Energy Markets Should Be Allowed to Work for Consumers

Mark Green
Posted February 10, 2017

A pillar of a sound energy policy, nationally and in the states, is letting markets work. Let the marketplace and consumers determine an energy source’s viability – based on affordability, efficiency, usefulness and other market factors.

Unfortunately, Connecticut is considering legislation that would go the other direction, providing market-distorting government subsidies for nuclear power generation that could negatively impact consumers. Connecticut Petroleum Council Executive Director Steven Guveyan:

“When our region has been paying 50 percent more for electricity as compared to the rest of the nation, energy policies need to focus on bringing consumers the best prices rather than picking winners and losers. Providing government subsidies sets a dangerous precedent, distorts the market and provides no incremental environmental impact. Instead of expanding government carve outs and subsidies that could add costs for consumers, the State of Connecticut should embrace the markets, which, thanks to abundant and affordable natural gas, have been delivering lower electricity prices.”

According to the Hartford Courant, legislation may be offered that would guarantee markets for the state nuclear plant. A plan failed last year that would have allowed nuclear to participate in a competitive purchase of renewable or low-carbon electric power in a state-administered process, the newspaper reported. In testimony this week before the state General Assembly’s Energy and Technology Committee, Guveyan called the proposal a government carve-out that would “interfere with efficient market outcomes.” Guveyan:

“New efficient and flexible resources should be able to compete in the market – this concept is one of the main foundational principles of deregulated electric markets. If Connecticut decides to support uneconomic assets through a government carve-out, then the state is undermining the very intent and progress of its own deregulation law. Abundant natural gas has been driving down natural gas prices, which in turn has driven down electricity prices. … [L]ower electricity prices are exactly what Connecticut consumers want, and it is exactly what market forces have been delivering.”

The Electric Power Supply Association (EPSA), a trade association representing independent power producers and marketers, said the proposal could put the power supply system at risk:

“[P]roposals to selectively grant some resources preferential treatment without regard for the impact of doing so on the rest of the power supply system risk highly adverse and likely irreversible consequences. First and foremost, consumers will pay higher prices for the same electricity under the proposed power purchase agreements (PPAs) than would otherwise be the case, or else for the reasons detailed below those seeking PPAs would not be doing so. More broadly, and at a minimum, investors in resources without PPAs will price more political risk into their decision making. Once investors, developers and plant operators conclude the deck is stacked against them in favor of a few others, even though all compete with each other to be dispatched on a least-cost basis, the damage will have been done.”

Two really important points: The proposal in Connecticut would place government’s thumb on the scales and consumers could bear the costs. Second, once the thumb tips the scales, there’s a market-suppressing signal that could negatively impact investments in the most efficient, energy source – natural gas. Again, residents and businesses could be affected.

Let the marketplace work, in Connecticut and in other states where government interference might be contemplated.