Monday, April 06, 2009

Three Ways to Hold Down Electricity Prices

The state’s electricity reregulation bill shows little potential for cutting electricity rates and may even backfire. But state legislators can do three things that will hold down electric bills over time.

1. Encourage upstart power suppliers.

One of the worst provisions of the reregulation bill provides for a “schedule of transition” away from the little customer choice that currently exists for residential and small commercial customers. That is a mistake. A nascent industry of renewable energy suppliers is finally starting in Maryland, spearheaded by wind energy broker Clean Currents of Rockville. Clean Currents allows small customers to enter into contracts to receive wind power from suppliers across the U.S. Local First Wheaton recently helped three local small businesses band together to buy this power at a discount. Just this month, 1.73 million BG&E customers gained access to Clean Currents for the first time. And Montgomery County has relied on wind energy from wholesalers for 10% of its power consumption since 2004. The state should be encouraging alternative renewable suppliers so that one day they can challenge Pepco and Constellation instead of crushing them through legislation.

2. Consider state land for renewable energy.

A year ago, Governor O’Malley issued a blanket ban against windmills on state land. It is galling for state politicians to criticize the private sector for not building new capacity when renewable energy has been outlawed on state property. The General Assembly should repeal O’Malley’s ban and allow the Public Service Commission (PSC) to consider renewable power applications on state land on a case-by-case basis.

3. Adopt legislation modeled on the Berliner bill statewide.

Montgomery County Council Member Roger Berliner has proposed a Home Energy Loan program to promote energy conservation. His bill would set up a fund to provide low-interest or even zero-interest loans to home owners for the purpose of financing home energy audits; caulking and weatherstripping; insulation; purchases of energy-efficient boilers, furnaces and AC units; programmable thermostats; whole-house air sealing; and other improvements.

Conservation is a no-lose option because it saves money for consumers, reduces demand for energy and cuts greenhouse gas emissions. And the genius of the Berliner bill is that it promotes conservation while enhancing property values and encouraging the creation of green jobs all at the same time.

While the Berliner bill relies on loans, the state does not have to choose that particular enabling mechanism. The General Assembly could instead rely on subsidies, tax deductions, tax credits or some combination thereof. But however it is accomplished, this approach could reduce aggregate demand for electric power (and home heating fuel) and lead to smaller energy bills for participating homeowners.

So if state politicians really want to hold down electric rates, they should drop command-and-control economics and pass a bill with each of the above three components. That would provide a path to real relief for Marylanders.