Renewables and rate hikes

I don’t listen to talk radio, but I have a funny feeling a story from Oregon is going to be making the rounds this afternoon.

Customers of Pacific Power will see their electric rates spike 14.5 percent in January. … Meanwhile, customers of the state’s largest electric utility, Portland General Electric Co., will see a lesser, but still significant, rate increase of about 3.9 percent.

The biggest factor driving the increases: renewable power.

Oregon’s public policy choices during the past few years are coming home to roost in rates, a trend that will continue and likely be exacerbated in coming years by environmental edicts dealing with global warming and haze reduction. (Oregonian, Dec. 17)

Now, before we break out the Al Gore effigy and the lighter fluid, let’s hold on for just a minute.

Renewable energy projects aren’t the only reason utilities seek rate increases. Earlier this year, Black Hills Power sought a rate increase of more than 30 percent to pay for a new coal plant, and Michigan regulators determined that a proposed coal plant in Rogers City would have resulted in rate increases of nearly 60 percent.

Commenters on the Oregonian story say nuclear power is the answer, but customers in North Carolina recently saw their rates increase nearly 5 percent just to pay for the upkeep on an existing nuclear plant.

Meanwhile, across the border, Idaho Power is investing aggressively in renewable energy despite the lack of a state mandate. And in Iowa, wind power is credited for keeping electricity bills among the lowest in the nation.

You have to be careful about drawing universal conclusions based on isolated events.

What’s happening in Oregon is a utility having to finance a large generation project and a large interstate transmission project at the same time. It’s exactly the sort of sticker shock that a recently adopted plan by the Midwest Independent Systems Operators is designed to prevent.

You may have missed it last week, but it’s a pretty important development. In a nutshell, the Federal Energy Regulatory Commission will allow the costs of certain transmission projects to be spread throughout the entire region, instead of being absorbed by a single utility or developer.

That means ratepayers may still see higher bills to help finance grid upgrades and other projects, but hopefully not as drastic as they’re experiencing in Oregon.

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