Commentary: Renewable energy legislation would add to drain on small business

By Karen Kerrigan
Monday, July 26, 2010

As small-business owners across America struggle to rebound from the deep recession, Congress needs to be mindful of how each and every policy proposal impacts business costs. Indeed, entrepreneurs need action by Washington in critical areas such as capital, health coverage and energy. Regarding the last matter -- energy -- legislation is moving in the wrong direction, but it's not too late to stop certain bad ideas from becoming costly realities for small business.

In particular, a federal renewable energy standard (RES) is a really bad idea that would harm small-business owners and consumers across the nation.

A federal renewable energy mandate would require that a percentage of a state's energy be produced from "renewable" sources. The federal government would arbitrarily decide what sources are considered "renewable." The mandate does not take geography into account and fails to consider that many states do not have access to affordable renewable energy sources. This means the legislation is inequitable; it will punish small-business owners in states where renewable sources are limited.

Since it's often more expensive to produce energy from renewable sources than from fossil fuels, costs will surely rise. If energy costs increase for businesses, consumers and workers will bear the burden through higher prices and stagnant wages. For many small businesses, raising prices is not a competitive option. Therefore, business owners will have fewer dollars to invest in new jobs, higher wages and benefits for existing employees, or new equipment and technologies.

In response to challenging economic conditions, local Virginia retailer Barb Werner has cut costs to the bone, eaten every cost increase without raising prices and forgone her own salary to maintain her employees. Her shop, Black-Eyed Susan, on Church Street in Vienna, is known for its unique merchandise at reasonable prices. If energy costs go up, she says she will have to cut staff. Her margins only allow her to absorb so much. And she predicts that everyone she buys from -- mainly small U.S. manufacturers -- will be forced to raise their prices, too, which means she will be forced to raise hers and lose the competitive advantage she currently enjoys. Higher energy prices are one more cost burden she -- and all small-business owners -- would have to bear. "It's a slap in the face," she said.

A comprehensive energy policy is critical for our nation, but it cannot come at the expense of the small-business sector -- the backbone of our economy. President Obama and congressional leaders say they want to help small businesses create jobs and grow, but the RES mandate along with other intrusive regulations that will raise costs are non-starters.

Washington cannot burden small businesses with higher energy costs that sap their capital. The end result will be reduced profits, fewer resources, lost jobs and higher prices for consumers. Such outcomes will not enable small businesses to remain the driving force behind employment and growth so essential to turning our economy around.

Karen Kerrigan is president and chief executive of the Small Business & Entrepreneurship Council, a nonpartisan advocacy and research organization dedicated to protecting small business and promoting entrepreneurship.

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