Energy Costs and Their Impact on Small Business Operations

EMD-78-33: Published: Feb 6, 1978. Publicly Released: Feb 28, 1978.

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A review of impacts of energy costs on small businesses in the States of New York, Michigan, and Pennsylvania dealt with questions of: whether State utility regulating commissions allow non-competitive procurement of fuels, whether competitive fuel procurements would result in lower rates, whether utility companies rate structures favor industries over small businesses, and what factors are resulting in relocations of small businesses. None of the three State commissions require advertised solicitations with sealed bids for procurement of fuel by utility companies, and only the Pennsylvania Commission has criteria to evaluate fuel purchases. Procurements made through the competitive process generally result in lower costs than are achieved through negotiated contracts. Although the effects of negotiated procurements on utility rates could not be accurately assessed, the negotiated prices may not be significantly higher under certain conditions. Current rate structures favor industry over small businesses because utility companies attempt to assess rates on the cost of providing service to various customer classes. Energy costs have not usually been a primary factor in relocation of businesses.

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