Rates on the Rise
AP File Photo
Over-subsidizing of renewable energy sources — like these solar panels at a Green Mountain Power site in Berlin — among other things, are leading to ever-higher electric rates, according to Campaign For Vermont.
In his op-ed, Doug Smith, the director of power supply at Green Mountain Power disagrees with Campaign for Vermont regarding Vermont’s high electric rates, though he found CFV’s report “thoughtful” and welcomes CFV to the public debate on Vermont’s energy future. CFV appreciates his kind words and similarly believes that respectful disagreement and debate will shed important light on an area vital to the future prosperity of Vermonters.
Mr. Smith notes that “Vermont policy and Vermont utilities have a long history of valuing competitive and stable electric rates.” While true when looking back to the early 1990s, CFV believes, and the data affirms, that things have changed dramatically over the past five years, and not for the better.
According to federal Energy Information Administration data, as of July, Vermont’s average residential retail electric rate of 16.84 cents per kilowatt-hour was third highest in the contiguous United States and our commercial and industrial rates were fourth and seventh highest respectively. Relative to national averages, Vermont’s rates are an eye-popping 40 percent higher. Further, since 2008, Vermont’s residential, commercial and industrial rates have increased by 17.5 percent, 14.9 percent and 10.8 percent respectively, while comparable rates in New England are down by 11.1 percent, 11.9 percent and 8.3 percent.
Mr. Smith notes that the “expansion of U.S. natural gas production … caused wholesale electricity market prices to decline significantly” and “utilities relying on short-term market purchases have benefited from the price decline, allowing them to lower their rates to levels that are more competitive with GMP.” We agree with Mr. Smith’s assessment that utilities more reliant on cheap natural gas are lowering their electric rates. However, CFV, along with most observers, believes that cheap natural gas is not a short-term event, but here for the foreseeable future. With Vermont’s electric rates at 40 percent above the national average and rising relative to rates in New England, “the competitive and stable electric rates” experienced by GMP in the past are at risk for our future. Given that the USEIA reports that Vermont has the second-lowest per capita consumption of natural gas in the country, the use of natural gas to replace more expensive and dirty fossil-fueled energy should be a priority.
Another upward pressure on Vermont’s electric rates is the aggressive policy of the governor, the Legislature, the Public Service Board and the Public Service Department to acquire expensive “renewable” electricity. Vermont’s current policy is to grow over the next 20 years the share of electricity consumed in Vermont to 75 percent “renewable” from its current level of about 30 percent. While electricity can be purchased on the wholesale market for about 5 cents per kilowatt hour, electricity from solar and wind generators costs 100 percent to 500 percent more. These higher wholesale prices are paid by ratepayers and taxpayers through an arsenal of state-sponsored subsidies including feed-in-tariffs, net metering credits, meter charges, rate surcharges, depreciation credits on leased solar equipment, 20-year guaranteed rates of return for renewable developers, corporate and individual income tax credits, exemptions from the sales tax, the sale of renewable energy credits (RECs), a special education property tax rate for wind generators, along with federal tax credits. All in all, it’s clear that a kilowatt of natural-gas-generated electricity is far less expensive than a “renewable” kilowatt absent ratepayer and taxpayer-funded subsidies. CFV questions whether these state-crafted renewable subsidies are prudent investments of public funds. We also question whether low- and middle-income ratepayers and taxpayers carry an unfair burden in financing and accessing these subsidies — that they are not in fact an institutionalized reverse Robin Hood.
CFV is concerned that Vermont’s environment and economy are being harmed by the rising electric rates and tax burdens outlined above. Vermont’s major contributors to our carbon footprint are the use of fossil fuels for transportation and home heating. Being a rural state, driving is a necessity such that gasoline use constitutes 27 percent of Vermont’s total energy consumption. And, while only 9 percent of U.S. households heat with fuel oil, in Vermont it’s 59 percent. Vermont’s high electric rates are a real and significant barrier to the future use by most Vermonters of less polluting electric-powered vehicles and non-fuel-oil home heating systems.
Further, Vermont’s economy is at a near standstill, offering too few opportunities for our young adults starting a career. Our population is essentially stagnant, growing at less than 0.5 percent per year and our employment level, at 337,900 today, is at the same level as in 2005. In the best of Vermont’s traditions, we need to emphasize common sense, frugality and smart energy investments to secure prosperity. The utilization of more natural gas to generate lower cost electricity, heat our homes and power our vehicles seems a prudent path; emphasizing energy conservation, especially for low- and moderate-income households “where a dollar saved is a dollar earned” is most meaningful; and pursuing a more responsible and fair approach toward subsidizing expensive “renewables” would better serve Vermont’s environment and economy.
To read Campaign for Vermont’s report “Energizing Prosperity”, go to www.campaignforvermont.org or visit us on Facebook.
Tom Pelham was commissioner of finance in the Dean administration, tax commissioner in the Douglas administration and a founding partner of Campaign for Vermont.