Guest Post by Willis Eschenbach
I got to thinking about the way that California prices its electricity, which is never a good thing for a man’s blood pressure.
When I was a kid, the goal of the Public Utilities Commission and Pacific Gas and Electric was to provide cheap electricity. The Bonneville Dam and the Shasta Dam were lauded for bringing cheap, renewable electric power to the farms, just like the renewable electricity the Tennessee Valley Authority had supplied earlier. This cheap electricity was seen as liberating housewives from domestic slavery, and supporting business and manufacturing. It was hailed as the wave of the future and the path to success, and rightly so—cheap energy is the reason the developed world was able to lift itself out of poverty. And since we generated our own electric power when I was a kid, and had to live with the results when it went out, I know all about the ability of electricity to lessen even a kid’s load around a cattle ranch.
So … when did expensive energy become the new goal? When did raising the price of energy become a good thing? That’s topsy-turvy thinking.
I started this train of thought when I had occasion to revisit Anthony Watts’ outrageous electricity bill, which he discusses here.
Figure 1. Why California is circling the drain …
Ninety-two cents a freakin’ kilowatt-hour? The utility companies have a monopoly, and they are allowed to charge ninety-two cents a kilowatt-hour? How can that be? Isn’t the California Public Utilities Commission supposed to stop that kind of thing?
The most aggravating part of all of this to me is that so many people see this kind of pricing as being a good thing. Not the ninety-two cents part, most folks find that outrageous.
But lots of folks apparently approve of the part where the higher the demand for the electricity, the more the utilities charge for it. This is called “Time Of Use” pricing, and a lot of well-meaning people think it’s a good idea … not me. I figure that’s because they just never thought it through all the way, they never saw what’s at the other end of the spoon.
Now, the utilities claim that Time Of Use pricing is a good thing because it spreads the load more evenly over the 24 hours … but why should I care? That’s their business, to provide enough power for all conditions when and as needed … but I digress. Hang on, I can likely find an example of their justification style … OK, they say the reason for Time Of Use Pricing is:
“To ensure greater power reliability and a better energy future”.
Impressive, who wouldn’t want a better future. Can I translate that for you?
“Greater power reliability” means so they won’t run out of power. If they were honest they’d say that they have Time Of Use Pricing “to avoid brownouts because we don’t have adequate generation capacity”. And ensuring a “better energy future” means “we hope we can provide future power but only if we raise prices on you today.” I’ll return to this issue in a moment.
But in any case, what kind of heartless bastards charge you more for something when you really need it? Because with “Time Of Use” pricing, when Anthony’s wife and kids are suffering in the scorching heat in Chico and really need the aircon, Pacific Gas And Electric (PG&E) and the California Public Utilities Commission say “Fine, you folks can turn on your air conditioners … but it will cost you almost a dollar a kilowatt to cool down.”
I never in my life thought I’d see electricity pricing used as a weapon against the poor and the old folks like that. That is criminal. What a plan. The seniors can afford to air condition their apartments or their rooms whenever they don’t need to … but when it’s hot, when they really need to air condition them, they can’t afford to. Catch-22, thy name is legion.
Now, don’t get me wrong here. I’m sure the Public Utilities Commission didn’t intend that outcome. I’m not accusing them of deliberately trying to cook Grandma. To do that you’d need some smarts, and anyone implementing a plan like that clearly has no smarts to spare on Grandma. Sadly, it’s just another case of Noble Cause Corruption, where the noble cause of saving the world from Thermageddon™ has overwhelmed native common sense and compassion.
Seriously, folks, this kind of pricing is madness, it’s unacceptable. If we had a water utility, and they charged 5¢ a glass when you weren’t thirsty, and $5.00 a glass when you came in dying of thirst, everyone would scream bloody murder that as a public utility you can’t screw the customers like that. Pick a dang price for a glass of water and stick with it, you can’t be jacking the price through the roof on someone just because they’re thirsty, that’s not on.
But that’s exactly what’s happening with electricity. Air conditioning in Chico is becoming the province of the wealthy, due to the “Time Of Use” pricing policies of the PUC.
However, the PUC are not the villains here. They are caught in the middle because of the stupidity of the voters and of Governor Brown. The voters put in a very destructive “20% by 2020” plan requiring 20% of the electricity supply to come from renewables by 2020 … then Governor Moonbeam had a Brilliant Idea™, so he unilaterally raised it to 33% by 2020. I don’t know how he jacked it by himself, but his daddy was the Governor and he grew up in the state house, so he knows which side of the bread the bodies are buttered on … these things are mysteries to the uninitiated like you and I.
And of course, it’s nearly impossible to build a fossil-fired plant of any kind anywhere in California anyhow. I hear these days when you apply for a license in California to generate electricity from fossil fuels, the State Government just issues you a couple of lawsuits along with the permits, in order to save time …
So you can’t build fossil plants, and renewable plants are few and far between … and as a result the system operators, a company called CAISO, are always balancing on the edge of a “brownout”, when the power doesn’t go out, but you only get 90% of the voltage, or on the verge of rolling blackouts, the next step after brownouts … and we’ve seen both.
