Testimony to NYS Assembly Members
Regarding Electrical Costs
Syracuse City Hall
October 12, 2005
Mark Bitz
Plainville Farms
In a recent survey of
manufacturers, the Manufacturers Association of Central New York found
only 60% of its members responding received their electricity at a
reduced rate. Electrical costs for these members in 2004 ranged from
2.9 ¢ to 9.3 ¢ / kWh, while costs for the 40% unable to receive low cost power
allocations ranged from 12.0 to 17.6 ¢ / kWh.
New Yorkers spend over $18 billion a year on
electricity. The Business Council of New York State finds electricity
for industrial, commercial, and residential use runs 57% over the
national average. If businesses and consumers bought the same amount of
electricity at average national prices, they would save over $6 billion
annually.
If our business, Plainville Farms, bought
electricity at national average prices, we would save $200,000 each
year. The savings would cause us to add $20,000 to our employee bonus
and pay $70,000 more in federal taxes and $14,000 more in state taxes.
New York State receives back from the federal government 80% of the
federal taxes collected in the state. Thus, $56,000 of the $70,000 in
federal taxes would eventually come back to the state. We would invest
$96,000 more in our business. The additional money invested in the
business would enable us to borrow and invest another $96,000 in the
business.
In summary, the $200,000 savings causes the
company to employ additional people, improve existing employees’
compensation, and provide directly and indirectly a $282,000 ($20,000 +
$56,000 + $14,000 + $96,000 + $96,000) economic stimulus to the state.
Competitively priced electricity and these series
of events multiplied thousands of times in other businesses across the
state would strengthen businesses, create jobs, raise wages, and
increase government revenues.
Given a state blessed with more than its fair
share of low-cost hydro and nuclear power, why do businesses and
consumers on average pay 57% more for electricity than they would in
other states? Ask someone in government or the industry to explain this
and they will give you numerous reasons. Each responsible person will
blame someone else and suggest nothing can be done about the higher
costs.
Although New York taxes electricity, the taxes no
longer are a primary cause of the state’s high electrical prices. New
York electrical prices are higher than other states for two main
reasons: (1) our state government does a poor job regulating the
utilities, and (2) it obstructs the utilities’ ability to build capacity
and address transmission bottlenecks.
The Governor and Senate and Assembly Energy
Committees should appoint an independent commission to research and
recommend legislation to expand the state’s electrical generation and
transmission capacity. Our governor and legislature should initiate the
construction of additional generation capacity and the modernization of
the state’s electrical grid. They should predicate a utility’s
authorization to service an area on its delivery of electricity at costs
below the national average.
Since 1950 New York State has lost 1.2 million of
its 2 million manufacturing jobs. In addition, it has lost another 3
million supporting jobs that accompany the high paying manufacturing
jobs. During this time period the number one economy has been reduced
to 45th among the 50 states. New York’s share of U.S. income
has declined 37%, while states in the north, like Minnesota and New
Hampshire have maintained or increased their shares. New York State now
employs only 58% of its population while states like Minnesota employ
72%. The Federal Reserve of New York State estimates from 1983-2002,
the U.S. added 37% more high skilled manufacturing jobs, while New York
State lost 14% of the high skilled manufacturing jobs it had. High
Worker’s Compensation and high electrical cost are the two reasons most
frequently cited for the loss of these jobs.
The data indicates that for several decades
electrical costs have been too high relative to other states and that
New York could realize $6 billion of economic stimulus by addressing its
electrical industry as other states do. Only a proportion of the
population is made to sit behind desks and work in the information
economy. A very significant proportion of the population is better
suited for trade and manufacturing type jobs. If the leadership of New
York State is really for the working men and women of this state, then
they will not merely renew or modestly expand existing programs, but
they will address the high electrical costs for all New York businesses
in a real and meaningful manner.
The information in this testimony comes from
research for a book which I will publish in January of 2006 entitled
Creating a Prosperous New York State. |
