Consequences of energy policy

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(Host) Commentator John McClaughry says that legislation currently being considered in Montpelier to promote renewable energy resources may have unintended consequences.

(McClaughry) This year’s Big Idea for energy policy can be summed up this way: ratepayers aren’t paying enough for electricity, so state government needs to make it more expensive. That, in translation, is the argument that persuaded 24 senators to vote for the “renewable portfolio standard”(RPS) mandate.

The RPS mandate says that by 2013 an amount equal to all of each utility’s additional energy sales between now and that year must come from renewable sources.

The bill defines renewable energy basically as energy that does not come from coal, oil, natural gas, or nuclear. So that must mean solar, wind, landfill and sewage plant methane, wood chips, and hydro, right? Not quite.

The bill declares that only hydroelectricity that comes from facilities of less than 80 megawatt capacity qualifies as “renewable”. There’s an important reason for this arbitrary restriction.

The 80Mw cutoff naturally includes all the hydro dams in Vermont and on the Connecticut River. What it excludes is electricity from the giant HydroQuebec plants at James Bay and Churchill Falls. Why? Because if the electricity from the big HQ dams is recognized as “renewable”, Vermont would already be getting fifty percent of its power from renewable sources, making it among the “greenest” energy states in the nation.

Then there wouldn’t be any reason to have a renewable portfolio standard. So the renewables advocates simply defined HydroQuebec power out of the calculation.

There is one straightforward way to get Vermont utilities to buy more qualified renewable energy. That is to find it on the market at a price lower than “conventional” energy (nuclear, fossil fuels, and HQ hydro).

Utilities would run to sign up for any such lower cost power.

Unfortunately there isn’t any, and there’s not likely to be much of it for a long, long time.

That being the case, the RPS bill simply mandates that the utilities buy more expensive electricity instead of less expensive electricity. The utilities, of course, pass the extra cost on to their ratepayers.

Since 1990 Vermont electricity consumers have paid over $2 billion dollars more than they would have paid for electricity at U.S. average rates. This is a major burden on homeowners, small businesses, schools, hospitals, ski areas, and local governments, but it’s especially threatening to Vermont manufacturers whose products must be sold in a global market.

Notwithstanding that fact, 24 senators were pleased to pass legislation to require Vermont utilities to charge higher electricity prices, all to benefit a handful of politically active entrepreneurs whose more expensive product would find few buyers in a free marketplace without government compulsion.

This is renewable corporate welfare. It would be gratifying if the many House liberals who regularly – and rightly – decry corporate welfare would show enough spunk to act on their principles, and turn thumbs down on this latest example.

This is John McClaughry – thanks for listening.

John McClaughry is president of the Ethan Allen Institute, a Vermont policy research and education organization. He spoke from our studio at the Fairbanks Museum in St. Johnsbury.

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