And to put the icing on the cake, somewhere along the line, some congenital idiot ruled that hydroelectric power doesn’t count as a renewable energy source. I hope that person roasts in the place of eternal barbecue and HE doesn’t have the money to run the air conditioner. Truly don’t think I’ve heard a more expensive and destructive ruling than that one, especially after the TVA and Bonneville Dam and Shasta Dam have shown that yes, idiots, hydropower is indeed renewable. Yeah, dams have problems and there’s lots of issues, but last I looked the rain is still working both reliably and renewably …
So by 2020 we’re suppose to get a third of our power from solar, and rainbows, and wind, and hydrogen, and biomass, and methane from the digestive apparati of unicorns, and fuel cells, anything expensive and out of reach will do. The suppliers of these nostrums have the state over a barrel, of course, and demand outrageous prices.
And as you would predict, this unbelievable idiocy has left the state woefully short of power. And as a result, the whole program has gone into reverse.
So now, rather than increasing the amount of cheap electric power available to the consumer like a utility should, we’re going the other way. The PUC and PGE aren’t encouraging people to utilize cheap power in order to better their lives. They aren’t doing their job of ensuring an adequate supply of inexpensive power. Far from it.
Instead, they’re doing whatever they can to push people back into the dark ages, because they are UNABLE TO GENERATE ENOUGH LIGHT OUT OF UNICORN ERUCTATIONS TO FILL THE DEMAND …
So that’s why, when they say the pricing is to “assure greater power reliability”, that’s a lie. They are using that pricing to discourage demand. Have you ever heard a dumber thing than a business working to discourage demand? Who anywhere tells their customers to buy less? Why jack your prices to force them to buy less?
Well, because they don’t have the power generating capacity. And this in turn is because for every two fossil-fueled or hydroelectric power plants you build, you need one unicorn-fueled plant, and those damn unicorns are proving much harder to catch than Governor Moonbeam figured …
But even given that that is the case, and given that the PUC is caught in the middle, there has to be a better plan than cooking Grandma to deal with that problem.
The people pushing these rattle-trap schemes, like “Death Train” Jim Hansen, always talk about the grandchildren … meanwhile, every one of their damn plans, of carbon taxes, and cap-and-trade, and subsidies, and requirements for “renewables”, and regulations, and all the rest, every one of them does nothing but screw Grandma and the rest of the poor.
Those plans do nothing but raise the cost of energy with almost no benefit to the environment.
They don’t reduce CO2. They don’t save the planet. They don’t help the environment. At best, with a following wind they might make a difference of a couple hundredths of a degree in a century. And indeed, because they further impoverish Grandma and the poor, they are actively harming the environment.
And meanwhile in the present, far from the ivory towers where they entertain their century-long fantasies, on the other side of the tracks, out of sight from the houses of the wealthy, the reality of these destructive, ugly policies hit Grandma and the poor of California the hardest. The head of the PUC doesn’t have to worry whether he can afford to air condition his sick child’s room … the CEO of PG&E isn’t losing sleep over his electric bill.
I fear I have no magic bullet to solve this. It will be a slow slog back to sanity. All I can do is to highlight the issues, and trust that at some point people will come to their senses.
So all of you folks that think that fighting CO2 will make a difference decades from now, remember the difference that this pseudo-green insanity is making today. Your actions are cooking Grandma, impoverishing the poor, and harming the environment today, and history will not find your part in inflicting pain and deprivation on society’s weakest members to be funny in the slightest. I truly don’t care if you think the poor in 2050 desperately need help from some imagined tragedy. You are screwing the poor today.
My best Independence Day wishes to you all, and remember, the beauty of America is that you’re all free to air condition your houses … but only when it’s not hot.
w.
Roger
You’re making more and more of a fool of yourself. Lawyers constantly write books and articles giving a legal opinion on myriads of topics. You could easily provide an answer in general terms (not legal advice) to Mr Hagen if you wished but for some reason you choose not to. Your proffered reason strikes me as vacuous, unconvincing and consistent with your tactic of only engaging in battles where you think you have some prospect of making headway (whilst ignoring those where you realise the weakness of your case ).
@John:
“I do note, however, that if you visit his blog that “Comment moderation has been enabled. All comments must be approved by the blog author.” Just seems a little two-faced to me.”
In this time of spammers and scammers, it would be irresponsible for anyone to have a blog without moderation–either before publication or afterward–and especially for someone who is licensed by the state.
@roger, @willis:
Can we put the personal animus behind? You both have much to contribute.
I agree with the person above. I propose that we (the readers here) send Anthony some money to pay for the beer or cola if the two of you will meet in person and work things out. I believe that if you spent a few hours together, you would come away with understanding. You might never become best friends, but please consider it.
@ur momisugly Robert Scott on July 6, 2013 at 2:57 pm
You wrote to me:
“Roger
You’re making more and more of a fool of yourself. ”
It happens, and I’m not a bit concerned about that. I am interested in preserving my law license.
“Lawyers constantly write books and articles giving a legal opinion on myriads of topics.”
