On September 26, NFIB State Director in Indiana, Natalie Robinson, and NFIB member Joe Grossbauer testified in front of the 21st Century Energy Task Force.
Joe Grossbauer, owner of GGNet, a technology firm in Valparaiso, had to move his storage operations out of state because the cost was too high to keep it here in Indiana. GGNet has been in business since 2001. In 2018, Joe was hosting websites and data for clients but because of growing demand and power rate hikes, his monthly bill was soon around $2,400 and not sustainable. Grossbauer didn’t want to lose one of his core businesses, so he evaluated his options so he could stay in Indiana, but even with economic development funds, GGNet could not stay competitive. Research showed that if he stayed in Indiana, his electric bill would exceed $28,000 per year and that if he moved to Chicago, is rates would go down by nearly 10%. Grossbauer ultimately decided to relocate GGNet’s data center to Ohio and Virginia. Grossbauer says that if he were to buy power on the open market here in Indiana, it could save between $3,000 to $6,000 per year and allow him to keep his operations here. Grossbauer asked the Task Force to allow him to buy power on the open market.
Below is the testimony of Natalie Robinson, NFIB State Director in Indiana:
The small business economy is still recovering from the pandemic while inflation continues to be a serious problem for owners across the nation and here in Indiana. Uncertainty in the small business sector is climbing again with more owners unsure of what’s coming their way. Owners are managing the rising costs of utilities, fuel, labor, supplies, materials, rent, and inventory to protect their earnings. The worker shortage is impacting small business productivity as owners raise compensation to attract better workers.
Job openings and their plans to fill them are historically very high. But everything else is down including capital spending plans, inventory investment plans, expected real sales is way down and the environment for expanding is negative. All those factors combined with rising interest rates does not add up to an optimistic outlook. As we move into the third quarter of 2022, owners will continue to manage their firms into our very uncertain future.
As if the market conditions weren’t bad enough, now the stakes are even higher as electricity prices have increased 15% over the last 12 months (July CPI report). The latest NFIB Problems and Priorities survey shows that high electricity costs negatively impact a lot of small business owners. This is especially true for those industries heavily dependent on electricity such as manufacturing and many in the service sector industries.
Energy costs have increased rapidly over the last few years but the 15% increase over the last 12 months is particularly concerning. Small business owners are not able to adjust the price of their goods and services quickly enough to match steep energy cost increases without hurting their customer base. Plus, owners are not able to change business practices fast enough to offset the increases. For example, most owners cannot afford to buy new, more energy-efficient equipment if current equipment still has useful life. They are effectively caught in a squeeze that only time and/or good fortune will release.
On September 7th, The NFIB Research Center released the latest industry-specific Small Business Economic Trends report highlighting small businesses in the construction, manufacturing, retail, and services industries.
The report found small businesses in various industries are continuing to confront historic economic headwinds that are impacting their day-to-day business. Each industry is handling a unique set of circumstances resulting in varying degrees of owner optimism.
Manufacturing
· The manufacturing sector continues to be more optimistic compared to other industries, with the Optimism Index at 93.2 in July, 3.3 points above the overall optimism.
· Fifty-nine percent of firms reported unfilled job openings, second only to the construction industry and 10 percentage points higher than all firms.
· A net 28% of firms plan to create new jobs in the next three months, unchanged from April and eight percentage points higher than the overall small business economy.
· Future sales expectations declined 28 points in July from April’s quarterly report, a net negative 29% expecting higher real sales, historically a very poor reading.
Services
· The service sector Optimism Index decreased in July by two points to 92.2 and is 2.3 points above the overall index.
· Most of the decrease in the service sector optimism was driven by a decrease in expectations that the economy will improve and expectations of real higher sales.
· Service businesses’ concern about future sales over the next three months was unchanged from April at a net negative 8% of owners.
Small business owners depend on energy supplies at globally competitive prices to operate and effectively run their businesses. According to NFIB’s Energy Consumption poll, energy costs are one of the top three business expenses in 35% of small businesses.
Small companies use energy for several business-essential purposes. The primary energy cost:
- For 38% of small firms is operating vehicles
- For one-third of small firms is heating and/or cooling
- For one-fifth of small firms is operating equipment.
Small business owners on Main Street, which account for about 40% of our GDP and employment, are trying to run their businesses in the face of supply chain disruptions, labor shortages, covid disruptions, and double-digit inflation, all while energy prices rise.
It is critical for Hoosier small businesses to have access to affordable and reliable supplies of energy to remain competitive. NFIB recognizes its members’ concerns and is dedicated to working with lawmakers to find energy solutions that work for small business.
