Two decades ago Vermont policy leaders balked at a regional trend towards competitive retail markets for purchasing electricity. To date, the northeast continues to pay some of the highest prices in the nation and renewable energy could be the culprit.
Bill Short, an energy policy expert based in New York City, tells FYIVT that Vermont ratepayers are stuck in a forced monopoly while neighboring states get to embrace a free market.
“All the New England states except for Vermont have retail choice, and New York has retail choice and so does New Jersey, Pennsylvania, Delaware, the list goes on,” he said.
In retail states, it’s not just the company that ratepayers can choose, they can also choose which forms of power to support. If they want to only buy wind or solar, they can do that. If they want to buy coal, nuclear, or natural gas, they can choose those.
“They can buy the cheapest,” Short said. “It may not be the cleanest, but you can also buy that. Whatever somebody will offer to you.”
He said he’s not sure why Vermont chose a different path.
“They thought what I would call the ‘father knows best’ attitude would work,” he said.
Former Vermont Speaker of the House Mike Obuchowski (D) was one of the staunchest critics of the move towards a retail market back in 2000. In a February 2001 interview with the Executive Intelligence Review, he shared his skepticism that the market leaders would deliver reduced prices.
“And as soon as we started mentioning a guarantee, or as soon as we started mentioning a specific reduction in rates, or a set duration of time, the utilities clammed up,” he said. “They said to us, basically, ‘Well, we really can’t guarantee that this is going to happen,’ and so on.”
At least one company, Choose Energy based in New York, claims that the retail market is currently producing big savings for ratepayers.
“Last year, Choose Energy customers saved up to 34 percent on their energy supply rates by shopping and switching suppliers,” it’s website states. “That’s because when suppliers compete for your business, you can shop smart by comparing rates.”
Overall, a report by UtilityDrive.com of 16 states that have embraced retail markets says the results are mixed.
“Rates for commercial and industrial customers in deregulated states have not risen as sharply as they have for those in regulated states,” it states. “Residential rates have increased by about half a cent more in deregulated states overall than they have in regulated states.”
The real cost driver: renewables
Free market or not, Vermont and its neighbors have some of the most expensive electric bills in the nation. Vermont ranks tenth overall at $150.07 per month average in 2019 according to the US Energy Information Administration.
The real culprit, according to a study by the University of Chicago, is “Renewable Portfolio Standards.” These are renewable energy quotas that states target for the future. According to the study, states with ambitious RPS standards – such as those in the northeast – tend to have higher electric rates.
It says for each new percentage of new renewable energy creation there is about a six-fold increase in electric prices.
“The estimates indicate that seven years after passage of an RPS program, the required renewable share of generation is 1.8 percentage points higher and average retail electricity prices are 1.3 cents per kWh, or 11 percent higher,” it states.
Vermont, for example, is targeting 75 percent renewable energy by 2035. Maine at number 9 most expensive wants 100 percent by 2050. Next is New York at number 8 is looking to hit 100 percent by 2040, New Hampshire at number 6 is targeting 25 percent by 2025, Connecticut at number 5 is going for 48 percent by 2030, and Massachusetts at number 3 is targeting 35 percent by 2030.
The most expensive energy in all of the mainland 48 states is Rhode Island where ratepayers pay an average of $203.62 per electric bill, their renewable energy target is 38.5 percent by 2035.
To put these lofty energy goals into perspective, the whole US only currently uses 11 percent renewable energy as of 2018.
By contrast, in the non-renewable energy sector, energy prices are looking more positive. For example, fracked gas is credited with saving the American economy over a trillion dollars over the past decade according to the Ohio Oil and Gas Energy Education Program. It details that from 2008 to 2018 fracking has saved the average American household $900 per year.
Michael Bielawski is a freelance journalist, he can be reached at firstname.lastname@example.org.