Commentary - Directives should be withdrawnOur publicy-owned utility, Alexandria Light and Power, takes pride in providing reliable electric service at the lowest reasonable cost, consistent with good environmental stewardship. But recently, U.S. Energy Secretary Steven Chu has taken actions that threaten to increase the cost of our power and increase electricity rates in our community.
By Alexandria Light and Power board members Kevin Mahoney, Ed Rooney, Steve Senden, John Perino, Rick Paulsen and Al Crowser
Our publicy-owned utility, Alexandria Light and Power, takes pride in providing reliable electric service at the lowest reasonable cost, consistent with good environmental stewardship. But recently, U.S. Energy Secretary Steven Chu has taken actions that threaten to increase the cost of our power and increase electricity rates in our community.
We receive 35 percent of our power supply through long-term contracts with Western Area Power Administration, a “power marketing administration” that is part of the U.S. Department of Energy and sells hydropower generated at federally-owned dams. These power marketing administrations sell federal hydropower to hundreds of not-for-profit, consumer-owned utilities, like Alexandria Light and Power, in several regions of the country.
The power is sold at cost-based rates, the amount necessary to cover the costs of generating and transmitting the power, including the interest on the federal investment in the dams where the power is produced. Customers also pay the entire costs of any necessary upgrades to the generation and transmission facilities that are part of the system. This principle is known as “beneficiary pays” and it has worked well on these projects for decades. It has allowed our community to receive low-cost, reliable and clean hydropower that benefits our local economy.
However, on March 16, 2012, Secretary Chu sent a memorandum to the power marketing administrations directing them to change their fundamental and long-successful purpose to include a wide variety of new programs. The goals of many of these new programs – such as new transmission lines for wind and solar energy, increasing energy efficiency, and deploying electric vehicles – are laudable and we have already taken steps toward these goals on our own.
More importantly, we are very concerned that the current power customers will be required to pay for these new programs, even if they don’t benefit from them. This would raise electricity costs in our region substantially and move away from the “beneficiary pays” principle. Secretary Chu makes clear in his memo that he wants the rate structures modified to provide “incentives” for these new programs. In this case, incentives is the same as subsidies, which means those benefiting from the new programs, such as private developers of wind energy projects, will have part of their costs paid for by the current power customers.
There are other problems in Secretary Chu’s memo. Decisions about the power marketing administrations and the federal hydropower projects from which they sell power will be shifting away from the regions they serve to more decision making by the Department of Energy in Washington, D.C. And Secretary Chu wants to initiate new markets for selling energy that are similar to the energy markets in the eastern U.S. that have resulted in much higher electricity prices – prices that often bear no resemblance to the actual costs of producing the power.
In short, Energy Secretary Chu’s directives are ill-advised, unnecessary, and would increase electric costs for us in our community and to millions of Americans at a time when many families and businesses are still struggling to keep their economic footing. It is the classic solution in search of a problem. Secretary Chu should withdraw his directives and allow the power marketing administrations to continue their successful and low-cost operations.