July 21, 2012
Minnesota, Opinions

There are 2 big reasons electric rates aren’t falling

Written by Mark Vogt, Wright-Hennepin Cooperative Electric Association | www.sctimes.com 20 July 2012

As a worker in the electric utility industry, I am surprised by the content of the Times’ July 12 front-page report, “Electric rates not falling with fuel costs.”

This Associated Press story reported that retail electric rates were not dropping even though natural gas prices are 43 percent lower than a year ago.

It also reported that the federal Department of Energy seemed unclear about why this was happening, with one department official quoted as saying this pricing puzzle is “(causing) us to scratch our heads.”

Really? If any organization should know the factors influencing electric rates in the United States, it ought to be the Department of Energy.

The story offered a few reasons for the state of the nation’s electric rates, but those explanations missed two critical points.

First, a primary reason retail electric rates are not following the trend in gas prices is because of expensive new environmental regulations from federal and state lawmakers and regulators.

This escalation in government regulation in recent years is causing, among other things, coal-fired power plants to be shut down before their useful life has been reached and is adding tons of extra cost so other coal units might be saved, but converted to natural gas.

In addition, the electric utility industry is being made to meet a long list of other high priced (and some say unrealistic) new standards in very short order.

Second, these government bodies are forcing electric utilities to invest in renewable energy infrastructure that is duplicating costs, not driving them down.

The Wall Street Journal recently quoted the Minnesota Rural Electric Association, which reported that the state’s electric cooperative members “lost more than $70 million in 2011 because of the high cost of wind power.”

The article added that MREA estimates “annual residential utility bills are between $50 and $100 higher per household due to (Minnesota’s) renewable mandate.”

That officials in the Department of Energy are scratching their heads represents a shocking lack of understanding about the impact these abrupt and expensive mandates are having on homeowners, farmers and businesses.

A couple years ago I attended an industry conference where a media analyst made perhaps the most insightful comment I’ve heard regarding the energy path our nation is on. He said that America has spent a century building its present energy infrastructure. It shouldn’t be frightening to think we will power the 21st century differently. But it seems inconceivable that we would enact laws that would tear down all that we’ve built in 10 years.

Our nation should strive for an energy policy that balances needed environmental and renewable energy goals with sound economic objectives for the country and consumers. U.S. energy policy is presently missing this balance and is a prime reason why retail electric rates are not following the trend of natural gas prices.

This is the opinion of Mark Vogt, president and CEO of the Wright-Hennepin Cooperative Electric Association in Rockford.