July 8, 2007
RALEIGH – New energy mandates could drive up North Carolina’s regionally high electricity rates, even though consumers have shown little interest in paying more for renewable energy sources. That’s the conclusion of a new John Locke Foundation Spotlight report.
The N.C. Senate already has endorsed the proposed mandates within Senate Bill 3. The House is now considering the same ideas.
“This proposed mandate ignores the most important people affected by higher energy prices: electricity customers,” said report co-author Daren Bakst, JLF Legal and Regulatory Policy Analyst. “The legislation not only fails to reduce electricity prices for customers, it increases electricity prices instead.”
S.B. 3 would create a 12.5 percent Renewable Energy and Energy Efficiency Portfolio Standard, or REPS, Bakst said. That standard has two parts. First, a renewable portfolio standard requires utilities to provide 7.5 percent of their energy from renewable sources, such as wind or solar power. Second, the REPS requires a 5 percent reduction in energy use through efficiency measures.
The public might support renewable energy, but it does not support paying higher electric bills just to subsidize renewable energy, Bakst said. “In fact, the whole purpose of a renewable portfolio standard is to force the public to buy renewable energy because the public will not buy it voluntarily.”
North Carolina has had a “dismal participation rate” in NC GreenPower, the voluntary program that gives electricity customers the option to pay more for renewable energy, Bakst said. “Currently, North Carolinians only choose to receive 0.011 percent of their energy needs from renewable sources through this program.”
Bakst and co-author Geoff Lawrence, a JLF research intern, found that residential electricity prices in North Carolina are, on average, 8 percent higher than those of Georgia, Virginia, South Carolina, and Tennessee.
The N.C. Utilities Commission’s own consultant suggests the renewable energy mandate would add $310 million a year to N.C. electricity bills, Bakst said. There’s even less certainty about the costs of mandated energy efficiency. The REPS would require utility companies to charge customers extra money so the companies could provide financial incentives to these same customers if they reduced their energy usage.
“There is nothing wrong with energy efficiency, but there is something wrong with a ‘nanny state,’” Bakst said. “Businesses have to earn a profit and are capable of determining if they should make investments in energy efficiency. Individuals will, and do, buy energy efficient products already, without needing to be taxed into making the ‘right’ decision.”
Electricity customers are not the only potential losers as a result of this bill, Bakst said. Mountain and coastal communities could wind up with wind farms in their back yards. “These farms consist of numerous industrial wind turbines that can be as tall as 400 feet, or the height of a 40-story building.”
North Carolinians would bear a substantial cost for the questionable benefits of new energy mandates, Bakst said. “Senate Bill 3 amounts to the government forcing its values and choices on the public,” he said. “The costs could total hundreds of millions of dollars or more. Plus the bill would benefit only a few select groups, while sticking the average consumer with the bill.”
Daren Bakst and Geoff Lawrence’s Spotlight report, “Renewable Energy At All Costs: Legislation ignores the will of the public and would have unintended consequences,” is available at the JLF web site. For more information, please contact Bakst at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].