Are You Prepared to Pay 8X Your Electric Bill?

I want to start this post by saying that this issue hits very close to home.

In Shelby, OH, our local power plant was closed due to the EPA’s regulations on coal producing power plants. Our local city council voted to “allow the powerplant to convert to natural gas.” The powerplant took this as a directive that they were to comply with the EPA and abruptly announced they are shuttering their doors. And it isn’t just happening here.

As many as 57 Power plants representing 8.5% of coal power production will be shut down in 2012. While the article mentions that these are aging plants, we really face two problems:

1. It isn’t economically feasible for investors to invest in renovations due to regulations.

2. No new plants are going to be scheduled for production due to the same regulations.

Ok, big deal you say. As Americans, we have built this nation into a prosperous powerhouse precisely because of our reliance on cheap energy. Oil and coal built this country into what it is today. Without either, we face a different economic reality.

The PJM Interconnection manages our electric grid. It ensures that we will have the Gigawatts necessary to keep the machine running in the future. Every year, this means they have an auction each year to ensure there is enough “electricity plus a reserve to ensure no blackouts.” The problem, according to that Chicago Tribune article is:

This year, the auction procured 164,561 megawatts of capacity at $136 per megawatt for 2015-2016 in the area that includes Chicago — a megawatt can power 800 to 1,000 homes. That compares to $16 per megawatt consumers will be paying as of June 1 this year and $126 per megawatt in last year’s auction for 2014-2015. Prices were higher in northern Ohio and the Mid-Atlantic region, at $357 per megawatt and $167 per megawatt, respectively.

WHAT?! You read that right. Right now we pay about $16/megawatt for electricity as of June. That price jumps to $126 June of 2014. And jumps to $136/mw for June 2015. For us in northern Ohio…$357/mw!

My word. Now, our energy prices have already increased 5% in Shelby year over year. And if you take out the fees we paid for the powerplant itself, it has increased over 30%.

Admittedly, there is a difference in what we pay here in Northern Ohio. Right now, factoring in everything the consumer prices are at about $95/mw. Let’s assume a little overhead in distribution and put that number at $85 wholesale (I think it is much lower, but I am trying to be conservative) Jumping from $85 to $357 is a 400% increase in a couple of years. I think our consumer jump will be more in line with the 800% seen at the wholesale level. If that is accurate…imagine paying $800 for a typical $100 electricity bill…

But let’s not just look at our households…look a local businesses. You see, the Wal-Marts of the world can afford the jump, they will just pass it off to consumers or they will lay off workers. It is a volume game with them. But what about local businesses who don’t have that volume. Can my local grocery store afford an 800% swing? The answer is no. They will shutter up. This will also affect the wholesale prices of everything as well. Electricity runs factory equipment. It also powers the stuff that people buy. You won’t buy a TV if you can’t afford to turn the thing on.

Here is the biggest issue I have with feel good environmentalists. They want to hurt the big corporations for their neglect of the environment. But, these regulations do nothing but destroy the middle income sector of our economy. Just look at third world countries. Energy issues are at the heart of separation between a 2nd world country and 3rd world country. The wealthy in the country are able to afford the luxuries that come with expensive energy. The poor…can’t.

In America, we have a strong middle income economy BECAUSE of cheap/reliable energy. You destroy that, you destroy us.

Environmentalism is often a false choice between Polar Bears and Humans. Between green spaces and asphalt. But, their energy choices fail because they are expensive and inefficient. The only way to make owning an electric car popular is $6/gallon gas. The only way to prop up solar cells and wind farms is $357/mwh electricity. This is a purposeful move to push their ideology…and until Americans understand that when a Presidential candidate says, “IF someone wants to build a coal power plant they can, its just that it will bankrupt them.” He just might mean what he says.

I understand there are a lot of middle income people who voted for Obama because he gave a good speech. Or, you felt, Clinton didn’t destroy the framework of America (Kids in my youth group were excited what sexual relations DIDN’T include because they were virgins…so there is that) so this guy couldn’t be that bad. I get it. I don’t judge. You made an error in judgement kind of like the time you went base jumping drunk off the frat house without a parachute. Crap happens.

BUT now that the crap is actually happening, we need policies that provide cheap and reliable energy. AND if CLEAN can compete…let it, but clean energy isn’t worth destroying our entire way of life. And if you feel it is…then you should go off the grid…because the only thing worse than a preachy environmentalist…is one that also sucks up my megawatts and shuts down my power plant!