Is Your Electricity Subsidized?

While the term "subsidy" has taken on derogatory implications, the fact is that in spite of our so called free market economy, most of the things we buy, including electricity have some financial help from Uncle Sam. It may be a simple adjustment in federal taxes or tax credits available for certain industries, it may be federal funding of research and development, it maybe discounted loan programs. What ever it is, from automobiles to grapefruit, there is something that someone can call a "Subsidy". Investor owned utilities(IOU’s), municipal owned utilities (MUNI’s), and member owned utilities (COOPS) all get subsidized in some way. So, get over it.

The question you should ask is not who gets a subsidy , but rather who benefits from the subsidy and do those subsidies support industries that are good for the long term health of the nation and the World? In the case of electricity generation, they do, if you believe that price is all that matters. Our electric rates nation wide would be higher, maybe much higher, if it were not for the maze of tax incentives and benefits available to those making electricity.

Our collective sense of things is that the big guys, king coal, nuclear power and natural gas get bigger subsidies then the little guys like wind, solar, energy conservation and bio fuels. And, if you thought that, you, would be right. In a year 2000 Federal Report (Number SR/OIAF/2000-02 http://www.eia.doe.gov/oiaf/servicerpt/subsidy1/index.html ); the numbers show that in 1999 base load generation from fossil fuels was supported 2.2 times more than energy conservation and 15.35 times more than renewable technologies.

According to the executive summary of the 2000 report, "Federal subsidies for transformation and end-use activities are estimated to be $2.2 billion in fiscal year 1999, a decline of about 10 percent in real terms from the total found for similar items in fiscal year 1992 (Table ES1 and Figure ES1).execsummary_fnotes.htmlIt is estimated that direct subsidies--the sum of direct expenditures and tax expenditures--totaled $1.8 billion in fiscal year 1999, of which direct expenditures totaled $1.4 billion. R&D subsidies accounted for the remainder, just over $0.45 billion."

The 2005 Energy Act promises to promote energy conservation and renewables, yet so far the amount of support and subsidy still weighs in heavier for coal(big emphasis on clean coal technologies) and nuclear energy than it does for conservation and renewables.
Meeting the electric energy needs of this nation will require subsidies on a more even playing field that will help fledgling industries compete against the old timers decades of federal support. Clean coal, safe nuclear generation, hydro- electric production, and renewables must all be evaluated for the contribution that they can make to meet the needs without creating long lasting environmental programs. But, this wont be cheap.
Residential electricity rates across the nation have increased faster than the Consumer Price Index for many years.
Consumer Price Index Increase - All Urban Areas
2003 -1.9%
2004 -3.3%
2005 - 3.4%
2006 - 2.5%
Four Year Annual Avg
2.8%
US Department of Labor Statistics ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

Average Retail Price of Electricity to Consumer
Year Cents/kWh Percent increase
2003 8.72 3.32%
2004 8.98 2.98%
2005 9.46 5.35%
2006 10.46 10.57%
Four Year Annual Avg.
5.55%
Source: Energy Information Administration http://www.eia.doe.gov/cneaf/electricity/epa/epat7p4.html#_ftn2

Get used to rising rates. There is no way we can move into an era of less dependence on fossil fuels without paying more at the meter.

Recent claims of victory by environmental groups over the apparent retreat of TXU investors over plans to build 11 new coal generation facilities, could be hollow chest thumping, if other generation sources don’t surface to meet the need. Sure, TXU may have over-estimated load growth, just to look like good guys when they agreed to stop plans for 8 coal plants, but some day load will exceed supply if current trends continue.

Changing the paltry contribution of renewables to the nation’s generation fuel mix will take a lot more than chasing off coal plant investors.