renewable electricity standard

Xcel Energy’s Versatile, Profitable Carbon Tax

by William Yeatman on May 5, 2011

in Blog, Features

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To my knowledge, Colorado is the only state in which regulators allow utilities to incorporate a carbon tax into the economic models used to make resource acquisition decisions (see here and here). Ratepayers can’t see it in their monthly bill, but the tax is used in the models, and the models dictate spending. It’s the worst kind of virtual reality: The carbon tax leaps from computers to ratepayer wallets.

The Colorado Public Utilities Commission was authorized to allow for a carbon tax in 2008 with the passage of HB 1164 by the General Assembly. The legislation was advertised as an essential component of former Governor’s Bill Ritter’s environmentalist “New Energy Economy,” but, in practice, the carbon tax has served as an accounting loophole through which Xcel Energy, the largest investor-owned utility in the State, has awarded itself big time profits. In a previous post, I explained in some detail how Xcel uses the carbon tax. Here are a few examples:

  • One of Xcel’s priorities is winning market share from independent power producers on the wholesale electricity market. Older natural gas plants are Xcel’s fiercest competitors, because they have already paid off their capital costs, so they can bid electricity prices relatively low. The $20/ton carbon tax eliminates this advantage, because new plants are more efficient than older plants. It tilts the playing field to Xcel’s favor.

Are State Green Energy Production Quotas Unconstitutional?

by William Yeatman on April 5, 2011

in Blog

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I’m contributing to a lawsuit, filed by the American Tradition Institute, against Colorado, alleging that the State’s green energy production quota, known as a Renewable Electricity Standard, is an unlawful violation of the Congress’s authority to regulate interstate commerce under the Commerce Clause of the U.S. Constitution.

Read all about it here.

Energy Policy: Top 5 Worst Sitting Governors/Governors-elect

by William Yeatman on December 28, 2010

in Blog

In an earlier post, I listed the top five worst governors on energy policy. Alas, four of the five were lame ducks, which means that my original list had a very limited shelf life. With that in mind, I made a new list. This one is limited to sitting governors and governors-elect, so it should remain relevant for the foreseeable future.

And so, without further ado, THE TOP FIVE WORST GOVERNORS ON ENERGY POLICY….[cue drum roll]…

5         Kansas Governor-elect Sam Brownback

Sam Brownback has yet to serve a day as Governor, but he earned a place on this list for a particularly egregious mistake he recently committed while representing Kansas in the U.S. Senate.  It happened late last July. At the time, with an election looming, Senate majority leader Harry Reid decided that to drop debate on a Soviet-style renewable energy production quota, known as a Renewable Electricity Standard. Cap-and-trade had already died in the Senate, and the Congressional calendar was nearing its end, so Reid’s decision to abandon a RES meant that the 111th Congress would avoid the worst ideas in energy policy. Then, Sen. Sam Brownback, in an apparent effort to snatch defeat from the jaws of victory, announced that he would introduce aRES. Thankfully, Brownback’s proposal was ignored.

4.       New Jersey Governor Chris Christie

Christie’s skepticism of global warming alarmism is great. What’s not so great is his continued participation in a regional cap-and-trade energy rationing scheme. For whatever reason, the climate skeptic sounding governor has yet to pull his state out of the Regional Greenhouse Gas Initiative, the aforementioned energy tax.

3.       Massachusetts Governor Deval Patrick

For Massachusetts Governor Deval Patrick, climate policy is all about style over substance. In one sense, that’s a good thing, because Patrick (like me) has no interest in expensive energy policies.  In 2008, for example, Gov. Patrick championed the Global Warming Solutions Act, which, according to the Governor’s press release, requires emissions reductions 25% below 1990 levels by 2020. That sounds like a big commitment, but when you read the fine print, it turns out that the legislation mandates emissions reductions of only 10% below 1990 levels. Moreover, the State’s business-as-usual future is projected to reduce emissions 3% below 1990 levels by 2020. And when you account for federal and state policies already in place, Massachusetts is on track to reduce emissions 18% below 1990 levels by 2020. The upshot is that the Governor’s climate plan is pointless, which is probably the reason why his website’s “key priorities” page makes no mention of global warming. While I appreciate the Massachusetts Governor’s aversion to expensive energy climate policies, by enacting  long term, legally binding emissions reductions targets, he created a powerful tool with which environmentalist lawyers can gum up economic activity.

2.       Maryland Governor Martin O Malley

Governor Martin O Malley wants his constituents to believe that they can have their cake and eat it, too, when it comes to climate change mitigation. In 2009, Governor O Malley sponsored the Greenhouse Gas Reductions Act, which requires emissions reductions 25% below 2006 levels by 2020. Yet the law requires that any emissions reductions strategy also, “produce a net economic benefit to the State’s economy and a net increase in jobs in the state.” Of course, these are mutually exclusive propositions. No matter how much politicians blather on about “green jobs,” the fact remains that the price of “doing something” about climate change is forsaken economic growth. To be sure, O Malley ensured that he wouldn’t be the one to square this circle. The law postpones any meaningful requirement until after the Governor is safely out of office.

