Tuesday, March 11, 2014

ALEC Seeks Profit at the Expense of Efficient Energy Delivery

Stating the Obvious.

I am not a fan of the American Legislative Exchange Council (ALEC). Its agenda is not in the best interests of consumers and citizens. It serves Corporate America as a 2012 list of its private sector members reveals. It also serves legislators with tentacles wrapped inside State governments as well as federal-level politicians and elected representatives.

I do not object to the existence of ALEC. It has a right to exist and to pitch its point of view. What I object to is its disdain for the common good by and for the people in favor of a jaundiced and biased self-serving agenda by and for Capitalist America. The full set of model legislation advocated and disseminated by and for ALEC proves how little it cares for citizens and consumers.  I’ve been considering these pieces of legislation one by one. Today’s is a perfect example. But first, a bit of background.

Background Relevant to ALEC’s Net Metering Resolution.

Energy producers, from those who extract raw product from below the surface of the earth to those who capture the power of the wind or sun, must have hardware equal to the task and staff sufficient to meet demand. Energy delivery systems also require extensive technology, networks, and manpower to insure that men and women worldwide have heat to cook disease from foods and to create medicines. But our energy hunger far exceeds these two most basic uses for it. People in more developed regions, even those sparsely populated, enjoy much more through energy: they have light by which to work and learn, the comforts of temperature control, and an array of appliances and communication devices to make their lives less labor intensive. All of these benefits have costs. No one, especially this writer, doubts that production and delivery factors contribute to the cost of energy, but recovery for those costs are built-in to the charges assessed. Just take a close look at your energy bills. Basic charges are routine and are for the costs of purchasing the fuel, delivering it, maintaining the infrastructure that delivers it, and administering the accounts. Few would begrudge the producers and deliverers that charge.

Background: Net Metering.

A late 20th century innovation designed to encourage alternative energy sources and conserve our precious, finite resources includes net metering, a program which rewards those who generate power from the sun. They may earn credits or receive payment for any excess energy made available to other energy users. In other words, if consumers install solar panels and generate more energy than they consume, they may share it with modest returns coming to them. 

ALEC Resolves to Bypass and/or Further Assess Consumers in Favor of Industry and Energy-Producers.

As noted above, few would argue that energy producers and suppliers have a need to recover their costs. After all, someone or some group built the infrastructure, and we all share in its costs. The roads upon which we drive are paid for and maintained with taxes and/or tolls. Sidewalks that surround our homes are paid for by contractors and developers when a neighborhood is first built, the cost often passed on to home buyers and later, to cities that maintain those walkways for the ease and safety of us all with tax revenue. Sewer lines, gas lines, water lines, power grids, cell towers, lights--indeed, all the amenities of living are shared costs either through taxes or fees, most regulated by municipal, state or federal governments.

Al Griffin Photography
Electric companies are not exempt. They pass on the costs of  building, maintaining, and overseeing production and delivery (hereafter referred to as overhead) to us in the form of a basic charge. However, ALEC argues that net metering (see below: Updating Net Metering Policies Resolution) unfairly rewards small solar energy producers with an incentive to produce energy without requiring those small producers to share in the overhead costs.

Tax Breaks and Incentives for Energy Producers and Delivery.

In a nation that embraces hard work and rugged individualism with commensurate reward for the one’s labor, ALEC’s argument might persuade until one remembers that energy producers and deliverers receive subsidies, tax breaks, and/or incentives, but, with the Net Metering resolution, would deny those financial incentives to small producers while retaining financial incentives for Big Business. In fact, the cost to produce a barrel of oil is significantly offset by tax breaks. Hydroelectric power such as that provided by Hoover Dam was made possible with government funds; i.e., tax money. Incentives to build and develop wind energy just expired, in part because they were so successful. Wind energy has grown exponentially due to government incentives. In addition, low-interest, long-term loans brought electricity to rural areas where the cost of establishing an infrastructure proved too high for most electric companies. With government intervention and support, rural areas now enjoy electric service.  In summary, as these statements with links prove, energy producers and deliverers work hand in hand with government through subsidized loans, tax breaks, or direct incentives to bring us energy and to succeed. These producers and deliverers do not bear the full cost alone nor do they refuse financial incentives, yet they would deny that incentive to small solar energy producers because, as they claim (see model resolution below), energy is so vital that its production and delivery must be coordinated. Such a claim cannot stand because producers and deliverers continue to remain separate.

