Are High Utility Rates Driving Tech Companies Out of California?

Are High Utility Rates Driving Tech Companies Out of California? Main Photo

17 Jul 2020

COVID-19 has had a sweeping impact on the economy and businesses throughout the country. With profits down, companies must evaluate the best ways to reduce expenses without impacting productivity. The best options involve reducing overhead costs without laying off employees since doing so can have a significant negative impact on operations and future growth.

Enter the Minnesota Technology Corridor.

Utility rates and real estate prices are more affordable here than in major tech centers like the Silicon Valley and Toronto. Moving to the Minnesota Technology Corridor could be the answer for executives in search of cost savings. 

Utility rates have been driving companies out of California even before COVID-19. 

The high cost of doing business in California is nothing new. The Site Selection Group published an article in 2017 highlighting how simply moving a data center from one state to another could save a business hundreds of thousands of dollars annually. “Electricity rates vary significantly across the country, so the savings can be dramatic. In the latest U.S. Energy Information Administration’s Electric Power Monthly report, depending upon the state, the average industrial user can pay anywhere in the continental U.S. from a low power rate (including tariffs) below $.047/kwh up to almost $.15/kwh. The U.S. average rate is $.0733/kwh and this report only tracks state-by-state instead of by utility. For a large data center user in the continental U.S., using the EIA’s report that significant delta between high and low for the “same” power translates to a difference of ~$878,000 annually.”

Large businesses like Google have already made moves to relocate for lower energy and property costs. In fact, last year Google announced they were building a $600 million data center in Minnesota after successfully completing negotiations with Xcel Energy.

You have options for where your energy comes from.

In the Minnesota Technology Corridor tech companies can choose to get their energy from traditional or renewable sources, which can further drive down the cost. Being able to negotiate with providers, while having supportive state and local governments makes it easy to save money. 

CFO’s should consider relocating as the best way to reduce expenses. 

We encourage CFO’s to contact us for specific information on how much they could save by relocating their tech company to the Minnesota Technology Corridor. We can provide detailed information on real estate and energy costs, while discussing any state incentives that may make the move even more attractive financially.