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Energy Policy – Stay in Your Lane, Bro

By June 10, 2019Energy Rant
Energy Policy – Stay in Your Lane, Bro, Michaels Energy

Ohio lawmakers are again at the beck and call of deregulated power producing titans as they pass a nuclear and coal plant bailout at the expense of energy efficiency. They also dumped mandates for renewable resources.

Almost simultaneously, the Institute for Energy Research (IER) published this brand new report, which compares levelized cost of electricity from existing nuclear plants to that of new wind and solar generation, transmission, and required backup resources. It may explain why Ohio lawmakers did what they did. The word “may” is used because I am firmly convinced the political class is mostly clueless regarding regulated and deregulated utility markets.

Using my experience engaging with many lawmakers on the subject, let us consider some ways in which to connect with the rare, open-minded, and benevolent politician by dispelling farcical reasons to gut efficiency policy.

Farce Number 1: Let Free Markets Work

Politician – regulated utilities are monopolies. They surrendered their rights to competing against other resources in exchange for captive customers and a handsome return on equity. If you do not know what a revenue requirement is, you are not qualified to make policy in this industry.

Farce Number 2: Prevention is Waste

As noted, utilities have a revenue requirement based on the cost of service. The cost of acquiring power for sale or delivery is mostly divorced from prices charged to customers. No politician will want to understand this. That, I guarantee. They would not understand day-ahead auctions, selling at one price, no matter what it costs to produce in real time, etc.

Instead, I used preventive medicine as a metaphor for efficiency policy. Why would greedy health insurance companies implore their customers to take advantage of free annual physical inspections, biometric screening, blood testing, prostate checks (my favorite), and colonoscopies? Reasons include lack of time and displeasure of paying for something that sucks. Who likes these things?

Why should I pay for my neighbor’s colonoscopy and prostate exam? He should pay for his stuff.

Really? He eats eight pounds of burgers, ribeyes, various cuts of pork, sausage and delicious bacon every week, and he’s a hundred pounds overweight. I think I want that guy watched like a hawk for a few hundred bucks a year to avoid paying millions in avoidable waste, and frankly, pain on his part. It reminds me of the following ad which a few of you may remember.

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To this plea, I heard from one hack, “Don’t try to use this country’s healthcare system as a model for efficiency! That is ridiculous!.” That was a total waste of my time with a person who has no intention of understanding the issues on which he votes.

Farce Number 3: Let Free Markets Work

Customers are smart enough to make investment decisions on their own. (?) Come to think of it, I used to think that, but at 52 years young, I recently hired a financial advisor for the first time because, a) I don’t have time to deal with it, b) I’m not interested in the work (I have this other thing to do), c) I don’t want to do anything stupid, and d) the work doesn’t interest me, but I want results. In other words, I hire an expert who lives the stuff every day to guide my decisions and make sure I don’t do anything dumb. Customers don’t need the same for saving energy?  This reminds me of another old ad: “B-O-L-O-G-N-A.”

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Furthermore, let’s allow free market work for everything! Have you ever seen the size of mining equipment? Economy of scale – bigger is more cost effective. Engineers love challenges like making humongous equipment. Surely they could design trucks that haul much larger loads of freight at lower cost. They could pull small, or even large trains down the highway. And why stop at 20,000 lbs per axle? It’s the other guy’s (everyone else’s) problem. Why should automobile, bus, motorcycle, RV, and light truck drivers care? It’s none of their business.

The answers are obvious: safety, preservation of assets, and keeping costs low for everyone.

What happened to “your freedom ends where it impinges on mine?” In this case, your freedom to make more money ends where it costs me more to buy infrastructure that 95% of the population doesn’t need.

Farce Number 4: Wind is Free

Utilities and their consultants know wind-generated electricity is not free. It isn’t even free after it’s built. In addition to the turbines and generators themselves, a lot of new transmission, substation, and duplicate generating capacity is required to keep the lights on. Yet some political hacks claim it is free. If you want video evidence, I can find it for you for a small fee. I saw it with my own lyin eyes.

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What does this have to do with efficiency? Remember “too cheap to meter” nuclear power? The insinuation is that we now have a free energy resource, so why save? At the behest of merchant nuclear generators, Ohio lawmakers did not fall for this. The IER report mentioned at the start of this post notes power produced by existing nuclear plants costs 63.33% less than power from new wind generation and its associated transmission and accompanying gas-fired, combined-cycle resource.

Stay in Your Lane, Bro

This post reminds me of a recent memorable ad, “stay in your lane, bro.”  Every state has utility commissions by varying names to handle energy policy for the people. That’s all they do. Let them do their job. I don’t hire attorneys, doctors, or financial advisors so I can tell them what I need. I’m smart enough to know where I need expert guidance. Utility regulation requires expert guidance, not unlearned ideologues calling the shots from on high.

Jeff Ihnen

Author Jeff Ihnen

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