Issues

Expanded mandates would make electricity more expensive

Supporters of commonsense energy policy in the Commonwealth are coming under increasing attack from groups that want things their way and their way only with regard to alternative energy. In this case, “their way” is legislation (H.B. 80) under consideration in the state General Assembly that would extend well into the future certain renewable energy mandates – solar in particular – under Pennsylvania’s 2004 Alternative Energy Portfolio Standards Act, a law that established initial alternative energy requirements for utilities.

Pennsylvanians who are concerned about the cost of energy and the prospects for long-term job creation in the Commonwealth need to pay close attention to the debate.

Let’s make one thing clear: the debate over H.B. 80 is not about the value of alternative energy. On the contrary, meeting the Commonwealth’s growing demand for energy (demand for which is expected to increase nationwide by 50 percent over the next two decades) means that all forms, including traditional and renewable sources, must be part of the mix.

At issue is how Pennsylvania incorporates alternative energy into that mix, as the approach taken will have tremendous economic implications moving forward.

Citizens to Protect PA Jobs supports a commonsense strategy for the Commonwealth that approaches alternative energy within the framework of a free enterprise system that balances energy needs with viable sources to meet those needs.

Unfortunately, supporters of H.B. 80 are advocating just the opposite, preferring that government pick the sources of alternative energy to mandate for years to come.

There are a number of problems with this approach:

1. H.B. 80 WILL INCREASE ELECTRICITY COSTS. Despite proponents’ rhetoric, which they back with “expert” studies based on assumptions, this legislation would lead to higher costs for electricity producers and consumers, not to mention negatively impact the reliability and adequacy of Pennsylvania’s electric generation supply. Estimates are that the additional mandates contained in H.B. 80 could add as much as $9 billion to $12 billion to the cost of electricity purchases in future years, equating to at least a 10 percent to 13 percent increase in electric rates. With electric rate caps coming off and the uncertainties in the market as a result, now is not the time to increase the mandates for more expensive forms of energy. This is especially true considering the renewable energy mandates established by the 2004 AEPS law have not yet been fully implemented, and that law’s impact on cost is not yet known. Even the state’s Public Utility Commission does not recommend any changes to the 2004 law at this time. The Office of Small Business Advocate has indicated that H.B. 80 “would increase default service electric rates for small business ratepayers, at least in the near term.” As the backbone of the economy, small business will be looked on to drive recovery from the worst financial crisis since the Great Depression. Adding yet another unnecessary cost burden will do little to help fuel this significant economic engine.

2. H.B. 80 THREATENS PRIVATE SECTOR JOBS. The “green” jobs created by a government mandated energy policy also come at a cost to jobs lost in the traditional energy industry. There are numerous studies that suggest that the government subsidy/mandate approach taken by some European counties has been more expensive than beneficial. These studies should give lawmakers here pause in deciding to follow a similar approach. Can government mandates create jobs? Sure. But government cannot mandate long-term prosperity – this can only come from a healthy private sector. Government mandated and subsidized job creation that occurs at the expense of private sector job creation is not the key to sustainable economic recovery and growth. As pointed out by a recent policy blog by the Commonwealth Foundation, “If alternative energies are so cost-effective and are the future of our economy, there is no need to both subsidies and then mandate these energy sources.”

3. H.B. 80 THWARTS INNOVATION. By shutting out one-third of the market, which would occur under H.B. 80, Pennsylvania is essentially shutting out alternative energies that may not even be developed yet and may not get developed because they wouldn’t be included on some arbitrary list of qualifying alternative energy sources. Government cannot adequately predict what the next alternative energy breakthrough might be next year, let alone five or 10 years from now. The development of Marcellus Shale natural gas reserves, for instance, was not anticipated a decade ago.

Abundant and affordable energy is as critical for job creators as it is for individuals and families. Pennsylvania must take reasonable steps to ensure adequate supplies of traditional and renewable sources at affordable prices in the future; the last thing Pennsylvania should be doing is making policy decisions that could make energy more expensive.

House Bill 80 is not the solution for creating a sound energy policy for the Commonwealth that will fuel the economy, provide for a comfortable existence and allow the free market to determine viable alternative energy sources.

The message to state lawmakers is simple. Alternative energy, yes! H.B. 80 and its mandates, no!