Cheap Power, Still Second

By Wes Calder. From MFGCalcs Magazine, Issue 1, November 2026, page 57.

In July a million kilowatt-hours of electricity cost about $251,100 in California and about $70,700 in Texas, at the Energy Information Administration’s average industrial prices. The California bill is more than 3.5 times as large, and for a company deciding where its next line goes, a gap that wide is hard to miss.

The factory figures seem to follow the bill. Of the 10 biggest manufacturing states, Texas, second only to California, grew fastest after inflation from 2019 to 2025, by more than a third, the Bureau of Economic Analysis’ figures show. California’s real output ended those six years slightly smaller than it began. The figures do not show that cheap power caused the growth.

In 2019 California’s factories produced $1.59 for every dollar of Texas’, counted in current dollars. From 2021 on, Texas’ real output rose every year, and more than a third of its gain since 2019, in current dollars, came from chemical makers, whose output nearly doubled. By 2025 Texas had made up most of California’s lead, even after a year in which California won some of it back.

That year, California’s real output grew faster than Texas’, and in current dollars its lead widened for the first time since 2020. Nearly all of California’s gain that year, counted in current dollars, came from makers of computers and electronics, which now account for about a third of the value California’s factories add. The state with the costliest industrial power in the Lower 48 still makes more than any other.

Power is only part of the bill. MFG Calcs’ State Cost-to-Manufacture Index weights factory wages at three-quarters and industrial power at one-quarter, and it scores Texas at 90.6 and California at 146.3 against a national benchmark of 100. More than four-fifths of that gap is power. On wages alone the two states are far closer, and for one skilled trade the order flips: the Bureau of Labor Statistics’ median hourly wage for machinists in 2025 was lower in California than in Texas.

California also has more factory jobs than any other state, 1.21 million in September to about 1 million in Texas, by the same bureau’s count. When Industrial Electric Mfg., a maker of power distribution equipment, chose San Antonio for a new plant, its chief executive, Clayton Such, gave his reasons in a release from the Texas governor’s office in August: “The city’s skilled workforce, strong infrastructure, and collaborative economic development environment made this a natural choice for our next phase of growth.” The release never mentions the price of electricity, though it does report a Texas Enterprise Fund grant for IEM, the kind of incentive the index leaves out. The index also omits taxes and land, and it reads one month of power prices, which the EIA may revise; no figure here says how much power a given plant uses.

California’s makers still feel the bill. “Manufacturers have warned the Legislature for years that Cap-and-Invest policies and regulations like these would drive up energy costs and make California less affordable for businesses and consumers,” Lance Hastings, president and chief executive of the California Manufacturers & Technology Association, said in March.

In the Beige Book published in September, a contact told the Dallas Fed that skilled manufacturing workers moving from California had helped ease the region’s labor shortages. Another noted job candidates asking for San Francisco wages.

Live data from this story

• California’s Lead, Narrowing: Manufacturing by state

Read it in the magazine

• MFGCalcs Magazine, Issue 1, November 2026, page 57