Regulatory Reform

More Energy Mandates Mean Higher Prices

By Robert Bryce

About two-thirds of the U.S. population as well as countless businesses and industrial users are now subject to rules that require them to buy renewable electricity.

Proponents of the renewable mandates, which are in effect in 29 states (and the District of Columbia and Puerto Rico) claim that they will reduce harmful emissions and spur job growth, by stimulating investment in green technologies. But here’s the problem: There is growing evidence that the costs may be too high—that the price tag for purchasing renewable energy, and for building new transmission lines to deliver it, may not only outweigh any environmental benefits but may also be detrimental to the economy, costing jobs rather than adding them.

I just completed a study for the Manhattan Institute on these mandates. In 2010, residential electricity prices in states with renewable-electricity mandates were 31.9 percent higher than in non-mandate states. Commercial electricity rates were 27.4 percent higher, and industrial rates were 30.7 percent higher. Of the ten states with the highest electricity prices, eight have renewable mandates. Of the ten states with the lowest electricity prices, only two have RPS mandates.

In an effort to compare states with similar profiles, I looked at seven coal-dependent states with renewable mandates and seven coal-dependent states without mandates. Between 2001 and 2010, electricity rates in the coal-dependent states with mandates increased by an average of 54.2 percent, more than twice the increase seen in the coal-dependent states that don’t have mandates.

The reaction from the Green/Left to my study has been predictable: they claim that the renewable mandates won’t have any effect on electricity costs. One Left-leaning critic even said there wouldn’t be any “statistically significant” change in rates.

Those claims ignore the data. In my study, I reference a 14.5 percent rate hike imposed last year by Pacific Power, which supplies electricity to 555,000 customers in Oregon, The biggest reason for the cost increase: a new transmission line needed to connect the state’s customers with two wind projects in Wyoming. The result of the rate hike: the average residential customer who relies on electricity from Pacific Power is now paying about $9.38 more per month, or about $112.56 per year.

I also reported on work done by Edison Electric Institute (EEI), a trade group that represents shareholder-owned electric companies. EEI estimates that about $39.5 billion in new transmission investment is being made on “projects addressing the integration of renewable resources, and where needed, to accommodate the expected off-peak production.” The cost of the new transmission lines for renewable-energy projects will be about $126 for each American.

But the renewable-energy advocates aren’t stopping with the 29 states. Last week, Senator Jeff Bingaman, (D-N.M.) introduced national “clean energy” mandate legislation. He’s not calling it a carbon tax. But make no mistake, that’s exactly what it is. And just as the renewable mandates are boosting costs in the states that have them, so, too, will a clean energy mandate mean higher costs.

Again, from my study, I looked at recent work done by the  Energy Information Administration on the financial impact of a national “clean energy” mandate. Last October, an EIA analysis found that by 2035, a national clean energy standard would result in hikes of at least 40 percent in seven regions, with the impact likely to be biggest on the areas that are dependent on coal. By 2035, when compared with the reference case, electricity prices would rise by 42 percent in Texas, 46 percent in Oklahoma, 47 percent in Tennessee and Kentucky, 48 percent in Colorado, 50 percent in eastern Pennsylvania and New Jersey, 51 percent on Long Island, and by 61 percent in southern Illinois and eastern Missouri.

Be wary of government energy mandates.

Robert Bryce is a senior fellow at the Manhattan Institute, 501(c)(3) nonprofit public policy research organization and a private sector member of ALEC. Mr. Bryce’s latest report is “The High Cost of Renewable-Electricity Mandates.”

In Depth: Regulatory Reform

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