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Senator Doug Whitsett, Oregon District 28, E-Newsletter 2/18/13

Oregon's green energy frenzy vs. gree market principles

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 electricity.

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 provider.

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 electricity.

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 electric power.

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 makers.

An entire green energy industry is growing wealthy from the benefits of these utility taxes, masquerading as residential and commercial power bills.

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 their passage.

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 policies.

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 feeding frenzy.

Please remember, if we do not stand up for rural Oregon no one will.

Best Regards,


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