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U.S. News and Commentary



Thursday
Apr262012

Chu memo expanding federal energy role could chew up your electricity budget

Western Area Power Administration line crews continued work on one of the Sacramento Voltage Support towers near Elverta, Calif. (Photo: WAPA Annual Report, 2011)The House of Representatives Committee on Natural Resources held a hearing on Thursday in response to a memorandum issued by Energy secretary Steven Chu. The memorandum related to the role of the Power Marketing Administrators who deliver power to more than 30 U.S. states from federal hydroelectric resources. Sound boring?

Listen up. Chu’s memorandum, if fully implemented, could chew up your household electricity budget. That's just for starters.

The memorandum is very complicated, in keeping with bureaucratic tendencies to micromanage and radically change U.S. energy practices in keeping with President Barack Obama’s rigid energy policy.

Committee chairman Doc Hastings (R-Wash.) called for the meeting in an attempt to determine the impact on American consumers. The memorandum basically expands the federal government’s role in what is at present a regional system.

One industry expert said Chu’s memorandum is a “solution in search of a problem.”

Hastings sent a letter to Chu in hopes of getting answers about the impact, making several points about the validity of the plan Chu proposes. Hastings said:

  • The Department of Energy has failed to assess the potentially significant impacts of these directives on electricity consumers.
  • Do the PMAs have the legal authority to implement major parts of the Memorandum, dramatically change the PMAs and bluntly implement what seems to be a "Washington, DC knows best" philosophy on ratepayer-financed regional entities that usually work well with their customers?
  • The effect of the memorandum is an imposition of expansive Federal Energy Regulatory Commission jurisdiction, and the significant consumer costs experienced in regions with RTOs [regional transmission organizations] have led to the rejection of these proposals by those in the Pacific Northwest.

Hastings also pointed out the absurdity of including electric cars in a memorandum related to home energy:

“This command-and-control philosophy is also embodied in the Memorandum's absurd notion that PMA rates should be changed to incentivize electric vehicle deployment, a matter usually handled at the state and retail levels. Why would a family farmer in Prosser, Washington or Troy, Montana be forced to pay higher power rates for a millionaire to plug in his or her electric vehicle in downtown Seattle? It appears that the answer is: because the Secretary of Energy says so. Many PMA customers are wondering whether their rates will be increased to set up uneconomical electric refilling stations in rural areas.”

Taxpayers across the nation will bear the costs for Chu’s changes even if they do not reside in a state where such power is delivered. Hastings said, “Implementing the Memorandum’s directives would be borne by taxpayers.”

Chu wrote—note the use of the word should rather than will:

“While WAPA [Western Area Power Administration] may incur costs during the initial transition to an EIM [Energy Imbalance Market], ultimately the move should reduce the overall costs for WAPA’s customers.”

What’s an EIM? Here’s how the government defines it—you can read the entire 47-page explanation online if you don't have anything else to do:

“Imbalance energy (or Energy Imbalance) is the difference between what actually happens for each generator and load location, and what they prearranged through schedules.”

The amount of increase or decrease is paid for by the “asset owner.”

Ultimately, that “asset owner” will pass the cost on to you.

At present no one knows what this expansion of federal powers will cost us, not just for our electricity but also for commercial costs for products and transportation that will also be passed on to consumers. Chu didn’t check on any of that.

During the hearing, one expert said consumer costs were "likely to go up a lot."

(Analysis by Kay B. Day/April 26, 2012)

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