Which states have the best business energy environment?

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By Arthur Murray November 12th, 2019
For business

What’s behind Louisiana’s top ranking? The state had the lowest average rates in August for industrial and residential electricity – 5.20 and 9.57 cents per kilowatt hour (kWh), respective. It also had the sixth-lowest commercial rate at 8.60 cents/kWh.

Why the index might not tell the whole business energy story

Rates are a great way to measure business electricity costs, but they aren’t the end-all and be-all. Why? Because usage also plays a major factor in a company’s bottom line.

For example, Louisiana industrial electricity users consume much more industrial electricity – 159,426 kWh hours per month – than the U.S. average of 99,221 kWh. That means the average industrial user in the state pays a monthly bill of $8,290 – much higher than the $7,382 national average. Those numbers put Louisiana in 26th among states (1 = cheapest).

Following are states with the cheapest average bills for industrial users:

As for the states with the highest average bills for industrial users, Tennessee tops the list, shattering that national average. Here are the 10 states with the most expensive average industrial bills:

What about commercial customers? Commercial businesses in Idaho pay the lowest commercial electricity rates in the country, and they also benefit from low average monthly usage. It adds up to average monthly commercial electricity bills of only $378 – way below the U.S. average of $681.

Following are the 10 states with the lowest average commercial electricity bills:

The highest average monthly commercial electricity bills occur in Hawaii – $1,225 a month. Following are the 10 states with the highest average monthly bills:

What’s it all mean? Idaho, Montana, and Nebraska businesses – industrial or commercial – have lower average monthly bills than most other states. Those states were 5th, 17th, and 27th, respectively, in the index. Business bills in Hawaii, not surprisingly, are much higher. It was 50th in the index.

But wait, there’s more. There’s more to business energy than electricity.

What about industrial natural gas rates?

Industrial energy consumers love natural gas – it’s considered cheap and reliable. So it would be a mistake to leave that commodity out of the discussion.

Oklahoma had the lowest price – $1.86 per 1,000 cubic feet. The average U.S. rate is $3.20. Following are the 10 states with the lowest prices:

The highest prices – again – are in Hawaii: $20.59. On the mainland, Delaware’s rate of $10.31 was next up. Following are the 10 states with the highest prices.

Why business energy costs matter

In a word, recruiting.  Energy costs play a major role – along with location and trained workforce – in site selection when companies move or open businesses. Richard Clements, executive vice president of the Greater Oklahoma City Chamber of Commerce, tells Choose Energy that relocation decisions for businesses are made on a case-by-case basis. “As a project’s demand for electricity increases, the price of electricity plays a more important role in the final location decision,” he says.

“Most site location processes segment costs and arrive at a total project cost based on location differences,” he says. “In other words, they spreadsheet their costs in many categories (transportation, real estate, labor, energy, taxes, etc.), divide them by startup and ongoing costs, then look at the long-term average of all costs. If the company uses a lot of electricity, that component becomes more and more important in the final decision.”

Arthur Murray directs ChooseEnergy.com’s newsroom, taking advantage of nearly 30 years of newspaper and magazine experience. His articles have appeared on Zillow.com, Business.com, Nasdaq.com, and USNews.com, among others. You may reach him at amurray@chooseenergy.com.