Last modified: Monday, October 22, 2007 12:08 AM EDT Power costs jolt firms BY JIM HAND SUN CHRONICLE STAFF The rising price of electricity is starting to rival health care costs as a drag on business expansion and job creation in Massachusetts, a survey of manufacturers has found. The survey of 125 businesses by Associated Industries of Massachusetts found that manufacturers would rather expand in other states because electricity is too expensive here. Furthermore, efforts to conserve energy have reduced the use of electricity, but have not lowered costs, the survey found. The cost of electricity in Massachusetts has gone from 9.49 cents per kilowatt hour in 2000 to 15.17 cents this year, according to the state Division of Energy Resources. Robert Rio, executive vice president of the association, said the problem is hurting the state as a whole because fewer jobs are being created and costs are also rising for municipal governments, schools and non-profit agencies. "It's not just an industry problem. It is a societal problem," he said. John Corcoran, general manager of Valentine Tool & Stamping in Norton, said his firm has become more efficient and reduced the use of electricity, but costs keep going up. "We can't cut back enough to save money," he said. "It is making it less and less friendly to do business in New England." Other manufacturers who responded to the survey tell similar stories. One said its plant in Pennsylvania pays 6.5 cents per kilowatt while the cost in Massachusetts is 14.5 cents per kilowatt. Another said its electricity costs have doubled in three years. A third said it has reduced consumption by 27 percent, but its costs have still risen by 14 percent. Brian Gilmore of the association said the high costs are hurting the local economy. He said Revere Copper closed its New Bedford plant, but kept its operation in Rome, N.Y. open in part because of the high cost of energy in Massachusetts. MeadWestvaco, a paper manufacturer, closed its plant in Lee, but kept its out-of-state plants open, he said. Rio said part of the problem is that Massachusetts discourages the construction of new power plants in favor of conservation. But, conservation alone cannot free up enough energy to meet needs, he said. Furthermore, the state has an unhealthy reliance on natural gas powered electrical plants and natural gas is one of the most expensive forms of energy, he said. The survey also found that conservation and alternative energy programs funded by customers and administered by utilities are having little impact. Sixty-six percent of companies that responded to the survey said they were unaware of a $25 million a year program that helps fund alternative sources of power. Ninety-four percent said they have never received a grant from the program. The program is funded by a surcharge on electricity bills, as is a larger effort to promote conservation. About $125 million a year in surcharges go toward a program that does energy audits of buildings to find ways of making them more efficient. Thirty-six percent of responding companies said the program was not useful. Rio said the programs total $150 million a year, and at that price should be more helpful. The association is urging the state to change its policies to encourage new power plants and is recommending utilities reinvigorate their conservation programs. But, Philip Giudice, commissioner for the state Division of Energy Resources, said conservation and efficiency efforts are less expensive that building new plants. He said it cost 3.2 cents to save a kilowatt hour through conservation and efficiency while it costs 8 cent per kilowatt hour to purchase energy. The reason Massachusetts has such high costs, he said, is not a lack of plants, but a lack of natural resources. Other states are closer to supplies of coal, oil and natural gas, he said. Giudice said the $125 million conservation program is successful as it helps homeowners and business purchase new equipment that uses less energy. Massachusetts is one of the most successful states in terms of energy efficiency, he said, but a lot more can be done. Changing lights to compact fluorescent bulbs would reduce useage by 2 percent statewide, he said. JIM HAND can be reached at 508-236-0399 or at jhand@thesunchronicle.com.