A centrally-planned economy is one in which the government controls industry, making decisions regarding the production and distribution of goods and services.
The O’Malley administration’s wind generation legislation, the Maryland Offshore Wind Energy Act, is a case in this economic doctrine.
The measure was crafted with no regard to the traditional American economic system of free markets.
It is not only the philosophical argument that concerns Maryland Business for Responsive Government.
It does not address key business details and raises consumers’ utility rates to finance a political objective.
There is no timetable to build the Mid-Atlantic Power Pathway – a high-voltage transmission line, connecting central Maryland to the proposed offshore wind generation system and other energy sources and destinations.
As it stands, wind power could benefit only residents of other mid-Atlantic states and the Eastern Shore, yet all Maryland utility consumers will pay for it.
The administration appears to doubt the market potential for wind power. In 2007, the Maryland Public Service Commission paid a consultant more than $2 million to report on future energy options.
It concluded that off shore wind was the most expensive form of energy among commercially viable choices.
The legislation avoids economic reality by forcing utilities to sign long-term purchasing contracts. Forcing one party to sign a contract means it’s not a good deal for someone.
The law forces the state’s investor owned utilities to purchase wind power for 25 years from select firms.
This would lead to construction of wind turbines off the Eastern Shore. Government agencies select which firms are awarded offshore leases, set profit margins and spell out contracts.
Electric power consumers fund this by paying higher bills, to be determined by the Public Service Commission.
There is less incentive for precise cost estimates. The priority is to pass the legislation and figure out details later.
The Department of Legislative Services estimates building the turbines would cost $4.6 billion.
The administration disputes that, but has not offered its own projected construction costs.
A private company could not expect to sell shareholders or its board on a new venture without knowing the costs.
The cost of the subsidy would be spread among all Maryland electric customers through monthly surcharges, estimates of which vary by the week and so widely as to be useless for anything but political purposes.
The Public Service Commission estimates $1.44 a month for residential customers, but an analysis released by Department of Legislative Services is $3.61 a month. Utility analysts project it can be as high as $7.
For the state’s largest industrial power users, the surcharges would be tens of thousands of dollars a month. Consumers who bear these costs are unlikely to discern that higher electric bills are driven by government policy.
Another consideration is the efficacy of wind generation compared to solar, bio-fuels or technologies still being developed.
All of these will be virtually shut out of the market when Allegheny Power, Baltimore Gas and Electric Co., Delmarva Power, and Pepco are forced into long-term contracts.
Utilities say this increases borrowing costs and would reduce further private investment in wind, solar and energy technologies.
There doesn’t appear to be a firewall between firms with political connections and government agencies that decide who gets the contracts, leaving the legislation open to charges of crony capitalism.
Press reports have documented the political influence of some firms with the administration, which raises questions about what is driving the agenda and the urgency to erect a giant wind farm.
There is a way to develop alternative energy without picking winners and losers and financing it on the backs of residential and commercial utility customers.
Dismissing the role of free markets in alternative energy stifles further innovation and is a multi-billion dollar gamble that government knows best how to plan and implement energy production.
There is too much promising technology that can be harnessed and better ways to incentivize its development.
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