View in your browser.

Over the past several years, this newsletter has discussed North Carolina’s renewable energy mandate, commonly referred to as Senate Bill 3 (SB3). Passed in 2007, this legislation, by mandating that utility companies provide electricity from expensive power generators like wind and solar plants, is implicitly forcing North Carolina electricity customers to buy their electricity from the same sources. Of course, if the costs of the inputs are higher than they need to be, so will be the price of the product those inputs are generating–in this case electricity.

North Carolina has a relatively low renewable standard: 12.5 percent with a minimum of 7.5 percent that must come from renewables and can be supplemented by a 5 percent reduction in energy usage, mislabeled energy efficiency. Ultimately the costs of meeting this mandate will be born by NC’s utility rate-payers.

Colorado law gives us a picture what happens as these mandates are extended. Colorado has a 30 percent renewables mandate that must be met by 2020. Their original mandate, which was put in place in 2004, was 10 percent, but it has been hiked continuously since then. The Heartland Institute’s James Taylor, writing on the National Center for Policy Analysis’s environment blog, recounts the history of the law in Colorado:

In 2004 Colorado voters approved an initiative requiring larger utilities to generate 10 percent of their electricity from renewable sources. Since 2004 the state legislature has approved a succession of bills making the mandate stricter. Current law requires electricity providers serving most of the state’s customers to generate 30 percent of their electricity from renewable sources by 2020.

This history has led to Colorado electricity customers having to face utility price hikes that are far above the national average. Citing US Energy Information Agency data, Taylor explains that:

Since 2004, U.S. electricity prices have risen 33.8 percent, and Colorado prices have risen 40.4 percent (data through October 2013, the most recent month for which the U.S. Energy Information Administration published data when this paper went to press).

Since 2007, U.S. electricity prices have risen 10.8 percent, while Colorado prices have risen 27.5 percent.

Since 2010, U.S. electricity prices have risen 3.1 percent, while Colorado electricity prices have risen 7.0 percent.

Taylor further explains how this is harming the typical family in Colorado:

Had Colorado electricity prices risen at merely the national average since 2007, when the state legislature first passed a renewable power mandate, Colorado electricity consumers would have saved $4.2 billion in electricity costs. Averaged out over Colorado’s nearly 2 million households, the average Colorado household has already paid an extra $2,100 in electricity costs (more than $350 per household per year) beyond what each household would have paid if the state’s electricity prices rose merely at the same pace as the national average since 2007.

While North Carolina’s mandate is much less demanding, the direction, if not the intensity, of its effects on electricity costs will be the same. Furthermore the reality of these mandates is that they have no quantifiable benefits for those who are paying the added costs. They are having no effect on climate change, and there are no studies that even suggest that they will. What they are doing is diverting the resources of utility customers to higher electric bills and away from expanding purchases on other goods and services that make their lives better. In this sense, these higher costs are equivalent to a tax that simply transfers wealth from the average electricity customer to big businesses that control the renewable energy market. In Colorado this tax is much greater than it is in North Carolina. But the tax does exist in North Carolina, and it results in nothing more than a wealth transfer from consumers to certain privileged electricity producers.

Click here for the Environment Update archive.

You can unsubscribe to this and all future e-mails from the John Locke Foundation by clicking the "Manage Subscriptions" button at the top of this newsletter.