Just another special-interest lobby seeking plunder

There is a very active special-interest lobby in North Carolina. Dozens upon dozens of its lobbyists are a constant presence at the North Carolina General Assembly. They desire:

  • Exorbitant, ongoing investment tax credits for their industry
  • Generous accelerated depreciation schedules
  • Consumers forced by law to purchase an increasing amount of their product
  • All of the above portrayed as pro-free market

Here are a few questions based on those desires:

Does it matter what the industry is? Should it matter?

What about the principles of free market? Do they change?

What if the industry in question is a regulated monopoly?

The special-interest lobby seeking generous tax credits for its industry and demanding consumers be forced by law to buy an increasing amount of their product represents … renewable energy.

Does that change things? Is night now day? Is down up? Is breathtaking cronyism pro-free market?

The lobby itself must suspect that it doesn’t change things, so it has a novel argument being used in social media, comments, and other under-the-radar venues against North Carolina’s leading light for true freedom. That argument is that the electricity market in North Carolina is not a free market, but the John Locke Foundation isn’t informing people that.

I didn’t say it was a good argument. At worst it would simply mean that JLF isn’t bothering to point out the patently obvious.

I think the argument is a fumbling attempt at technical disqualification, as if all the work JLF has done in bringing facts and data to light about the nature and limitations of renewable energy — and all the corporate cronyism, tax incentives, and purchase mandates used by the lobby’s friends and campaign donation beneficiaries in government to force it on people — doesn’t “count” if the lobby finds some way, any way to argue JLF shouldn’t be involved.

Not that the goal of the argument matters; is it true or not? Let’s look at JLF reports on the renewable energy mandate.

Most Recent JLF Spotlight Report on Renewable Energy

The most recent was mine from June 4, “Renewable Energy: Lobby’s report more fog than light.” It dismantles a recent report by the renewable energy lobby.

The JLF report’s conclusion began:

In North Carolina, electricity consumers have no choice in their electricity provider. This fact should, first of all, never provide an excuse to use this lack of a free market to enrich special interests at the expense of captive ratepayers.

Gracious, there are three mentions of the electricity monopoly in the first two sentences. Furthermore, they are aimed directly at the lobby’s rhetoric.

The phrase “captive ratepayers” is an especially important one because electricity is a vital necessity, not a luxury item. I use that term to underscore the inescapable, obvious fact that North Carolinians are given no choice in who provides them this critical household good.

As long as that is the case, I see it as a moral imperative that state leaders craft energy policy from the perspective that, quoting the report, “the top stakeholders are ratepayers whose chief interest is least-cost, reliable power at the flip of the switch.”

The lobby sees things differently. They see the pre-existing monopoly as an irresistible opportunity to plunder captive ratepayers for their industry’s gain.

The 2013 JLF Carolina Cronyism Report on the REPS Law

I also wrote a Carolina Cronyism report in 2013 entitled “Power to the People: End SB 3 with its expensive, regressive renewable energy portfolio standard.”

The third Key Fact of that report was this:

The RPS mandate does, however, contribute to higher electricity prices for captive ratepayers.

In the report proper, on the first page, in the first section after the introduction, there is this paragraph (first subhead included):

The main issue to captive ratepayers: what electricity costs

Given that ratepayers have no choice in who provides their homes with electricity or from what sources they derive it, the overarching issue for ratepayers, especially poor ratepayers whose household budgets are significantly affected by electricity costs, is what it costs them to turn on the lights. Utilities should be interested in the lowest-cost, most reliable, and most efficient ways of generating electricity. RPS mandates pare away at that process, however, forcing utilities to make state-sanctioned compromises in their electricity bundles and ultimately their rates.

That report also refers throughout to captive ratepayers in a monopoly market. The conclusion reminds everyone that

All of this occurs in a tightly restricted market where consumers are allowed no choice over their electricity providers.

The final two paragraphs are these:

For these reasons, SB 3 should be repealed. At the very least, as is currently under discussion, the renewable energy portfolio standard should be capped and ended. Ideally, the renewable energy and energy efficiency portfolio standard would be eliminated, and CWIP would be struck out. North Carolina policy should support lowest-cost, reliable, and efficient energy sources. One day those could include renewable sources, but it should be left to private entrepreneurs competing and seeking innovation to bring that about.

Meanwhile, rather than dictate energy source bundles to utilities, N.C. lawmakers should consider ways to free up electricity markets to less price-sensitive consumers who would like to be able to receive electricity from select sources, including solar and wind power, if given the opportunity.

A 2014 JLF/NC WARN Joint Forum on “The Competitive Challenges to N.C.’s Monopoly Electricity Model”

JLF’s press release put it this way:

JLF and NC WARN agreed to co-host the forums to publicize two key concerns about North Carolina’s electricity market. First, consumers would benefit if North Carolina state government would open up the electricity market to more competition.

Well.

My introductory remarks to this forum, “The Four P’s of Electricity Competition,” concluded:

Furthermore, as discussed above, other new technologies and “disruptive innovations” that would benefit consumers should not be effectively blocked by a monopoly model of electricity.

Increasing competition must go hand-in-glove with this principle, however: no subsidies and no mandates. Generating sources must be able to stand on their own. … To be viable, then, either generating sources must be price-competitive, or they should fill a particular consumer preference. Broadening consumer choice obviously helps consumers by allowing them to choose lower-cost options and thereby pressuring providers to compete along those lines, but choice also implies letting consumers decide according to their own particular values. A monopoly system, however, prevents choice itself, whether for a least-cost option, boutique provider, or anything in between.

