March 25, 2012

Assessing energy costs' effect on the economy

Gov. Paul LePage's says high energy costs have inhibited Maine job creation, but experts and businesses say a skilled work force and location are bigger issues.

By Tux Turkel tturkel@pressherald.com
Staff Writer

Jobs and energy. In promoting his energy legislation, Gov. Paul LePage has tied Maine's economic growth to the cost of energy.

"One of the largest inhibitors, if not the biggest obstacle to job creation is Maine's high energy costs," he said in introducing his package of energy bills this month.

It's a strong statement, but according to economists, business brokers and labor department statistics, it's not accurate.

No business wants high energy bills. That goes double for the state's existing manufacturers, for whom electricity and heat can be a large part of overall costs.

But the manufacturing sector has been shedding jobs in Maine for decades, shrinking by 28,800 employees between 2000 and 2010, according to the Maine Department of Labor. Most new jobs in recent years have been in service sectors. Looking out to 2018, the department expects 80 percent of jobs to be created in education and health services, professional and business services, and leisure and hospitality.

For these businesses, a deep labor pool and skilled work force are more important than energy prices.

But the LePage administration has ignored these trends by making the link between its package of four, energy-related bills and job growth.

The bills include controversial proposals to shift money away from Efficiency Maine's conservation programs and offer low-interest loans for high-efficiency electric heating systems.

Another effort would change renewable energy rules to try to attract hydroelectric power from Canada.

MARKET FORCES AFFECT RATES

Gov. LePage frequently laments that Maine's electric rates are 12th highest in the country. He doesn't mention that the same U.S. Energy Information Administration figures show Maine has the lowest commercial rates north of Pennsylvania, which benefits from cheaper coal and nuclear power.

Also left unsaid is that Maine's standard offer rate for electric energy is falling dramatically this spring. It's down by more than 12 percent for small commercial customers, and more than 25 percent for industrial customers, compared to a year ago, according to the Maine Public Utilities Commission.

The drop has nothing to do with politics or state policies. Market forces have cut the cost for natural gas, which is used by many power generators in New England. Despite the improvements, New England's power generation mix can't compete on price with coal and government-subsidized hydro projects in the South and West.

So for energy-intensive companies looking to expand in the United States, Maine isn't on the radar screen, according to Peter DelGreco, president and chief executive officer of Maine & Co., a Portland-based consulting firm that helps companies locate and expand here.

"If energy is important to a company, chances are they're not going to pick New England," DelGreco said. "Site location consultants would tell their clients, 'don't even look at the Northeast.'"

DelGreco said he couldn't recall the last time a large manufacturer moved here.

MAINE'S CHANGING ECONOMY

On the other hand, Maine & Co. has helped bring fast-growing employers with hundreds of jobs to Maine in recent years. They include Carbonite Inc., an online backup firm; NotifyMD, a medical call center; and Athenahealth, a health care information technology firm. They were attracted in part by a work force that was well-trained in customer contact skills during the 1990s, when credit-card bank MBNA was a major employer in Maine.

Athenahealth has offices outside Boston, Atlanta and Birmingham, Ala., and in India. It set up shop in the former MBNA offices in Belfast in 2007. Today the company has 400 workers in Belfast and held a job fair in Bangor last week to recruit 80 more. Salaries range from $30,000 to $60,000 for associates, plus benefits.

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