By Joe Nichols
October 9, 2015
Last week, a bipartisan committee in Ohio’s General Assembly recommended allowing Ohioans — not the government — to determine the best way to meet their own electricity needs. In 2008, Ohio law ordered utility companies to increase their energy efficiency and renewable energy usage through 2025. The mandates made electricity more expensive and cost Ohio’s recovering economy a competitive edge.
State legislators, concerned with the costs and feasibility of these onerous energy standards, froze the required annual increases last year and formed a committee to study the costs and benefits of the 2008 energy mandates. After careful consideration, the study committee rightly concluded that Ohio’s renewable energy and energy efficiency requirements — the Alternative Energy Portfolio Standard — should remain frozen at current levels indefinitely.
This is good news.
Energy mandates like Ohio’s invariably favor some for-profit businesses over others. They empower the government to pick the winners and losers in Ohio’s energy market. And when governments pick the winners, consumers lose.
Under the mandates, politicians inevitably reward the politically popular companies or the companies with the best lobbyists. This kind of “crony capitalism” and corporate welfare uses the law to reward some and punish others, while costing businesses and residential consumers billions in artificially high electric bills.
The study committee found that the energy mandates cost Ohio’s “mom-and-pop” businesses $7,000 to $18,000 extra last year to help pay for green energy’s current version of crony capitalism. Those are dollars that could have been spent on hiring more part-time help, adding to inventory or paying employee health benefits. Instead, they likely helped finance the next round of corporate lobbying for the green-energy sector.
Many of Ohio’s reviving manufacturers paid $139,000 to $264,000 more for electricity last year, making them less productive and less competitive than their domestic and foreign rivals. Timken Steel, for example, estimates that operating costs for two Canton-area plants increased by up to $2.9 million last year due to these energy mandates. Those steel mills could have used that money to hire workers, raise wages or invest in new safety equipment, rather than pay a needlessly high energy bill.
Indeed, economists at Utah State University and Strata Policy estimate that the energy mandates may already have cost Ohio a staggering 29,000 jobs so far, and “defrosting” the now-frozen regulations would add $1.9 billion to ratepayers’ bills over the next decade. Those are costs that Ohio simply cannot afford.
Adding insult to injury, the Obama administration’s Clean Power Plan stands ready to strangle Ohio power plants with red tape and green mandates, triggering more price increases for power and electricity across the state. Ohio’s attorney general has joined more than a dozen states challenging this federal power grab in court.
This is not the time to unleash the Alternative Energy Portfolio Standard mandates on Ohio’s energy sector. Fortunately, the General Assembly’s study committee reached the right conclusion: not now.
An even better answer would be for Ohio to repeal the requirements and pass reform measures that will spur entrepreneurs to find cost-effective, green-energy solutions that clean up the environment without resorting to the costly coercion of crony capitalism and corporate welfare.
The financial well-being of our most vulnerable can’t be forgotten when we raise utility prices for an ill-conceived government mandate. The Washington Post — not a conservative mouthpiece by any means — documented the effect of higher prices in Colorado from renewable energy mandates.
“Why do you need to turn the lights off?” mother (Sharon Garcia) asked her son, Mariano.
“Because otherwise there’s no money,” he answers, dutifully.
“And when there’s no money?”
“You can’t feed us or take us anywhere.”
The Washington Post reporter made this trenchant observation: “To a wealthy community, skyrocketing electricity rates might not have much of an impact: When you have a decent paying job, what’s a few more dollars on your utility bill?”
But for low-income families, “it happened in a way that has left poor consumers gasping for relief.”
Joe Nichols is the William & Helen Diehl Energy and Transparency Fellow at the Buckeye Institute for Public Policy Solutions.