Regulatory Reform

Do Skyrocketing Electricity Rates in New England Foretell Consequences of Clean Power Plan?

The New York Times ran an interesting article a few days ago discussing the skyrocketing electricity prices residents of New England are being forced to pay even before the winter season begins.

The article identifies a resident of New Hampshire named John York who paid $376 to power his small printing business this past October. With no change in the amount of his work or his thermostat, his electricity bill climbed to $788 in November – an increase of 110 percent in just one month.

What the article reveals (perhaps unintentionally) are the likely consequences of heavy handed government policies and regulations that distort energy markets and threaten the supply of affordable and reliable energy for consumers.

Utilities in New England states have apparently been warning their customers for months now to expect electricity rates to increase due to the shortage of natural gas pipeline capacity in the region. During the winter months, natural gas is also often used in the region to generate heat, thereby exacerbating the problem. Seven new pipelines have been proposed to fix these shortages, however these projects have been victims of fierce NIMBY-ism that have scuttled any prospects of construction.

What’s more, many environmentalists have opposed any construction of new pipelines that would increase the region’s dependence on fossil fuels. Ironically, increasing the amount of electricity generated from natural gas is a significant component of President Obama’s Climate Action Plan and specifically EPA’s proposed Clean Power Plan (“Building Block 2”). This lack of adequate pipeline infrastructure needed to comply with EPA’s plan is a concern cited by the North American Electric Reliability Corporation (NERC) in a recent report. Additional concerns have also been raised about the short timelines presented in the Clean Power Plan, especially in light of the fact that it typically takes three to five years to plan, permit, finance, and construct additional pipeline capacity.

Furthermore, despite claims that renewable sources are now cost-competitive with (or even cheaper than) coal and natural gas, The New York Times piece goes on to explain that the Massachusetts Legislature this past August failed to approve a coordinated regional strategy consisting of new pipelines because “in part…cheap energy would flood in the market and thwart attempts to advance wind and solar projects.” In other words, the legislature decided to keep electricity prices artificially high so that renewable projects could compete with coal and natural gas. Notably, an increased reliance on renewables for electricity generation is also a key component of the Clean Power Plan (“Building Block 3”).

And, ultimately, who suffers? The John Yorks of the world.

In September, New England residents paid an average rate of 17.67 cents per kilowatt-hour (kWh) compared to a national average of 12.94 cents per kWh for electricity. Massachusetts’ largest utility expects rates to reach 24.24 cents within the Commonwealth later this winter. Unfortunately—but unsurprisingly—there are real consequences to government policies and regulations that threaten the supply of affordable and reliable energy.

The rest of the country should take note.

In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

+ Regulatory Reform In Depth