Worcester Business Journal

www.wbjournal.com August 3, 2015 • Worcester Business Journal 13 effect throughout the industry." The lost revenue has resulted in belt- tightening measures, with companies primarily cutting back on staff or R&D. The Advanced Medical Technology Association (AdvaMed), an industry group, estimates that up to 195,000 jobs have been lost as a result of manufactur- ers' response to the tax, with 39,000 of them having come directly from the medical device sector. In a recent survey, the organization found that 71 percent of the companies would rehire employ- ees if the tax were repealed, while 85 percent would reinstate research that had been cut. While the job losses have an impact, it's the cut in R&D that could have a longer-lasting impact on the industry's competitiveness. "If the medical device tax were repealed, it would free up dollars that could be reinvested in R&D, new hiring or other business priorities," MacMillan said. The cost of the tax for subcontractors is harder to quantify, said Al Cotton, a spokesman for Clinton-based Nypro. Contracted companies are always nego- tiating over price, he said, and it's uncer- tain how much of that has been influ- enced by the new tax. However, Cotton said anything that benefits the compa- nies Nypro services would also benefit Nypro. The impact is not just a financial crunch, but a possible slowing of con- tracts as the development of new tech- nology by these suppliers slows with a lack of R&D funding, said Matt Giza, vice president and general manager of Cogmedix, of Worcester. Ultimately, he said, removing the tax could improve the prospects of all com- panies in the medical device market. "At a macro level, the tide (raises) all ships. If there is more money in the mar- ket, it is potentially going to trickle down to the service providers," Giza said. "Not all companies are going to put that money directly into research and development, but those that do are going to help the industry in general." n >> B U S I N E S S & P U B L I C P O L I C Y Hydropower: A gift and a curse? O n its surface, Gov. Charlie Baker's bill to encourage large- scale adoption of hydropower by Massachusetts utilities appears to take a reasonable crack at reducing car- bon emissions, a requirement of legisla- tion passed in 2008. But while it may be aptly designed to achieve that by reducing dependence on fossil fuel-based power in favor of water-generated electricity, industry sources say it could work to deregulate the energy market in the Bay State at the expense of power suppliers and consumers. The bill was filed with the state Senate on July 9. In a statement, Baker the bill is "critical to reducing our car- bon footprint, meeting the goals of the … Global Warming Solutions Act and protecting ratepayers already stuck by sky-high energy prices." The act requires a 25-percent reduction of car- bon emissions from 1990 levels by 2020, and an 80-percent reduction by 2050. According to the Baker administration, the bill would achieve 5 percent of the needed reduction. Baker's plan relies heavily on Canadian hydropower, a vast resource there. For its part, Canada is keenly interested in exporting it to utilities in the Northeast, especially New York and New England, so its interests are aligned with Baker's strategy. The bill would require Massachusetts utilities and the Department of Energy Resources to issue requests for propos- als for long-term contracts of 15 to 25 years with hydropower suppliers for about 1,200 megawatts, with up to 2,400 megawatts to be bought. The bill has language that adds wind suppliers to the process, with hydropower shoring up wind power since the latter's supply varies. But the primary focus is on con- tracting for hydropower. The bill's language doesn't specify that suppliers must be Canadian firms, which are provincially-owned entities. But because there are pending propos- als by utilities to build transmission projects that would tap into Canadian hydropower resources, industry insid- ers say it's clear that the goal is to har- vest Canadian hydropower. It's a goal many power industry lead- ers aren't comfortable with. James Bride, president of Boston-based Energy Tariff Experts, has cautioned his clients about the bill's potential costs for consumers. An advisor to companies on manag- ing energy costs, Bride predicted that the cost of buying new hydropower from Canada will be passed on to con- sumers. While wholesale prices to the utility may not differ much from cur- rent sources, the cost of new projects Canadian suppliers must complete to export to New England will show up on retail bills, he said. Four times the power? Bride estimated that Baker's bill effectively means that up to 40 percent of the power to be purchased could come from