One of the biggest problems with President Obama’s climate and energy transformation agenda is that it unavoidably increases the cost of energy. Forcing people away from coal and other affordable, reliable sources of energy will increase costs for Americans. President Obama has acknowledged this simple fact saying that under his plan “electricity prices would necessarily skyrocket.”
A bipartisan group of Senators sent President Obama a letter after the President said he would double down on his unilateral climate and energy agenda in his most recent State of the Union. As the Senators explain:
The goal [of the President’s Climate Action Plan] will nevertheless cost consumers in the form of increased prices for energy and anything made, grown, or transported using energy. These new costs will result in less disposable income in families’ pockets. That means less money to spend on groceries, doctor’s visits, and education. In short, low cost energy is critical to human health and welfare.
For some ratepayers, like the millions of rural electric cooperative consumers in the country, coal makes up around 80% of their electricity. According to the 2009 Bureau of Labor Statistics Consumer Expenditure Survey, nearly 40 million American households earning less than $30,000 per year spend almost 20% of their income on energy. The most vulnerable families are those hit the hardest by bad energy policies and high utility bills.
President Obama’s energy plans are already making life more difficult for the people he suggest he cares about and his plan is to do more of the same.
The cold weather gives us a look at a future with less coal-fired generation – the future Obama and Vice President Biden have both said they welcome. Already, electricity prices in natural-gas heavy areas of the country have doubled and even quadruped. Now PJM, the grid operator covering the area from Virginia to New Jersey to Illinois wants a dispensation to allow power plants to be able to collect over $1000 per megawatt hour due to spiking cold-related demand. Utilities who use gas in PJM saw spot prices peak at $140/mmBtu, up from less than $5/mmBtu normally.
Natural gas is a wonderful energy source, but when more and more natural gas is diverted to electricity generation because the use of coal is being discouraged by government, these price spikes will be more common. This is what happens when government destroys diversity in fuel supply. The government that uses tax dollars to educate Americans about the need for diversity in their food choices for good health actually discourages diversity in energy sources.
The Senators’ letter also explains that the U.S. has the opportunity to be a low-cost manufacturer because of low-cost energy. The Senators write:
Recent studies have predicted that the U.S. is steadily becoming one of the lowest-cost countries for manufacturing in the developed world. The study estimates that by 2015, average manufacturing costs in advanced economies such as Germany, Japan, France, Italy, and the U.K. will be up to 18% higher than in the United States.
This development is driven in large measure by low-cost natural gas made possible by modern technologies. But if we fundamentally transform our energy use and ban the use of coal as the President suggests, the burden for energy supplies will fall solely on natural gas, causing demand to skyrocket, greatly increasing prices and putting a manufacturing renaissance in peril. The Europeans are starting to see that their energy policies, many of which the President wants to emulate, are making Europe uncompetitive with the United States.
In the State of the Union, the President said that he has directed “my administration to work with states, utilities, and others to set new standards on the amount of carbon pollution our power plants are allowed to dump into the air.” The President wants to bypass Congress because Congress have refused time and time again to approve the type of energy-price increasing measures the President supports. The simple truth is the President’s climate and energy agenda is designed to drive up the cost of energy, as the president says, to make his favored types of energy “the profitable kind.”
Thankfully, at least 21 Senators are willing to stand up the President Obama’s desire to increase energy prices on middle and low-income families.