In conclusion.

Our nation indeed needs a coordinated effort to update energy delivery. One proposal is for a smart grid, but the needs to meet future demands safely and economically are extensive and multifaceted. Only one centralized group can and should oversee such work: government. With the use of incentives, tax breaks, and direct payments, private and public contractors can meet our needs, but no one, small or large, should be preferred or excluded. All should share the burden of bringing our nation to increased prosperity and efficiency. That burden will be placed upon the shoulders of tax payers and consumers with each entitled to enjoy the benefits of helping our nation be good stewards for tomorrow whether that benefit is in the form of net metering or clean air or just the satisfaction of having done the right thing for the greatest number of people.


Updating Net Metering Policies Resolution

WHEREAS, the U.S. electric grid delivers a product essential to all Americans; and

WHEREAS, electricity runs our economy—it powers our homes, businesses, industries, and the smart technologies and innovations that enhance our quality of life; and 

WHEREAS, the electric power industry is leading the transformation to make the grid more flexible and more resilient to meet the growing demands of our digital society; and 

WHEREAS, the electric power industry directly employs more than 500,000 American workers and is the nation’s most capital-intensive industry, investing more than $90 billion per year, on average, in capital expenditures, including investments in transmission and distribution infrastructure; and 

WHEREAS, ALEC’s Electricity Transmission Principles assert that the electricity transmission system must be “coordinated in a manner that satisfies current needs and future growth, and that provides energy consumers with the necessary levels of system security, overall reliability, and access to the most economic and diverse sources of electricity”; and 

WHEREAS, there is growing interest among customers to self-serve with on-site rooftop solar panels; and 

WHEREAS, there is growing interest among renewable energy service providers in installing rooftop solar panels and other small-scale, on-site distributed generation (DG) systems; and 

WHEREAS, it is recognized that when these rooftop solar and other DG systems first came to market years ago, many states approved a billing plan called net metering that provided a subsidy to distributed generators to encourage their introduction; and 

WHEREAS, some states now have net metering policies that credit rooftop solar or other DG customers for any excess electricity that they generate and sell using the grid and require utilities to buy this power at the full retail rate; and 

WHEREAS, the full retail rate of electricity often includes the fixed costs of the poles, wires, meters, advanced technologies, and other infrastructure that make the electric grid safe, reliable, and able to accommodate solar panels and other DG systems; and 

WHEREAS, when net-metered customers are credited for the full retail cost of electricity, they effectively avoid paying the grid costs, and these costs for maintaining the grid then are shifted to those customers without rooftop solar or other DG systems through higher utility bills; and  

WHEREAS, the use of rooftop solar and other DG systems now has become more widespread, and many states are reviewing their net metering polices; and 

WHEREAS, there have been several recent public policy developments, such as a National Association of Regulatory Utility Commissioners resolution, a Southern States Energy Board resolution, development of Critical Consumer Issues Forum policy principles, and even state regulatory proceedings, that recognize the need for proper allocation of costs to support customers use of the electric power grid; and 

THEREFORE BE IT RESOLVED that the American Legislative Exchange Council encourages state policymakers to recognize the value the electric grid delivers to all and to: 

1. Update net metering policies to require that everyone who uses the grid helps pay to maintain it and to keep it operating reliably at all times; 

2. Create a fixed grid charge or other rate mechanisms that recover grid costs from DG systems to ensure that costs are transparent to the customer; and 

3. Ensure electric rates are fair and affordable for all customers and that all customers have safe and reliable electricity. 

Adopted by the Energy, Environment & Agriculture Task Force on December 6, 2013.

Approved by the ALEC Board of Directors on January 9, 2014.