A recent op-ed about electricity prices from the Taxpayers Protection Alliance uses misleading arguments to justify resurrecting monopoly control of electricity generation as a solution to rising prices. It repeatedly asserts that PJM, the regional grid operator for much of the mid-Atlantic, limits who can generate power. That’s patently false.
Investor-owned utilities can — and already are — building generation through competitive subsidiaries in PJM. PSEG, a New Jersey utility, said in its most recent earnings call that it is exploring opportunities in PJM through its unregulated generation subsidiary, PSEG Power. PPL, a utility in Pennsylvania, recently told investors that PJM has already accepted 5 gigawatts of generation as part of a joint venture with PPL. That project and others should not be possible if utilities were really prevented from building or owning generation.
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Despite this clear evidence from utilities themselves that they’re allowed to build generation, TPA and others retread the same misstatements former Rep. Joe Barton, a Texas Republican, recently made.
Perhaps these folks should say the important part out loud: when utilities build under a competitive arm, they’re not allowed to pass the risks of building that generation onto residential customers through a monopoly system and receive a guaranteed return in exchange. That’s what these utilities are after.
Even more misleading is hiding arguments in support of a monopoly utility system behind language about the “efficiencies of vertical integration.”
When a pizza company vertically integrates by bringing delivery drivers in-house, it bears the risk of paying drivers even if delivery orders plummet. When a utility vertically integrates, it creates a monopoly system where the utility can still collect guaranteed returns on investment, even if electricity demand doesn’t meet expectations. A vertically integrated utility can pass the risk of its investment onto ratepayers through guaranteed returns on investment. Just look at the Alvin W. Vogtle Electric Generating Plant in Georgia, where customers were left to pay billions of dollars after a new power plant doubled its projected cost.
Vertical integration is purportedly meant to provide more affordable electricity, but that approach directly contradicts the ratepayer advocates in the region, who are specifically tasked with ensuring electricity prices are fair. Those consumer advocates agree that monopoly utility systems or “vertically integrated utilities” are bad for ratepayers.
Maryland People’s Counsel David Lapp has explicitly rejected calls for a monopoly utility system, arguing, “For many reasons, it’s a bad idea to have utilities build and operate power plants and have the costs treated like distribution costs.”
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Similarly, Brian Lipman, director of New Jersey’s Division of Rate Counsel, has agreed that “competition is good for ratepayers. Moreover, utility-owned generation will likely shift the risk of producing generation away from generation developers and onto ratepayers.”
States across PJM abandoned monopoly utility generation in favor of competition, in part because it saves customers billions of dollars each year. Utilities can already build and own generation in PJM if they’re willing to compete with other power plants. Returning to an antiquated monopoly system to pass off the risks of those investments onto families already struggling with high electricity bills is not the solution.
Todd Snitchler is president and CEO of the Electric Power Supply Association.
