The stampede for higher rates
Back on Tuesday I promoted Marita Noon’s most recent column on social media with the promise to do a Maryland-centric follow up “If I think about it this week.” (I planned to all along, but sometimes I forget so I figured I better cover myself.) Anyway, the passage that piqued my interest was this one:
In California, where (billionaire and liberal Democrat political backer Tom Steyer) has been a generous supporter of green energy policies, he helped pass Senate Bill 350 that calls for 50 percent renewable energy by 2030. California’s current mandate is 33 percent by 2020 – which California’s three investor-owned utilities are, reportedly, “already well on their way to meeting.” It is no surprise that California already has some of the highest electricity rates in the country. Analysis released last week found that states with policies supporting green energy have much higher power prices.
In doing research for the monoblogue Accountability Project, which I am in the process of completing now, I stumbled across two bills which dovetail nicely with both this article and another recent commentary by Noon regarding solar power mandates and incentives. I’ll tackle the latter issue first.
For several years the state of Maryland has mandated a certain percentage of electrical power be derived from renewable sources, with a proposed new version of the law (HB1106/SB921)retaining the 13.1% share required for 2017 but increasing the carveout for solar energy from 0.95% to 1.15%. This bill also proposed that the share of both renewables and solar power increase at an accelerating rate, eventually ratcheting up the requirements to 25% and 2.5%, respectively. While that would be great news for the solar industry, it would be bad news for consumers – according to the information provided with these bills the increase in monthly electric bills to an average consumer if this measure is enacted could be as much as $3.06 per month by 2020. However, Maryland’s Department of Legislative Services cautions (page 7 of the Fiscal and Policy Note) predicting this increase can only be “for illustrative purposes” because of all the factors involved.
The reason behind the rate increases is the payment to the state called the Alternative Compliance Payment (ACP), which also is affected by the bill. The proposal actually would decrease slightly the ACP for all renewable energy sources except solar from 4 cents to 3.75 cents per kilowatt-hour, or, in a more practical term, from $40 per megawatt-hour (MWh) to $37.50 per MWh. (An average home is considered to use 1 megawatt-hour of electricity per month.) It also gives utilities a temporary break on the solar energy carveout, where the fee for a shortfall would decrease from a scheduled $200 per MWh in 2017 and 2018 to $195 and $175 for 2017 and 2018, respectively. The fee would increase in the out years, however.
When the Fiscal Note predicts that the state itself would incur an additional $2.2 million in electrical costs by 2021, it’s obvious that this proposal would be a costly one for consumers. At this point the bill is in limbo, as it was passed by both the House of Delegates and Senate but has not been signed or vetoed yet by Governor Larry Hogan.
Now let’s turn to the most recent commentary from Noon, where she notes California will mandate 50 percent renewables 14 years hence. Unfortunately, Maryland is not that far behind them as they just enacted SB323, which will take effect in October. Instead of letting this silly notion that our little state can actually do something about climate change by reducing our energy consumption expire – as it would have with no action - this bill instead maintained a 25% by 2020 mandate and increased the mandated energy reduction to 40% by 2030. As an analysis Noon used in her piece shows, Maryland is among the states with the highest electricity bills and follies such as these are a reason why.
Don’t get me wrong: I am definitely for energy efficiency, but it should be in terms of consumer choice rather than government fiat. Those who create and pass the laws rarely embark on any sort of dynamic cost/benefit analysis for their policies, so in this case they’re not considering the effect on ratepayers and job creators in balance with the very dubious pie-in-the-sky notion of affecting our climate. (After all, if it was once warm enough to have the polar expanse of Greenland actually be green, as it was around the turn of the previous millennium – well before the Industrial Revolution or the car-happy society we inhabit now – then how much effect do we really have?) We can hardly predict with any certainly the weather two weeks from now, so why should we trust the accuracy and inerrancy of a climate forecast for 2050 when it’s used as an excuse for confiscatory policy that indirectly benefits those making the forecast?
As I brought up the monoblogue Accountability Project earlier, it shall be noted that the votes on both these bills will be used for this year’s mAP. It’s a shame that just 39 Delegates out of 141 and only two (yes, two!) Senators out of 47 have the potential for getting both these votes correct. Maryland has a relatively powerful environmental lobby thanks to its straddling of Chesapeake Bay, but these were cases where the state’s budding attempt to be more business-friendly and hopefully end its economic reliance on big government should have held sway. While Governor Hogan erred in signing the climate change folly, he can do a more concrete favor for businesses and ratepayers by vetoing HB1106/SB921 and creating a proposal to sunset the ACP for next year’s session.
And while we are at making energy policy, I encourage Governor Hogan to follow the lead of his friend and cohort New Jersey Governor Chris Christie and remove Maryland from the membership rolls of the Regional Greenhouse Gas Initiative. Utilities (and their ratepayers) will thank him from getting us out from under that wealth transfer boondoggle.