Low Energy Costs = Low Motivation?

Missouri, you've just had it too good for too long. So why not try and stretch it a little bit longer?

Just prior to the New Year, a bipartisan panel of Missouri lawmakers released a report highlighting Missouri's energy future. The mission of the panel was to "Determine the best strategy to ensure a plentiful, affordable and clean supply of electricity that will meet the needs of the people and businesses of Missouri for the next twenty-five years and ensure that Missourians continue to benefit from low rates (emphasis mine)." Considering the Missouri has had it so good for their energy prices, it is only natural that they would want to continue this trend. However, the tension between clean energy and cheap energy is only going to increase.

According to the U.S. Energy Information Administration, Missouri residents have a kilowatt-hour cost for their power almost 25% cheaper than the national average, largely driven by a reliance on coal. Fully 80% of Missouri's power generation is fueled by coal. While this form of power generation is indeed the cheapest, it does have a few other attendant costs that have been so expertly socialized by the power industry, and reliance on this form of power for cheaper rates may prove problematic. If Washington pursues the form of cap-and-trade legislation currently bandied about in Congress, Missouri may face an increase in rates as the cost to pollute goes up.

This startling and unsurprising fact clearly influenced the authors of the report, who proceeded to lambast current federal plans as "devastating to Missouri's economic well-being," and glossed over forms of alternate energy with a circumspection and lack of depth that can only belie disinterest or outright ignorance. As a result, the four Democrats on the panel refused to sign the report. This should not be surprising- the struggle for cleaner energy, particularly at the state level, has proceeded largely along party lines throughout the country. However, this tussle hints at a wider problem that needs discussion as well.

The big question is, why should Missouri continue to enjoy energy rates that are lower than the national average? To me, this seems a prime example of what Tom Friedman refers to as part of the national epidemic of "privatizing the gains and socializing the losses." While Missouri residents get the benefit of cheap electricity, borne by the heavy use of cheap coal, neighbors downwind get the cost of increased emissions. While you can't blame Missouri for trying, in the coming era of climate awareness and pending legislation, it is foolhardy and indeed shortsighted for the state house to seek to maintain these low rates. In the report, the 80% reliance on coal as bandied about as a reason to get used to coal reliance. But lets look at the inverse of that. Is this reliance on coal a reflection of a lack of incentive of Missouri utilities to seek alternative power sources? Is the legislative regime demanding low rates stifling creativity and innovation in the Missouri power industry?

These are questions well worth exploring, but do not expect lawmakers to have any part in acknowledging inevitably higher rates. Consistently, the Missouri Public Service Commission has acted to keep rates low, often below the amounts needed by utilities. As fuel costs keep rising, expect the hard-up utilities to seek increasing to raise the rates in tandem.

The omissions and oversights of the report raise further eyebrows. I was surprised at the lack of attention paid to wind power in Missouri, given that this resource has been extensively studied at the state and federal level. While this form of power generation needs further investment and research, there is potential in this industry, and it curious that lawmakers ignored this potential source of jobs and prestige for the state.

Another factor worth considering, and one largely ignored by the panel, is the potential for alternative fuel sources and increased efficiency. Considering the low costs and high reward for increased efficiency measures, it is laughable that this was not pursued further by lawmakers as a policy goal. Perhaps this is because without the proper price incentives, consumers have no reason to reduce consumption. For a case study, refer to Juneau, Alaska. When faced with avalanches that knocked out transmission lines, threatening a five-fold increase in price, Juneau drastically cut its power consumption. When faced with truly crippling bills, Juneau made the adjustments. In a state such as Missouri, home to several large research universities, it is insulting to insinuate that the state is completely inadaptable.

In all, it seems that Jefferson City has laid out its priorities quite clearly: maintain the status quo, continue to rely on cheap coal, keep rates low, everybody happy. But the time for such policies has come and gone, and change is in the wind. One can only hope that the state house will not maintain such short-sighted policies in the face of change, and seek the opportunity presented by these changes.