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The cautionary tales arising from European-style progressivism just got another jolt, if you’ll pardon the expression, of reality last week. On Wednesday, British utility giant Scottish Electric announced that the gas and electricity bills of five million customers would go up by a whopping 19 and 10 percent respectively, beginning August first. Six other major power providers in Britain are expected to follow suit. The move follows a 30 percent increase in the wholesale costs of energy since last November, and will push average annual household costs for fuel as high as $2050, the highest level ever recorded. Yet rising wholesale costs are only half the story.
“Wholesale prices for gas and electricity have increased significantly since the end of last year and continuing unrest in global energy markets means future prices are volatile,” said Raymond Jack, Scottish Power’s chief executive. “We understand times are difficult for many people, and we have done what we can to absorb these additional costs for as long as possible to minimize the impact on our customers.”
Mr. Jack then said something that should sound distressingly familiar to Americans. “The rising burden of non-energy costs faced by Britain’s energy suppliers–including the cost of meeting government environmental and social programs and the cost of distributing electricity on the national grid–has also placed further upward pressure on energy bills.”
What Mr. Jack is referring to is government regulations which essentially decide who the “winners” and “losers” are in the energy game. These regulations are designed to intentionally drive up prices, and then give the extra money to the owners of renewable power generators. One of these regulations is called a Feed-in-Tariff (FIT) in which an inflated price is paid to the owners of massive wind farms or those who put rooftop solar panels on their houses. This cost is then added onto everyone’s electric bills. Since those who can afford wind farms or solar panels tend to be people who are better off economically, the net result is that poorer Brits are subsidizing the power consumption of those who are better off.
Another of these regulations is the Renewables Obligation, where “loser” power suppliers are compelled to show the government Renewables Obligation Certificates (ROCs) which represent a percentage of the electricity they produce each year, measured in mega-watt hours. Where do the losers get the ROCs? The government issues them to the “winning” owners of any power plants it defines as producing “renewable” energy. The winners then turn around and sell them to the losers as a means of offsetting “buy out fees,” (read: fines) the losers incur for producing “dirty” power. Since government has escalated the percentage of electricity produced by loser companies that must be covered by the ROCs — currently 11 percent, expected to reach 15 percent in 2015, where it will remain until 2037 — it forces energy prices up, irrespective of free market forces.
Like almost any company faced with a price increase, those increased costs are then passed on to the customer. Even worse, such an arrangement provides no incentive for renewable power entities to cover their costs by actually selling electricity. They are more like government-subsidized banks offering environmental “dispensation” to the less fortunate, non-renewable power providers. In effect, the government is creating a middleman in the power supply chain out of thin air.
If this scheme sounds distressingly familiar, it’s because the Obama administration has made “cap and trade” one of the prime movers in its attempt to “green” America. And in 2008, then-candidate Obama made no pretense of what would occur as a result. “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket…because I’m capping greenhouse gases…[W]hatever the [energy producing] industry was, they would have to retro-fit their operations. That would cost money. They will pass that money on to consumers,” Mr.Obama told the San Francisco Chronicle.
Cap and trade was killed, despite Democrat majorities in both houses of Congress, when the Senate refused in 2010 to take up the bill narrowly passed in the House in June of 2009. Why did the scheme die? “The short answer is that it was done in by the weak economy, the Wall Street meltdown, determined industry opposition and its own complexity,” offered the NY Times in March of 2010.
Nonsense. The bill was done in by a Democratic Party coming to grips with the fact that ObamaCare, which took the exact same command-and-control approach with healthcare that cap and trade does with energy, was an unmitigated disaster. After the 2010 election, which put Republicans in control of the House, cap and trade could no longer be implemented legislatively.
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