Small businesses fear ‘huge’ electric bill increases under Pa.’s $500 million nuclear proposal

By: - April 26, 2019 7:04 am

Sri Kumarasimgam in his restaurant Pastorante, at 1012 N. 3rd Street in Harrisburg.

Sri Kumarasimgam owns Pastorante, an Italian restaurant in Harrisburg’s Midtown neighborhood just blocks from the state Capitol. Right now, the electric bill for his 2,000-square-foot eatery runs him about $500 to $600 a month.

It’s a manageable expense. But Kumarasimgam could see his bill jump by more than $1,300 per year — about $110 per month — if lawmakers pass a $500 million proposal to aid Pennsylvania’s nuclear power plants.

That “huge” bump that would be “like paying an extra two months of electricity bills,” he told the Capital-Star this week.

So far, the debate over Pennsylvania’s nuclear bailout proposal — which would require utilities to purchase clean energy credits from nuclear companies, resulting in millions of dollars of new revenue for the plants and higher energy prices for consumers — has largely focused on the potential impact on residential customers.

Different state agencies predict that Pennsylvania households could see electricity bills jump by anywhere from $1.53 to $3 per month.

Proponents of nuclear intervention say those rate hikes are a small price to pay to prevent the shutdown of two of the state’s nuclear power plants, which support thousands of jobs and supply reliable, resilient, and low-carbon energy.

But rate increases could have a more profound impact on large energy consumers, including manufacturers, hospitals, and schools.

And they stand to be particularly tough on small businesses, where thin profit margins can’t always accommodate unexpected operating costs.

Small commercial electricity businesses like Pastorante could see their annual power bills increase by $1,322 if the nuclear bill sponsored by Rep. Tom Mehaffie, R-Dauphin, passes this June, according to an analysis of the bill by Pennsylvania’s Office of the Consumer Advocate, which represents the state’s utility consumers.

If those projections prove accurate, Kumarasimgam said that he’d have to trim other parts of his operating budget to cover electricity costs. He’d likely have to defer the pay raises he wants to offer his waitstaff, who earn $5 an hour plus tips, and his kitchen staff, who earn $13 an hour.

He’d like to increase their hourly wage rates to $9 and $15, respectively, but doesn’t think he could afford it if his electricity bills increased.

“Our margins are already so tight,” Kumarasimgam said. “If we had to pay extra [for electricity], we will push back wage increases.”

Ravi Patel, who owns a mini-mart one block down Third Street, pays $900 in an average month for electricity.

His bill drops by about $100 in the winter, thanks to his gas heating system. But other factors beyond his control — such as cigarette price hikes that have dampened sales — have eaten into his profits in the past year.

As a result, he’s skeptical he could absorb the electricity price hikes projected by the Consumer Advocate.

“A $50 increase, maybe we could sustain that,” Patel said. “But $100, I would have to pay out of pocket.”

Residential customers can change their habits or swap out energy-sucking appliances to rein in hefty power bills. But most commercial customers have fixed energy needs that they can’t supplant by other means.

Such is the case for Charlotte Todd, owner of Minuteman Press in downtown Harrisburg. There, a good business day requires the near-constant use of printers and copiers.

Todd said the increases projected by Consumer Advocate could negatively impact her business. She said she’d try to look for cheaper supplies – such as paper, rubber bands, and staples – to make up the cost.

In addition to energy costs, a typical operating budget for a small business can include water and sewer rates, payroll taxes, and ever-increasing insurance premiums, said Ken Hammaker, vice president of the Community First Fund, which provides financing to small businesses in low-income communities.

A lot of operating expenses are relatively small, Hammaker said. But taken together, they eat up a significant portion of a business’ revenues each month.

“If you do have even a 10 percent increase in one category, it would have a negative impact on their bottom line,” Hammaker said. “They have to pass that on to the customer through higher costs.”

Mehaffie could not be reached for comment on the Consumer Advocate’s projections.

But Sen. Ryan Aument, a Lancaster Republican who’s sponsoring a companion bill in the Senate, said he’s sensitive to the costs that customers will bear under the proposal.

The Consumer Advocate hasn’t completed its analysis of Aument’s bill, which is expected to have the same $450 to $500 million price tag as Mehaffie’s.

Aument thinks that legislators need to be open and transparent with constituents about the anticipated costs of the proposal. He acknowledges that there will always be a price to pay for keeping nuclear plants afloat.

But Aument also says that energy consumers will pay higher electricity bills in the future if nuclear plants close and natural gas companies gobble up a larger share of the energy market.

A 2016 study by the Brattle Group, a consulting firm, found that energy prices could rise in the future if all of Pennsylvania’s nuclear plants close and aren’t replaced by other energy sources.

That argument is disputed by research from Penn State professor Seth Blumsack, who says that the closure of nuclear plants could result in lower energy prices, albeit greater carbon emissions, if nuclear sources are replaced with natural gas.

Aument said he hasn’t yet had time to dig into the report from the Consumer Advocate, which was published March 22. But he thinks that the numbers it produced are inflated.

The analysis Aument has used, from the Pennsylvania Public Utility Commission, projects a $1.53 monthly increase for residential consumers, compared to the nearly $3 per month increase anticipated in the Consumer Advocate analysis of the House bill.

Aument thinks that the Public Utility Commission is the best arbiter of the legislation’s potential impacts. But in an independent memo last week, published by the environmental news site StateImpact Pennsylvania, PUC commissioner Andrew Place quoted higher rate hikes than those cited by Aument.

Place said that residential bills could increase by anywhere from $2.36 to $4.50 per month, depending on a user’s heat source.

As the nuclear proposals advance through committees, stakeholders across the state will use their own methods to determine how much the deal will cost.

Community colleges, for instance, are analyzing how rate increases will affect their campuses, said Carolyn Simpson, director of communications for the Pennsylvania Commission for Community Colleges.

Simpson didn’t comment on the figure provided by the Consumer Advocate, but said “any increase in electric rates adds to the operating expenses of each institution.”

Community colleges and state-related universities received flat-line operating funds in Gov. Tom Wolf’s proposed 2019-20 budget.

The rate hikes are also troubling to manufacturing firms, which already pay hundreds of thousands or even millions of dollars in electricity bills each year, and can’t accommodate large increases in energy costs without cutting other expenses, said David Taylor, president of the Pennsylvania Manufacturers Association, which adamantly opposes the proposal.

Taylor said it’s misleading for lawmakers to focus on residential consumer impact as they pitch their nuclear legislation to colleagues and constituents.

Those relatively modest rate hikes obfuscate other costs that businesses, public institutions, and their stakeholders will have to bear if electricity prices go up, Taylor said.

“When it comes to the amount of energy that’s required to operate an individual household, it’s an entirely different scale than a university campus or a major medical center or an industrial operation,” Taylor said. “And this is where the bit is really going to come down — higher prices … to all those institutions.”

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Elizabeth Hardison
Elizabeth Hardison

Elizabeth Hardison covered education policy, election administration, criminal justice and legislative news for the Capital-Star from Jan. 2019-April 2021. You can find her on Twitter @ElizHardison.