Energy cost, reliability are hitting employers

Action is need to address serious near-term challenges

Electricity prices and uncertainties about future power supply reliability are a drag on New Hampshire’s business competitiveness. 

Just ask Jeff Chierepko, director of facilities at Sig Sauer, a major defense and law enforcement contractor, in Newington. Sig Sauer has been a job creator for New Hampshire, but that could change. In just a decade, its workforce grew from about 120 employees to more than 1,600 in five facilities, four of them in manufacturing. It also operates plants in Arkansas and Oregon and is looking at Florida.

Electricity costs are an important factor. “New Hampshire’s rates are about twice those of the other states,” according to Chierepko. “Today, any expansion plans have to take into account electricity costs, employee skill levels and the political climate. Electricity costs today, and concerns about future price volatility, along with the inability in this region to build new energy infrastructure of almost any type, put New Hampshire at a distinct disadvantage as we look to expand.”

Chierepko adds that the reliability of electricity is also a concern. “We need highly reliable service at precise levels to avoid costly shutdowns, the loss of expensive materials and possible damage to machines, which can cost half a million dollars or more.”

Gordon van Welie, who heads ISO New England, the nonprofit responsible for ensuring the region has a reliable supply of electricity, has described a “precarious” and “unsustainable” electric grid operating system over the next few years during periods of extreme cold. That’s a concern for any business operating 24/7 year-round. It is a huge concern to individual consumers who depend on electricity to keep their homes warm and families fed.

Recent legislation has focused on renewable generation from wind and solar to address climate concerns. But the region is falling behind on energy infrastructure needed to make electricity more affordable and reliable for Sig Sauer and other employers throughout the region. This includes delays in permitting electric transmission projects and roadblocks to gas pipeline projects.

In 2014, the New England States Committee on Electricity (NESCOE), which reports to the governors, found “all studies [reviewed] concluded that New England needs additional natural gas supply infrastructure to satisfy New England’s power system demand.”

Unfortunately, no organization today looks at the regional impacts of state-by-state policies with a comprehensive approach that considers electric reliability and the environment — or regional economic competitiveness. This approach was recommended by Daymark Energy Advisors in an update of an August 2015 study for the New England Coalition for Affordable Energy, whose members include the region’s largest business organizations.

The earlier study concluded the region’s energy costs could be $5.4 billion higher by 2020 unless actions are taken to add energy infrastructure of all types. The update found inaction on infrastructure development has increased the risk of even higher energy costs.

Major natural gas pipeline projects that would relieve constraints have been canceled or blocked. Transmission lines that would bring large amounts of wind energy from northern New England and hydropower from Canada to load centers have been delayed (as in the case of Northern Pass) or stopped. And up to one-third of the region’s electric power generation has either been retired or is likely to be retired in the coming years.

This is a serious near-term challenge. Action is needed now to approve infrastructure projects — pipelines, transmission lines, power generation of all types – based on the concerns the governors expressed in 2013 and have reiterated since.

Just ask Sig Sauer’s Chierepko, and other executives throughout New Hampshire, who battle every day to keep their companies competitive with domestic and foreign manufacturers whose energy costs are a fraction of those in New England. 

Jim Roche is president of the Business and Industry Association, New Hampshire’s statewide chamber of commerce. Carl Gustin is a consultant to the New England Coalition for Affordable Energy.