1.       California Governor-elect Jerry Brown (the #1 worst by a landslide)

Californians will rue the day they elected Jerry Brown for a second stint in the Governor’s mansion. He is exactly the wrong person at the exact worst time. The start of Brown’s term coincides the implementation phase of the 2006 Global Warming Solutions Act, which grants the state executive virtually unlimited authority to reduce greenhouse gas emissions 20% below 1990 levels by 2020. Governor-elect Brown has given every indication he will use this unprecedented expansion of authority in an imprudent manner. In the 1970s, when he was last governor, Brown refused to allow new generation resources to be built in the State, claiming instead that energy efficiency regulations would so diminish energy demand that no new power plants would be needed. Of course, he was wrong, and the policies he put in place led directly to the California energy crisis in 2000/2001. During the Schwarzenegger Administration, Jerry Brown served as Attorney General, and in that capacity he sued California counties for failing to take climate change mitigation into account in their long term growth strategies. It is difficult to overstate what trouble lies ahead for California.

Lame Duck Session a Big Success So Far

by Myron Ebell on November 22, 2010

in Blog

Lame Duck Session a Big Success So Far

The first week of Congress’s lame duck session has been a big success.  They haven’t done anything.  Senate Majority Leader Harry Reid (D-Nev.) pulled a scheduled vote to invoke cloture and proceed to S. 3815, the “Promoting Natural Gas and Electric Vehicles Act of 2010,” because he did not have the 60 votes required.

S. 3815 is known around town as the Boone Pickens Payoff Bill.  Pickens told Bloomberg News this week that he thought there was a better than 50-50 chance that the bill would be enacted, so we can’t celebrate yet.

The bill would provide $4.5 billion in subsidies for natural gas vehicles and $3.5 billion in subsidies for electric vehicles plus $2 billion in loans to manufacturers of natural gas vehicles.  The subsidies to purchasers would range from $8,000 to $64,000.  The larger payments would be for purchasers of heavy trucks that run on natural gas.

But the Lame Ducks Will Be Back after Thanksgiving

Congress will be in recess next week for Thanksgiving and will return on November 29th.  There are enough big must-do items that it still seems unlikely to me that the Senate will be able to take up Pickens’s bill or the Renewable Electricity Standard (or RES) bill, S. 3813.  The RES bill is sponsored by Senator Jeff Bingaman (D-NM), the Chairman of the Energy and Natural Resources Committee, and retiring Senator Sam Brownback (R-Ks.), who has just been elected Governor of Kansas.  It now has 31 co-sponsors, including three other Republicans.

The RES bill would raise electric rates in those States that haven’t yet followed the failed California model of raising rates to impoverish consumers and drive out energy-intensive industries.  My guess is that it will be blocked in the Senate by Republican and Democratic Senators from those States in the Mideast and Southeast that still depend on low-cost coal and therefore still have manufacturing.  On the other hand, there is an incentive for Senators from States that have already enacted their own renewable requirements to support a national standard in order to lower the competitiveness of the States that have not adopted renewable requirements.

Rep. Max Tyler Is Wrong about Wind Power

by William Yeatman on October 13, 2010

in Blog

[originally published at the Independence Institute’s Energy Center]

When it comes to renewable energy, Colorado politicians are trying to have their cake and eat it, too. In February, the General Assembly passed HB 1001, a law requiring that Xcel use 30% renewable energy by 2020. To be sure, renewable energy is more expensive than conventional energy, but lawmakers promised that the costs would be held in check by a 2 % rate cap codified in the legislation. You see, Colorado politicians believed they could establish a Soviet-style renewable energy production quota AND Soviet-style price controls.

In early September, the Independence Institute‘s Amy Oliver Cooke and I took this silliness to task in a Denver Post oped. Specifically, we explained the regulatory machinations employed by the Ritter Administration to get around the rate cap.

Nearly a month later, Rep. Max Tyler, the lead sponsor of HB 1001, replied to our oped with a letter in the Post. Rep. Tyler’s missive ignored our arguments, and instead boasted of the ancillary benefits of government picking which energy sources Coloradans must use. Along these lines, he noted that wind power in Colorado:

  • Creates more than $2.5 million for farmers and ranchers who lease land for wind generation
  • Supports 1,700 construction jobs and 300 permanent jobs in rural areas;
  • Generates $4.6 million in annual property tax revenue for local schools, roads, etc.

Of course, Rep. Tyler missed the point: These “benefits” aren’t a net positive for the State. Rather, they are paid for by Xcel consumers, in the form of higher energy bills, which means that Xcel ratepayers (primarily in Denver, Grand Junction, and Boulder) are subsidizing the rural development showcased by Rep. Tyler. This is a classic case of robbing Peter to pay Paul.

In his letter, Rep. Max Tyler stated that, “Colorado currently generates 1,244 megawatts of wind power.” That sounds like a lot, but it’s not. Because the wind doesn’t always blow, Xcel can rely on only a fraction of its wind generation’s nameplate capacity. In practice, 1,244 MW of wind is only 124 MW of real power. That’s about half of the coal power capacity that Xcel agreed to shutter in its most recent electric resource plan.

The problem for Colorado is that this small amount of wind power costs a large amount of money. According to the Public Utilities Staff, Xcel “identified wind energy costs for 2009 of $147,431,000 and 2010 of $155,462,000.”[1] That’s about 5% of Xcel’s 2009 and 2010 sales-or more than double the 2 % rate cap that Rep. Tyler trumpets in his letter (he wrote, “Another important fact: When developing new energy resources, utilities have a 2 percent increase rate-cap on retail customer bills”).

By highlighting localized gains, Rep. Max Tyler missed the big picture. Forcing Xcel customers to pay more for less energy hurts the State’s economy. Period.

[1] February 4 2010, “Answer Testimony and Exhibits of William J Dalton, Staff of the Colorado Public Utilities Commission,” p 14-15, Docket No 9A-772E