Energy costs matter

by Becki Gray, John Locke Foundation and NC SPIN panelist, April 9, 2015.

Energy is necessary for just about everything we do. And when the cost of energy goes up, we pay more over and over and over.

Residential customers pay more to keep the lights on and the refrigerator running. Business owners pay more to keep the lights on and the machines running. Consumers pay more when businesses pass along higher energy costs at the retail or wholesale level. Taxpayers pay more when government agencies spend more on energy costs for vehicles, buildings, and schools.

Each cost increase reduces our freedom to use those resources somewhere else. When almost 10 million North Carolinians must pay higher energy bills, it becomes a real drag on economic prosperity, reduces economic growth, and makes the state less competitive with our neighbors.

The market for energy is not free; it’s riddled with government interference. Because of the huge costs associated with building and maintaining the infrastructure to supply electricity, North Carolina’s public utilities, like most across the country, are regulated public monopolies.

As a result, choices are limited and prices heavily controlled. Federal and state regulations are sometimes duplicative, cumbersome, and costly, and they’re rarely reviewed.

Government subsidizes energy with direct cash payouts, tax breaks, loans, and research and development grants. All forms of energy get some kind of government subsidies. With subsidies, there are winners and losers. Taxpayers and ratepayers are the biggest losers.

But as North Carolina’s economy recovers, lawmakers are looking at ways to remove impediments to a freer market in the energy sector.

• Repeal the renewable energy portfolio standard. Last session, House Bill 298 aimed to “reduce the burden of high energy costs on the citizens of North Carolina” by capping, sunsetting, and repealing a 2007 mandate requiring that 12.5 percent of North Carolina’s energy come from expensive, highly subsidized renewable energy sources. Similar legislation may be introduced in the near future.

• Fight federal encroachments by the Environmental Protection Agency. A dozen states have joined a lawsuit challenging the EPA’s claimed authority under the Clean Air Act to regulate power plant emissions to “fight” climate change. Senate Bill 303 would prohibit the state Department of Environment and Natural Resources from enforcing any federal standard that jeopardizes the “health, safety, or economic well-being of a citizen of this state.” A House proposal would develop a North Carolina-specific plan to comply with the EPA’s federal greenhouse rules.

Meantime, DENR Secretary Donald van der Vaart recently testified before Congress, saying “states shouldn’t have to create a plan to meet the federal standards until after the courts settle lawsuits seeking to derail the EPA’s climate effort.”

Van der Vaart thinks the EPA has acted illegally; let’s hope the courts agree or Congress passes legislation blocking the EPA’s overreach, making these state measures unnecessary.

• Prioritize and define the role of government. In the 1980s, 32 local governments in eastern North Carolina jointly invested taxpayer money in power plants — a disastrous decision resulting in billions of dollars in debt and electricity rates that are 35 to 40 percent higher than Duke Energy customers paid over the same period.

Senate Bill 305, overwhelmingly approved in the General Assembly and signed into law by Gov. Pat McCrory on April 2, outlines a plan for Duke Energy to buy back ElectiCities’ shares of the power plants, greatly reduce the debt, and allow Duke to lock in lower fuel costs — immediately reducing energy costs by 10 to 15 percent for those harmed by the bad deal. Local governments should not own power plants.

• Encourage energy exploration. In 2011 the General Assembly passed a law opening discussions about natural gas exploration in North Carolina. Finally, the first permits for hydraulic fracturing have been issued.

Natural gas exploration holds opportunity for new jobs, new investments, and an affordable, locally developed, cost-effective energy source. Shale gas is clean-burning, plentiful, inexpensive, and subsidized much less than mandated renewable sources: wind, solar, and biomass.

Note to the natural gas industry: North Carolina is open for business.

If we want to be the most attractive state for people to build and expand businesses, raise families, and enjoy freedom, low energy costs are part of that formula. Kudos to North Carolina’s leaders for moving forward with real energy reform.

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