Why Should Utility Companies Profit from Government Incentives and Not Ratepayers?
The current grid is costly, unreliable, and dirty. The utility industry’s 20th century technology is no longer competitive on price, emissions, and reliability.
Image your company’s technology losing its price competitive advantage. Would you expect taxpayers to pay you to buy the technology your business must have to stay price competitive?
That is exactly what the Biden administration is proposing for electric utilities in its $150 billion incentive and penalty plan. This plan pays utilities to replace coal- and gas-fired power plants that are no longer price competitive against wind and solar power.
Even worse, there is no link in this clean energy plan to ensure that your business and home sees lower electric bills as a result of taxpayers paying utilities to install lower cost solar and wind energy.
Monopolies Block Customer Owned Clean Energy That Lowers Electric Bills
The current grid is costly, unreliable, and dirty. The utility industry’s 20th century technology is no longer competitive on price, emissions, and reliability.
Solar is now the least cost source for generating electricity. It can be installed on a roof or over a parking lot delivering voltage literally next to demand. Customer owned solar installations can be networked to increase reliability and potentially lower costs. Combined with onsite batteries, that are rapidly falling in price, consumer-owned solar can deliver electricity into the grid to increase its reliability.
The utility industry has responded to this technology challenge exactly as you would expect a monopoly to respond. They have implemented rates and rules that limit mass adoption of consumer-owned solar systems. They have massively lobbied state and federal governments to ensure that solar and wind electrons are monopoly metered electrons.
Think Georgia. It has no coal or natural gas supplies. Yet, 66% of Georgia Power’s generation mix is fueled with natural gas (methane, a greenhouse gas 25 times more potent than CO2) and coal. Georgia does have sunshine and ranks in the top ten states for solar insolation. But it ranks 41st among all states for customer-owned solar systems. Georgia Power caps how much customer-owned solar it will buy. And it only pays about a sixth of its residential rate for customer-owned solar that it purchases through a complex procurement process. They are implementing this customer-owned solar suppression even while the utility’s holding company is buying solar power plants in other states!
Connecting Electric Bills and Utility Profits
The current proposed legislation for throwing $150 billion of taxpayer money at the electric utility industry looks like a win for reducing emissions, a missed opportunity for reducing electric bills and a win for utility profits.
There is an alternative. It is to use federal excise taxes to align utility profits with consumer electric bills.
Today we have federal excise taxes on alcohol, tobacco, firearms and ammunition, gasoline, the industrial use of ozone-depleting chemicals, and indoor tanning services.
Why not an excise tax on utility profits tied to how much renewable energy and battery capacity is in their grid, including customer owned systems? This would create a strong incentive for utilities to work to implement consumer-owned clean technologies that reduce both emissions and electric bills.
Envision a 33% excise tax on utility profits for utilities meeting less than 33% of their peak grid demand with solar, wind and batteries. Further image this plan where consumer-owned solar, wind, and batteries are included in calculating a utility’s peak grid supplies. Senior utility management would be executing their “fiduciary responsibilities to stockholders” by aggressively enabling all solar, wind, and battery systems including consumer-owned systems.
A tax threat of reducing utility profits by 33% overnight is too much too fast. The excise tax would have a progressive, five-year implementation path where the first year the tax would be 6.6%, 13.2% the next year and so on toward 33% by year five. The excise tax on profits goes away when the utility reaches 33% of its grid coincident demand supplied from solar, wind, and batteries.
The anticipated reaction from the utility industry will be screams of blackouts and financial ruin.
In terms of blackouts, the electrical facts are that solar plus battery systems within the grid are proven to enhance reliability. Batteries are proving to be superior in their response times to grid stress compared to the utility industry’s natural gas fired peaker-plants.
In terms of financial ruin, monopolies are monopolies. Their financial strength will not disappear if they have to pay for their own shift into least cost, zero emission technologies. Furthermore, our country’s transportation shift from molecules to electrons will be a revenue windfall for electric utilities that the utility industry will be better able to harvest through least cost generation.
The bottom line is that it is hard to explain to America’s taxpayers and electricity consumers that paying monopolies with taxpayer monies to invest in least cost technologies in order to remain price competitive is a win/win.
The least cost economics of solar, wind, and batteries can deliver more, namely both zero emissions and reduced electric bills. And it shouldn’t cost taxpayers $150 billion to get there.
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