The cost of electric energy should be established by
the principles of supply and demand. In a truly free
market economy, the cost of electricity would be
driven up by an inadequate supply of affordable
power. Conversely, it would and be driven down by
increasing the power supply.
The cost of power would continue to decline until
the demand for electricity surpassed the supply. At
that point the market would dictate the need for
more power to be generated.
The demand for power supply can also be reduced
through conservation practices. Reducing the demand
by using less power, while maintaining stable
generation capacity, can create a relative
oversupply that would push prices downward. Consumer
costs would be reduced by both lower unit costs for
electricity as well as by consuming fewer units of
However, our electric utilities are "anything but" a
free market system. Consumer power rates are
increasing rapidly at the same time that we have an
over-abundance of power supply.
Each utility is a functional monopoly wherein the
customer has only one source to purchase needed
electric energy. Those monopolies are regulated by
government, or quasi-government, agencies for the
stated purpose of establishing and maintaining fair
power rates for the consumer.
This in of itself may be a necessary manipulation of
the free market. It is unlikely that two or more
utilities would be able to construct, operate and
maintain parallel transmission and distribution
systems more cost effectively than a single
Unfortunately, governments and their agencies are
not content to limit their regulating capacity to
fairness in pricing. Instead, governments are
imposing the costs of carrying out their favorite
political policies on utility rate payers.
They are replacing taxes with utility bill charges
in order to pay for achieving their political goals.
The Renewable Portfolio standard forces utilities to
purchase an ever increasing percentage of their
wholesale power supply from inefficient and high
cost renewable generation sources such as wind and
solar. The requirement for the utilities to purchase
that power is independent of the unit cost of
electricity. It is caused by the political
motivation to reduce the use of fossil fuels.
Unfortunately, that political motivation continues
to prevail even though the United States now has
several hundred years of domestic supply of clean
burning, efficient and affordable natural gas.
Utilities are required to add power production
subsidies to their wholesale costs as further
incentives for private businesses to build and
operate inefficient and costly green energy
generation plants. The subsidies are offered to make
it more affordable for private companies to produce
the unaffordable power. The cost of the subsidies
goes directly on to the ratepayers’ monthly bill.
Utilities are required to add a plethora of
additional costs and charges to their ratepayers’
bills to pay for other politically motivated
programs. For instance, the three percent public
purpose charge that is added to the monthly bill of
all investor owned utility customers is used for
both conservation efforts and to subsidize the cost
of green energy generation.
Additional tax credits, accelerated depreciation and
guaranteed loans are offered to encourage private
sector investment in these green generation sources.
These incentives are required because wind and solar
generation are not cost effective ways to generate
Because both wind and solar generation are
intermittent, they require a separate and redundant
backup source of generation to fill the lost
generation capacity when the wind is not blowing or
the sun is not shining. The cost of the redundant
generation supply is almost never included in
alleged cost of solar or wind generation. In fact,
it is rarely mentioned. Further, even more charges
are added to pay to connect these often widely
separated generation sources to the electric grid.
Investor owned utilities are allowed to recover all
of their prudently incurred costs by charging those
costs to their ratepayers. The Public Utility
Commission also allows them to add on a significant
margin of profit.
Costs that result from compliance with the law and
other regulations are generally considered to be
prudently incurred costs. So all of the cost related
to environmental compliance, green energy generation
and distribution, and carbon emission reduction are
paid by utility ratepayers.
The ratepayer has no choice but to pay for these
inflated costs because they receive their power from
a single regulated monopoly.
Make no mistake. Virtually all of these added costs
to utility customers are more like taxes than
charges for delivery of electricity. They are
incurred to facilitate political policies rather
than to produce and reliably deliver the lowest cost
For instance, as much as forty percent of the
wholesale cost of Bonneville Power Administration
electricity is directly attributable to
environmental policy rather than actual power
generation and transmission costs. The forced use of
high cost wind and solar generated power is not
related to delivery of low cost production but
rather to satisfy the political agenda of policy
An entire green energy industry is growing wealthy
from the benefits of these utility taxes,
masquerading as residential and commercial power
The current legislative session has brought a
veritable tsunami of proposed statutory changes that
are designed to further enhance this transfer of
wealth from ratepayers to the green energy industry.
Highly paid green energy employees are roaming the
halls of the Capitol in veritable packs lobbying
legislators to enact these bills that will further
benefit their employers. They are crowding the
hearing rooms to testify about how many jobs will be
created by enacting these policies and what
wonderful environmental benefits will accrue from
From my perspective, what they are not saying is
much more important than what they are saying.
They are not talking about how the enactment of
these policies will increase the cost of residential
and commercial power rates.
They are not talking about how much the tax credits,
accelerated depreciation and loan guarantees will
cost the taxpayers.
They are not talking about how the three percent
Public Purpose Charge on investor owned utility
bills are now costing ratepayers more than one
hundred fifty million dollars each year. They are
not talking about concerted efforts to increase that
charge to enhance the cash flow to support their
They are not talking about how investor owned
utility rates in Oregon have more than doubled
during the past seven years, largely because of
enactment of these so called green policies. They
are not talking about how those costs will continue
to escalate as current policies are made more
lucrative for the green energy producers and as more
green energy policies are adopted.
The utilities are generally not objecting because
their increased costs are recoverable thereby
potentially increasing their profits.
Unfortunately, virtually no one is testifying for
the ratepayers who are paying for, and will continue
to pay for, the aftermath of this disheartening
Please remember, if we do not stand up for rural
Oregon no one will.