Oklahoma grows are paying tens of thousands to turn the lights on
A growing number of Oklahoma cannabis businesses are being charged tens of thousands of dollars in utility service deposits.
The high cost of cannabis energy consumption is a hot topic. Cannabis cultivation now accounts for more than 1% of America’s energy consumption. In Massachusetts, indoor grows make up about 10% of all industrial electricity consumption—a state that has issued just 64 total licenses. Environmental concerns have taken the forefront of the conversation nationally, but locally it’s taking an economic focus.
Resource efficiency and proper planning is important when starting any business, and every grower knows lighting, HVAC and water are going to make up the bulk of their operating expenses. Newly licensed growers are wise to budget for their first quarter of estimated energy costs when there is no product to generate revenue. Not everyone is planning—or prepared however—to pay months in advance at max use cost just to turn the lights on. And that’s exactly what many are being required to do. It’s exactly what client Mark E. recently had to do for his Le Flore county grow, and while he was prepared, the discovery was certainly a surprise.
“They started with a $400 evaluation fee to determine if we could have the 800amps requested. After they approved our application we were notified that the upgrade costs another $400 and the deposit is $15,200 for a grand total of $16,000.”
Mark’s story is one of a handful we’ve heard in the past few weeks. And the commonality, while historically inevitable as ancillary businesses capitalize more on industry necessities, highlights another issue: The collective cost paid when cannabis businesses default on their utility bills. “The electric company explained that they have had a lot of bad experiences recently with growers running up big bills and not paying,” Mark said. “They explained that the deposit is based on two months of max usage of our 800amp service.” Mark’s experience is both shocking and understandable. One that should help growers set expectations around startup costs, and also understand why it may be a necessity of a small energy cooperative to ensure they’re covered for supplying an operation with such a high energy demand. Albeit, two months at a max use estimate is a little much.
While the cost of entry in Oklahoma’s cannabis market is the lowest in the country as far licensing goes, the associated costs of doing business shouldn’t be overlooked. Tens of thousands in utility deposits might ay be enough to push some growers outside and others out completely.
While we can’t advise as much as create awareness here, it’s important to remain adaptable and open to your options to stay in business. Before YOLO’ing on a grow facility or plat of land, understand what will be needed to get it grow ready beyond equipment, from upgrading to a three-phase system, to the incredibly high utility deposits or the cost of running electric from the road—which recently ran a client $85k alone. Expand your property search if your ideal place doesn’t leave you with a comfortable amount of working capital. You’ll find these service costs vary from county to county similarly to the cost of a certificate of compliance. In some places it’s nothing or next to nothing; in others plan on paying thousands.
Coming full circle, perhaps one upside of the economic issue is that it may push more growers into using more sustainable lighting and control systems—which would reduce the industry’s controversial carbon footprint along with individual operating costs. Mark just hopes the sharing of his experience may save someone from the giant surprise and difficulty. We do as well.
