Legalized Theft In the Beaver State
Only government can make stealing a virtue. Oregon is on a course to do just that. The House and Senate have passed legislation that would eliminate coal as an electric power source within two decades. The bill, now awaiting Governor Kate Brown's signature, would require that renewables provide 50 percent of the state's power by 2040.
This is a scheme that must have the state's two major utilities--Portland General Electric and Pacific Power--salivating, because they will reap higher profits.
Oregon's in-state power generation is primarily hydroelectric, providing at least half of the Beaver State's electric power, according to the Energy Information Administration. Coal and natural gas provide most of the rest of the state's electrical power. Oregon also imports electricity from Idaho Power, which generates electricity from hydropower and natural gas.
Since the legislation forces in-state coal-generated power to be eliminated before the end of its useful life, customers will bear the brunt of shut down and decommissioning costs. This could represent a financial windfall for the two major utilities. The potential for expanding hydropower is limited because the same environmental activists who have led the charge to eliminate coal-fired power also oppose expansion of hydroelectric power. As a result, coal-fired power will be replaced by higher-cost alternatives or greater imports from out of state power generators.
The state's two major utilities complain and wring their hands about the heavy hand of government overriding good business decisions and market forces. In reality, they will smile all the way to the bank. But since utilities operate at a "cost of service" basis, they get reimbursed by customers for the costs they incur and also have a guaranteed rate of return. The higher the costs, the more revenue they receive. In the end, Oregon's utilities will market themselves as leaders in the green energy climate change movement even though nothing they do will affect the climate.
It is unlikely that Oregon's legislation will lead to a single coal plant closing. Pacific Power, one of the utilities subject to the legislation, has equity interests in coal plants that provide electric power to customers in six states. As National Association of Regulatory Utility Commissioners president Travis Kavulla wrote in the Wall Street Journal, Pacific Power "could simply reallocate coal-generated power to customers outside Oregon." Portland General Electric is a co-owner of a coal plant with Montana utilities. It could follow a similar strategy.
How can the Oregon legislature monitor and enforce its anti-coal mandate? Unless coal-fired power from those power generators declines, emissions will not be affected. In the end, Oregon electric utility customers will pay more for power while emissions are not reduced. Furthermore, since emissions are global, state emission reduction schemes only have value if they are part of a global program. EIA projects that coal consumption will increase over the next two decades.
This is a classic example of how different interest groups--in this case, the environmentalists and the utilities--conspire to pick the pockets of consumers while making it appear that the public good is being served. This election year is making it obvious that a large segment of the voting public is tired of being bamboozled. When Oregon citizens find out that they have been fleeced by their legislators and climate activists who wrongly assert that greenhouse gases are declining, they may show the same level of anger.
William O'Keefe is the President of Solutions Consulting. You can follow him on Twitter here.
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