Subsidized power projects will hurt customers

April 03, 2011|By L. GENE ALESSANDRINI

Competitive electricity markets work. They work best when the market rules and structure are well-defined, transparent and properly regulated, and when the participants work together to find the right solutions.

Maryland’s competitive market is working. Wholesale electricity prices are down by more than 30 percent since 2008. The number of customers buying electricity from competitive suppliers has doubled in the last year. More suppliers are making offers to Maryland customers, increasing their options.

Importantly, Maryland electricity customers are not burdened with paying for new generation or upgrades at existing power plants in their monthly bills. The cost and the risks of these decisions are being borne by the companies making the investments.

With economics driving decisions, more cost-efficient alternatives — existing power plant upgrades, demand response, new power lines and energy conservation — are meeting Maryland’s energy needs. In short, consumers are benefiting from allowing the markets to work.

New power plants are not being built in Maryland because they are neither economical nor necessary. Market participants are responding to the signals they are receiving with alternatives far less expensive than new power plants.

Yet for some reason, the Public Service Commission and the administration have concluded that the market is not sending the right signals, and that state-subsidized generation, paid for by the people and businesses of Maryland, is the answer. They believe that owners of these subsidized power plants should be allowed to undermine the competitive market.

Pursuing these policies would take money from the pockets of every electricity user in Maryland. An example is the state’s press for development of offshore wind energy, which is one of the most-expensive sources of energy.

Legislative analysts estimate that a subsidy for offshore wind energy would add $9 a month to the average residential customer’s electric bill. The PSC has estimated the increase would be between 92 cents and $3 per month. But that estimate is based on spreading the costs over 25 years. All that does is spread recovery of the high costs over a longer period of time, potentially adding to the total price tag for customers.

State-subsidized energy development will cost consumers more in the long run, will hamper future development and will shift the risk from shareowners to consumers.

Maryland should not go down this path. Let the market work, without costly subsidies. In that way, developers will continue to bear the risks of new plants, the most economical solutions will be brought to market and consumers will reap the benefits.

L. Gene Alessandrini is senior vice president of PPL EnergyPlus in Allentown, Pa.

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