JLF Blog Posts

Could it be that the renewable-energy lobby’s argument is just flat wrong? (In other words, is night still night? Is down down? etc.) Well, let us examine some other JLF writings on the renewable energy mandate before making that conclusion.

Here’s one from July 15. Oh, wait, look away:

… how Big Renewable Energy Industry–friendly policies like huge special tax breaks and portfolio standards forcing monopoly providers into buying the overpriced, unreliable, intermittent and otherwise unmarketable junk can “work.”

What about July 10, discussing how Duke Energy figured out how to make out-of-state renewable energy credits (RECs) count for in-state renewable energy credits? Mm, never mind:

Imagine that kind of creative imagination being put to use in a market-based industry instead of one based on winning legislators instead of customers.

Ah, here’s one from July 7. On second thought, ignore that:

… as is always the unstated assumption in articles on renewable energy policies, the most important thing in the world is keeping the unsustainable industry afloat. Poor captive ratepayers with their need for low-cost, reliable electricity at the flip of the switch are pawns in the big game. Can they give political donations? Can they send in hordes of glad-handing and big-smiling lobbyists? What can they do but just try to make ends meet …

June 30? Yikes! Keep looking!

[T]heir state and federal investment tax credits and accelerated depreciation add up to, well … one hundred percent. Plus they get a captive consumer base who by law have no choice over who sells them electricity from whom and for how much

… the media instead fight to protect the corrupt cronies from the forces of evil, the ones they call “special interests,” who are of course ordinary people; i.e., the captive ratepayers/taxpayers whose “special interest” is in not being taken advantage of as taxpayers and ratepayers to benefit the big business. …

Meanwhile, captive ratepayers/taxpayers can only hope that the legislature will grow tired of this annual spectacle

June 10, then? Well, nope:

The News & Observer published a typical column in favor of keeping and ramping up North Carolina’s tax credits and forced purchase mandates on captive ratepayers/taxpayers. It hit all the lowlights [including] … acting like the forces of greed and cronyism are on the side of ending the tax credits and forced purchase mandates on captive ratepayers/taxpayers

What about May 5? Oh heavens no:

[The Greensboro News & Record writes]:

A survey of electric utilities released Monday ranks North Carolina third in the nation for new solar power operations added in 2014. …Duke Energy’s solar expansion is fueled, in large part, by demanding —

Demanding who? Consumers who have no choice over their electricity provider but who desperately want more solar? Ratepayers whose most important need at the flip of the switch is actually to swell with pride at the state’s suddenly new, higher solar ranking released coincidentally before an important vote in the House? Reading on…

— by demanding North Carolina regulations that require utilities to add an increasing portion of renewable energy to their sources of power.

Those regulations are being challenged in the current General Assembly.

Mandates established by the legislature in 2007 required utilities to buy 3 percent renewable energy by 2012, 6 percent by 2015, 10 percent by 2018 and 12.5 percent by 2021.

Proof once again that the solar industry thinks it cannot survive unless poor people with no say in the matter are forced to buy power from them through the only electricity provider they’re allowed to buy from.

April 28? Avoid that too!

I discussed this imbalance on pages 6-7 of my report on Carolina Cronyism. It takes principled leaders to resist public-choice cronyism.

Shorn of principle, the choice expands in a leader’s mind: People in this state may not have any choice over who sells them electricity, but we’re not charging them much to cover the renewable energy costs. And that mandate isn’t expanding by much, not at first. But it goes to support jobs in the industry. Jobs are good, right? You know that industry is right there in my district. Yes, everyone in my district is an electricity consumer, but that’s not what I’m talking about. These industry reps love me and support me. I can’t turn my back on them now.

A dozen moral compromises later, and the imperative seems to be supporting the industry that — despite years of promises to the contrary — still admittedly cannot stand on its own without loads of forced public support.

April 27 disappoints:

… focus on costs and innovation. That approach puts least-cost energy and North Carolina’s captive electricity consumers at the forefront of the state’s energy policy, as they should be.

But not as profoundly as April 22!

Principled, empirically sound stands for the citizens of North Carolina are no fun and don’t benefit campaign coffers or influential friends. It would just help those piddling poor people who are only useful as props and aren’t Important In Raleigh (other than to confer the title of “Representative” — you know, as being the ones whose interests are supposedly being represented). … I hope the poor, overlooked, captive ratepayers who matter just as little to this clot of politicians in Raleigh as they did to previous clots will remember as well.

April 21? Not even:

My Daily Journal column today explores the importance of reviving this crucial standard [least-cost reliable power] in a state that guarantees its electric utilities a locked-in consumer base.

April 17? Eek; not for the faint of heart:

The main thing the bill would do is refocus North Carolina on a policy of ensuring least-cost, reliable electricity to its citizens, who remember are given no choice in electric utilities.

Why would solar be afraid of that, if it’s so strong? Aren’t we told it’s becoming more competitive? That it’ll soon be cheaper than traditional energy sources?

What, then, could be the problem with asking solar to compete in the near future? Unless solar lobbyists know it can’t compete and can’t survive without purchase mandates on utilities, state and federal tax incentives, government grants, etc.

Although I haven’t even made it back to winter of this year, I think it’s best at this point to stop quoting. The lobby’s latest campaign has died under a flurry of truth like bullets raining down on Bonnie and Clyde. At some point decency cries relent.

If you’re inclined to keep looking, of course, you will find an ongoing consistency. Application of empirical data, facts, and principles to an issue of public policy has long been and remains JLF’s hallmark.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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