Scrambling for energy plan

[Mutley]

Price caps have kept energy rates relatively reasonable in Maryland for the last 7 years, but those price caps expire on July 1st. What will happen then?

State leaders, utility officials to discuss looming rise in electricity rates

By Kelly Brewington
Sun reporter
Originally published March 20, 2006

Amid mounting scrutiny of the commission that sets utility rates, lawmakers will be meeting this week with the governor and energy executives to try to lessen the blow of an estimated 72 percent electricity rate increase this summer.

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"We agreed to work together on a central premise, which was my premise: 72 percent will not stand. Nowhere near 72 percent will stand," Ehrlich said Saturday during his Stateline radio program on WBAL. "We're going to put together a package. I'm very optimistic it can and will get done in the next three weeks."

<snip>

Baltimore Mayor Martin O'Malley said yesterday the city solicitor will investigate whether BGE has violated the law by already factoring the 72 percent increase into the bills of thousands of Baltimore-area customers in its budget-billing program. "Billing these customers early raises a serious question as to whether the rate freeze law has been violated," O'Malley said in a statement.

<snip>

Democratic leadership pounced on Ehrlich, calling the exchanges between Commission Chairman Kenneth D. Schisler and lobbyist Carville B. Collins inappropriate and an indication of the board's pro-business leanings. On Saturday, Sen. Brian E. Frosh, a Montgomery County Democrat, joined O'Malley in calling for Schisler's ouster.

Continued...

http://www.baltimoresun.com/news/local/politics/bal-md.rates20mar20,0,3254077.story?coll=bal-local-headlines

[dcfirefighter]

1. Fossil energy has always been expensive

We've always been able to avoid paying the external costs, and foisting them on the rest of the world. Now that fossil energy is getting a bit scarcer, we're having to pay more. Learn this: ownership of natural resources is a monopoly privilege. These monopolists get to charge whatever the market will bear. This is the major and salient difference between LAND (oil and natural gas in this case) and CAPITAL (which is the product of, among other things someone's LABOR). CAPITAL must be competitively priced; else someone will create more and make it available cheaper. Not so with LAND. The owners of LAND take whatever price the market will give them, as no one can produce more oil. (They can produce more oil wells, or oil refineries, etc - In this case they are acting as owners of CAPITAL rather than LAND)

One method to alleviate this apparent injustice is with price caps, as maryland has had. However, price caps do two things: 1) they encourage overconsumption, and 2) they eventually must be modified to reflect the going rate for the product - which is happening here. The primary gas producers can sell their gas to anyone - they have the monopoly privilege - and eventually the price caps in MD mean that the utilities cannot afford to buy natural gas on the world market.

Another, IMO preferred method, is to let the prices fluctuate with the market, but to capture the portion attributed to monopoly privilege as public revenue. This revenue should be shared as a fungible energy credit.

IOW, MD (and other states) SHOULD have relatively high energy prices - b/c energy is expensive, both economically to purchase, and ecologically to produce. However, individuals should be share the monopoly privilege, particularly the financial returns to monopoly privilege, which could be used to offset increased energy prices.

So, my recommened 'Energy Package' would be:
1) Require the utilities to phase in their price increases over 5 years, and adjust them not more than 20% a year thereafter.
2) Place a $5 / T Carbon tax on energy and fuel used in MD. (~3% price increase on Electricity, 1 cent price increase on gas)
3) Raise this Carbon tax by 50% each year, for the next
4) Use this Carbon Tax to raise $260M in the first year. Revenue will not raise by 50% each year as busineses and individuals conserve.
5) Split this revenue equally among the 5.3 million residents for a ~$50/ person / year 'Carbon Credit', given at tax return time.
For a family of 4, this would be $200, compared to ~$25 in increased taxes they'd pay. (the remainder would be paid for by industrial, commercial, and a few extraordinary (energy hog) residential users.)

This may seem like a wash: all the money taken in (less a little for administration) goes back out, BUT this counts on the fact that there are few 'Outlier' energy users, people who use (or emit) more than their fair share of Carbon. IOW, and this may be counter intuitive, most people use a less than average amount of energy. Consider a class room test where 9 students scored 80%, and one student scored 100%. The average would be 82%, yet 9 of 10 students scored less than this.