Energy cost review: a bright idea 

A political consensus is developing on Beacon Hill around the need to address the staggering cost of electricity that has long suppressed economic growth in Massachusetts.

Attorney General Martha Coakley, Senate President Therese Murray, House Speaker Robert DeLeo, AIM and scores of Massachusetts employers have expressed remarkably similar messages about the need to create much-needed relief for consumers’ and employers’ electric bills.

The formula for relief on energy prices in Massachusetts is a state energy policy that’s technology-neutral, transparent, and based on a competitive bidding process that ensures the best possible prices for end users.

The stakes could not be higher for employers. The 2008 Green Communities Act – the commonwealth’s primary renewable energy policy – which was supposed to help control electricity costs, has produced price increases that are discouraging job creation, driving companies to other states and inhibiting economic recovery here.

According to the federal Department of Energy Information Administration, the average electricity price in the U.S. for industrial customers in July 2011 was 7.39 cents per kilowatt hour. But the Massachusetts average was 13.87 cents, the highest rate in the continental U.S. For commercial customers, the difference from the average is about 35 percent, with Massachusetts the third-highest state.

Coakley told a gathering of business leaders recently that the Green Communities Act will add $4 billion to the electric bills of Massachusetts employers and residents over four years. She said electricity costs in the state will continue to rise over the next decade, warranting a review of some of the act’s provisions that encourage investment in expensive technologies and give utility companies “overly generous” incentives to hit efficiency targets the law established.

Coakley also recommended that long-term, renewable energy contracts be competitively bid, a position long taken by AIM in its objection to the power sales agreement between National Grid and Cape Wind. The position is at odds with that taken by the administration’s top utility regulator, who said competitive bidding could discourage offshore wind and solar power development.

AIM applauds this review of energy costs and offers these three basic principles to guide it:

• Put the consumer first. Consumers should be the primary beneficiaries of energy policy, not developers, marketers, brokers, or other stakeholders seeking to benefit.

• Ensure programs are subject to rigorous, cost-effective standards and implemented at the least cost to consumers. Massachusetts is making a huge investment in renewables and energy efficiency under Green Communities; we should evaluate whether programs are cost effective.

• Ensure that legislative or regulatory goals are economically sustainable and open to review. Targets for the development of certain technologies and environmental goals should be dynamic and subject to periodic evaluation and adjustment, depending on economic conditions.

John R. Regan is executive vice president for government affairs at Associated Industries of Massachusetts (AIM).