Not content with fouling up its own energy policy, New York – with some of the country’s highest electricity rates – wants to foul up Arkansas’s, Louisiana’s, and Oklahoma’s, too.
New York state’s government-employee pension fund, run by Comptroller Thomas DiNapoli, owns a $100 million stake in American Electric Power (AEP), which provides electricity in the three other states mentioned above, our states. What the federal government wisely chooses not to do, activist shareholders like DiNapoli are trying to do instead.
DiNapoli drafted a shareholder resolution that would have compelled AEP to cut greenhouse-gas emissions in line with “reduction needs defined by the Paris Climate Agreement,” which President Trump has vowed to leave. But before this resolution was even brought to a vote, AEP caved to DiNapoli’s threat. So our electricity policy is now being set in deep-blue Albany.
Meeting DiNapoli’s demands won’t be easy. AEP has pledged to slash its greenhouse-gas emissions to 60 percent below 2000 levels by 2030 and 80 percent below the same levels by 2050. Emissions cuts of this magnitude are so steep that the parties to the Paris Agreement wouldn’t even agree to anything like them.
Part of AEP’s effort is the $4.5 billion Wind Catcher – 800 windmills on 300,000 acres in the Oklahoma panhandle. AEP subsidiaries in Arkansas, Louisiana, and Oklahoma have asked their ratepayers to finance the project to the tune of $607 million, $1.14 billion, and $1.36 billion, respectively. Not to worry, though. AEP promises that the plan will actually save customers $7 billion over the next 25 years, a claim resting on a handful of assumptions so fanciful that even some renewable energy supporters don’t buy them.
In announcing the plan, AEP CEO Nicholas K. Akins said Wind Catcher will help AEP “provide reliable, affordable energy” to its customers, when it would actually do the opposite. After all, the wind doesn’t blow all the time, even in the land “where the wind comes sweeping down the plain.” Because wind energy is intermittent, it is not “dispatchable,” i.e., available when needed. Integrating large-scale wind power onto the grid makes balancing supply and demand, which needs to be done constantly, a particular challenge. Just ask Australians: The 2016 statewide blackout in South Australia had many causes, not least of which was a rapid reduction in wind-farm output that caused a surge through a critical interconnector, tripping it. Many customers were without power for days.
Is that our future?
Despite what you may have heard, wind can’t compete without subsidies, which is why AEP is making such an effort to complete the project before the federal production tax credit for wind energy expires in 2020. How important are these subsidies? Very. As Warren Buffett observed: “We get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”
Wind Catcher is more about catching tax dollars than wind.
AEP is just the latest company targeted by DiNapoli, who has filed more than 120 climate change-related shareholder resolutions. In claiming victory over AEP, he issued this warning: “The utilities sector should pay close attention to AEP’s commitment to decarbonize its operations.”
But before other companies cave to DiNapoli’s strong-arm tactics, they should pay attention to what’s been happening at the Securities and Exchange Commission. The SEC is now routinely siding with companies that want to prevent shareholders from trying to force votes on environmental and other policies that are extraneous or detrimental to their bottom lines.
Because it is regulated by state public-utility commissions, AEP is legally obliged to provide low-cost power and ensure its investments are prudent. Instead of paying the $4.5 billion ransom demanded by DiNapoli, AEP should stick to providing safe, reliable, and affordable electricity to its customers. If New York thinks Arkansans, Louisianans, and Oklahomans need wind power so badly, perhaps it should tax its own citizens to pay for it.
There are a lot of great things Arkansans, Louisianans, and Oklahomans get from New York, but energy policy isn’t one of them. Wind Catcher is a raw deal for AEP customers and taxpayers. It’s time for officials in the impacted states to take the wind out of this boondoggle’s sails.
— John Tidwell is the state director of Americans for Prosperity-Oklahoma. John Kay is the state director of AFP-Louisiana. Ryan Norris is the state director of AFP-Arkansas.