New York State may be blanketed with snow this week, but at least small businesses won't have to worry much about heating bills. The state got a top rating in a comparison of states with the best energy climate for small businesses. Texas came in second, while Montana and Nevada were left out in the cold. Monday's study, done by independent utility Liberty Power, looked at how much choice small businesses in 20 states and the District of Columbia had when shopping for electric companies.
It found that since California got the ball rolling in the late 1990s by restructuring its power industry, some states have done a better job than others of catering to energy customers. California "became the poster child for how not to do it, and that scared a lot of states off," says Nora Mead Brownell, a former Pennsylvania state energy regulator. The state's rolling blackouts, coupled with the Enron meltdown and high gas prices, gave restructuring a bad name, she says. As a result, many states allowed private energy providers to come in but made it impossible for them to compete with the established, in-state power companies by mandating price caps and other barriers.
In New York and Texas, most small businesses and consumers can choose from more than 50 energy providers depending on where they are. Those states also make it easy for customers to compare energy companies by separating out costs on the power bill, says Fort Lauderdale, Fla.-based Liberty Power. They also allow customers to switch companies any time of the year. States that didn't fare well on the report, such as Michigan, allow customers to change energy providers only once a year, in December. Virginia, which also scored low, doesn't unbundle bills, making it tough for customers to compare energy prices, the study says.
Those regulations make a big difference to small companies, says Brownell. About a quarter of companies with fewer than 250 employees say energy is among their largest costs, along with rent and salaries, according to the National Federation of Independent Business. Larger companies have enough political clout to lobby lawmakers for special deals shielding them from energy restructuring rules, she says. For small companies, which feel every penny on their bottom line, being able to choose among energy providers could mean big savings.