Friday, November 21, 2014

Electricity Rates and "Green" Power

In New Hampshire, we are looking at some hefty increases in our electricity prices -- see here for a typical story.  My electricity rates will go up by about 50%.  (Be aware though that this is only the energy part of the bill -- many other charges are on the typical electric bill including distribution and a flat customer charge.  The energy part of my bill is only about 40% of the total bill.)

Before we start blaming the utility, let's be clear that the increase is because of increases in wholesale electricity prices, and those are set about as purely on the basis of supply and demand as one could hope.  Demand is up, and supply is down...because NE has been shutting coal fired plants.  And supply of wholesale power from cheaper, cleaner natural gas-fired electric plants is not filling the void because of a shortage of pipeline capacity coming into New England.

Meanwhile my neighbors have been heating up our neighborhood discussion board with questions on switching electricity suppliers.  One competitor is offering "renewable" source power, at higher prices than normal power.  One person is choosing a particular plan because it is sourced from hydro plants -- "the most green option."

Really?  Dams don't cause any environmental problems?  So is there another reason why we don't have any more salmon runs up the CT river?  Ever think about what slowing down water does to its temperature and clarity and how it affects silt buildup?  And is any of that 100% green power coming from new dams up in Quebec -- do we know what the impact those dams will have on wildlife and even native populations?

This is why incentivizing consumers to weigh environmental costs is so inefficient and, to be honest, economically dangerous.  My neighbors are wonderful folks and very smart, but to think that each one of them should be weighing all the environmental pluses and minuses of their electricity supply...when the average bill is probably only $75 per month!

There is a much better way to incorporate environmental costs into decision-making -- build them into the price we face.  Then we just have to compare prices, like in any other marketplace transaction.

Here is a picture of 100% green hydro.  Bet the fishing is good right there.