The Reason For High Energy Prices
Calwatchdog's Steve Greenhut explains why our energy prices are so high. No mention of renewable fuel mandates as I suggested yesterday. It's because of the regulatory pricing structure that allows utilities a certain percentage of profit no matter whether their spending policies make or lose money:
"In an open marketplace, gluts of products or services lead firms to slash their prices dramatically. If, say, car manufacturers produce too many vehicles, they will provide rebates or be stuck with lots full of unsold inventory. With California’s regulated utility system, by contrast, gluts in electricity actually raise prices for consumers because of the way utilities are paid for their investments. They need only get the approval from the Public Utilities Commission to build new plants and pass on costs to ratepayers."
Despite Californian's using less and less electricity, utilities build new power plants rather than buying cheaper power from existing plants since they're guaranteed a rate of return. This brings to mind progressive's love of regulations with no apparent concerns over who regulates the regulators.
As an aside, I am going to e-mail Greenhut and ask him how much renewable energy mandates might contribute to higher energy prices.
Addendum: Steve Greenhut promptly answered my e-mail: "I do believe that renewable mandates contribute to this. But the utilities get paid the same way whether they build solar or natural gas, so the same dynamic is at work. I need to do more research on the renewable portion of the equation."