I have a friend who is always very forthcoming with opinions on almost any subject, although when talking politics he often ends with, “It doesn’t really affect me one way or the other.” We all feel that way sometimes, because our political system can be completely paralyzed by excruciating details of the most inconsequential issues.
Sometimes, though, national issues affect all of us in ways we may not yet recognize. Consider the endless conflict about energy policy. For some, the debate is about climate change, fossil fuels, and renewables. For others, it is about jobs, businesses, and dependent communities. But for nearly everybody, whether we realize it or not, it actually hits much closer to home. It affects our monthly bills.
In 2008, presidential candidate Barack Obama made no secret of wanting to kill the coal industry, with an elaborate scheme for reducing emissions. He freely admitted that, “Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.”
To his credit, Obama plainly acknowledged that his agenda would directly impact the average American’s utility bills. “Even regardless of what I say about whether coal is good or bad, because I’m capping greenhouse gases, coal power plants, natural gas, you name it, whatever the plants were, whatever the industry was, they would have to retrofit their operations,” he said. “That will cost money; they will pass that money on to consumers.” He challenged Americans to accept that reality as part of their duty to end global warming.
Even when Obama’s party controlled both Houses, Congress would not pass his cap-and-trade scheme, so he instead used EPA to impose carbon regulations. The resulting “Clean Power Plan” and other major regulations immediately began to drive up utility bills.
Actually, electric costs had been steadily rising for a decade because of renewable mandates and federal regulations, but they suddenly “skyrocketed.” During Obama’s tenure, the average American’s electric bill went up 11 percent, according to Energy Information Administration data (analyzed by energy/science writer Andrew Follet). It was much worse in states with a strong coal industry and relatively low energy costs.
Colorado residents saw electricity bills increase from 7.47 cents per kilowatt hour in 2001 to 12.18 cents per kilowatt hour by 2014 – a 63 percent increase – while losing many of the 2,000 jobs the coal mining sector had provided a decade ago. Inflation in Colorado during that time was 34 percent, while median income went up just 24 percent. In other words, Coloradans now use more of their incomes to pay for electricity than ever before.
The irony is that while utility prices skyrocketed, wholesale coal rates were relatively flat, and natural gas prices were decreasing. The utility spike was caused by tough regulations and high-cost renewable mandates on utilities, which require expensive plant and equipment upgrades.
Regulatory costs are one of several factors determining utility companies’ costs. Taxes are another. The latter is now the source of some relief – finally – coming to average homes.
Besides repealing the “Clean Power Plan” and other regulations, the primary change under the new Administration is the tax cut. And with lower utility bills, that truly hits home.
For the first time in years, utility customers in all 50 states are beginning to spend less on their monthly bills, mainly because of the 2017 tax cuts. Americans for Tax Reform now reports that at least 134 utilities across the country have lowered rates for customers as a direct result of the Tax Cuts and Jobs Act. That translates directly into lower electric bills, lower gas bills, and lower water bills. The corporate income tax rate went from 35 to 21 percent, and utilities are passing those tax savings along to customers in the form of lower rates.
In Colorado, as the Denver Post reported, “Xcel Energy will pass on $20 million in federal tax savings to its natural gas customers in Colorado, with more savings on the way for electric customers.”
High utility bills disproportionately hurt lower-income families and the elderly, because they spend a higher proportion of their incomes on “basic needs” like electricity. Further, higher electricity rates also increase the cost of producing goods and services, effectively raising the price of almost everything. Those higher prices are ultimately paid by consumers, of course.
This turn-around in monthly expenses for ordinary Americans may be more helpful than anything Congress has done in years. Electric bills may not have been the main focus of that debate, but that’s what hits home – where we live.
This column originally appeared in the Grand Junction Daily Sentinel November 2, 2018.
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