent higher than the average price in other high-tech states; in 2013, that difference grew to 45 percent.

“These are startling trends, underscored by the fact that restructuring in 1997 was intended to control the state’s electric prices,” the MTF points out, noting, “The progress that the state made from that legislation has been erased – the difference between Massachusetts’s electric prices and the U.S. average is now equal to what it was before deregulation.”

“As globalization continues, other states are evolving and adapting in a variety of cost categories,” said MTF President Eileen McAnneny. “The Commonwealth has relied on our highly educated workforce to be the primary economic driver, but this is no longer enough to keep businesses here and our economy healthy long-term.”

Broadly, the MTF now is calling upon the state to engage business leaders in developing and implementing a comprehensive economic development plan that will address, among other factors, the state’s energy policy. That policy should be reexamined, the foundation states, in order “to balance affordability, reliability, and environmental impact to better control overall costs.”

In collaboration with legislators and MTF members, the MTF plans to hold “fact-finding” forums throughout the state to present its findings and recommendations to communities beyond Boston.

“Making progress on reducing our high cost structure has been stalled for the past 20 years. Massachusetts cannot waste any more time in addressing these costs if we want to position ourselves for long-term, statewide economic growth and opportunity,” commented McAnneny.

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