hydropower suppliers, more than four times the current nine per- cent, according to ISO New England, the region's grid operator. Bride said it's akin to "re-regulation" of the market, after it was deregulated in most of New England in the 1990s. Then, transmis- sion, generation and distribution were broken up so that one large company was not controlling all three. Bride is skeptical that large-scale hydropower adoption is required to meet the obligations of the 2008 legisla- tion. He noted that the renewable ener- gy market has seen healthy growth under legislation designed to foster its adoption, and that's already leading to a drop in carbon emissions. "I don't think it's fair to say we have to do this to meet the obligations of the Global Warming Solutions Act," Bride said. Another skeptic is Dan Dolan, presi- dent of the New England Power Generators Association. "This has the potential to completely undermine the competitive marketplace in Massachusetts," he said. But Ned Bartlett, undersecretary with the Executive Office of Energy and Environmental Affairs, said Baker's plan has the potential to significantly alter the market and introduce new competition for power suppliers. Bartlett said that while renewable resources such as solar and wind aren't steady enough to compete with tradi- tional, fossil-based fuels, hydropower is, and that may threaten suppliers. Bartlett also addressed another claim: Industry insiders have speculated that the bill props up the largest utilities, particularly Eversource, New England's largest energy provider. Eversource has publicly discussed its need to build new transmission infra- structure for its viability, and has pro- posed to do that with Hydro-Quebec, one of the major hydropower suppliers poised to benefit under Baker's bill. Bartlett said the bill is designed to include both small and large suppliers of hydropower, making it possible for locally-based suppliers to participate in the RFP. But he added that Hydro- Quebec will likely bid for the project. He also noted that incorporating renewable sources like solar and on- shore wind into contracts is an impor- tant and sincere component of the bill. Eversource spokesman Michael Durand, in an email response in sup- port of Baker's plan, pointed to a joint action plan by all six New England governors that focuses on making ener- gy more affordable, specifically recog- nizing hydropower's potential impact on customer costs. "The transmission of competitively priced hydropower will lead to a reduc- tion in the wholesale price of energy, so it's not surprising that those who today control the majority of existing power plants in the region might criticize the effort," Durand wrote. n Critics: Baker bill could harm energy market BY EMILY MICUCCI Worcester Business Journal Staff Writer >> Continued from previous page nate the wage gap for women and people of color. According to federal statistics from 2013, women earn about 80 per- cent of what men earn. The outlook? With income disparity looming as a major issue in next year's presidential election, this issue won't go away. 4. EMPLOYEE CLASSIFICATION What constitutes an "employee" has become a hot-button issue brought to the surface by businesses such as Uber and FedEx, which have classified workers as contractors, rather than employees. This also includes such positions as real estate agents and construction workers. The Labor Department recently released a 15-page memo that rein- forces a broader definition of "employee" that's tied to a company's influence over the worker. The memo says an "employee" is economically dependent on his or her employ- er, and therefore most workers are employees. While some business groups have taken umbrage with the interpretation, saying it will upset the legitimate use of contractors, the Labor Department explained that its memo focuses on how policies are interpreted and doesn't repre- sent a policy shift. What you should do: Take a closer look at how you clas- sify employees versus contractors to adhere to the change. 5. HEALTH INSURANCE This issue has either perplexed or perturbed business leaders for at least six years, when President Obama began to push the Affordable Care Act to passage. But in Massachusetts, where the state's 2006 landmark health insurance law preceded the ACA, businesses have been pushing for the use of state-set rating factors to help deter- mine insurance premiums for small businesses. Allowing that, they believe, rather than the smaller number of factors established by the ACA, would allow for more accurate pric- ing of premiums, potentially saving smaller firms money. The alternative? Ending the benefit and forcing employ- ees to fend for themselves, or putting up with the higher costs that could hurt employee retention. n

• Cover