You are right, but only to the extent that such writings do not involve publishing advice to a particular client. Attorneys have a right to opine on most topics, otherwise. I would provide the citation to ethics rules that bind attorneys and their public writings, but I’m using a smart phone and have some difficulty with that. As to lawyers who write, I have a blog and write on legal matters there. But there is no legal advice there, and certainly no response to a direct request for a legal opinion.
“You could easily provide an answer in general terms (not legal advice) to Mr Hagen if you wished but for some reason you choose not to. ”
My reasons are sufficient. I have no desire to lose my license.
“Your proffered reason strikes me as vacuous, unconvincing and consistent with your tactic of only engaging in battles where you think you have some prospect of making headway (whilst ignoring those where you realise the weakness of your case ).”
You are welcome to your opinion. I know the ethics rules that constrain what I write.
@gamecock:
“Utilities carry massive fixed cost to have standby power. They could have high rates to pay for it (past practice), or they could have demand based rates to pay for it. Demand based rates make a lot more sense, as people are paying directly for what they are getting. Industrial customers have been paying direct demand charges for decades.”
Aren’t industrial customers’ rates subsidized by consumers? I believe that industrial rates are a fraction of consumer rates. Not that you can easily get that information as the SoCalEdison site.
@lnxwalt
“Aren’t industrial customers’ rates subsidized by consumers? I believe that industrial rates are a fraction of consumer rates.”
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The reason industrial customers get lower rates is the same reason that large customers for most businesses get favourable treatment – they are predictable, volume contributors to the bottom line while usually requiring not much more attention than small or one-off customers. It’s not a subsidy – on the contrary, it provides the business with a stable base so that they can service the myriad of small customers with their variable demands and high-maintenance (relative to their spending) requirements.
Anyone who has worked in business knows that a single order worth $1,000 generates more profit than 100 orders worth $10, even if the margin on the large order is lower. And, if you know that you will get that $1,000 order once a week, you can afford to give and even better price and still make a good profit.
Y’all should enjoy this one …
Investor’s Business Daily editorializes:
w.
That certainly didn’t do my blood pressure any favors.
Willis, as I said way above, we are being conditioned to the notion that it is not up to the suppliers to provide, but up to us to curtail wicked demand. In markets where we have little or no choice (such as power and water) it simply amounts to enforced rationing, with a bonus of “money for nothing” extra profits for providers.
Complaints are met with sermons about wasteful consumption and the virtues of sacrifice and frugality. These have been the watchwords of cults, blossoming religions and extreme political ideology since the beginning of civilisation.
In a relatively free market, people would just tell these suppliers to go jump, and take their business elsewhere. Unfortunately, the highly regulated energy market leaves your average punter with no real choice. In Australia, “smart meters” are being rolled out at a massive cost to consumers, with the active support of governments. The flim-flam is that they will enable us to control our power bills; the reality is very different.
I notice that the comments under the IBD editorial linked by Willis are ALL skeptical that manmade global warming exists. Looks like the general public’s ‘consensus’ is that catastrophic AGW is pseudo-scientific nonsense.
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The EPA is on the front lines in “The War on Coal” and other inexpensive and reliable energy.
The are pushing things like wind and solar which are expensive and unreliable on a large scale.
Is a “smart-grid” a way to hide green power’s inefficiency?
If and when there is a supply problem will they cut off power to some but not to others?
Who would decide that and based on what criterion?
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Sometimes with water the plant may not be able to treat enough to keep up or the source water may naturally not have a safe yield large to meet higher demands.
But with power what’s happening is that the ability of the plants and the power sources to meet demand are being artificially restricted.
Gunga Din – water is the most abundant substance on the surface of the planet. Shortages are due to lack of infrastructure, in almost all cases.
Where I live, we had a 7 year drought, where restrictions on use were progressively tightened, while prices went up and up and up. When the drought broke, prices not only did not fall, but rose again. The rationale was that “water is a scarce resource”, plus that sacrifice and frugality is good for the soul. Some of the restrictions became permanent for the same reasons.
Our biggest dam has just been increased in capacity, but I suspect that a major reason is that someone decided that for security and comfort (of politicians) reasons, the national capital needs a reliable water supply.
Our bills, which have more than doubled in 10 years, are still rising. And, we are still being told by finger-wagging do-gooders that it is our responsibility to “conserve water.”
What a crock. The way that electricity markets are manipulated is remarkably similar.
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That what I was trying to say regarding water. With power instead of improving the proven that exist, they are dismantling it and replacing with what, at best, is unproven if not already proven to be unreliable.
The rest of your points are valid. If I remember correctly you live in Canada? I don’t know how your equivalent of our USEPA operates but much of the increase in rates is due to regulations based in science as sound as Hansen and Mann’s or just plain bureaucratic resistence to common sense.
(A few decades ago we had to test the water here in Ohio for an herbicide that was only used on pineapples in Hawaii!)
Willis,
As a long-time pedant, I feel it necessary to point out that some crude oils are suitable for direct use in crude oil engines operating with the help of a “hot bulb” for reliable ignition. Usually in shipping. The crude oil is typically heated to keep it flowing to and through the engine.
There are a bunch of smaller “crude oil engines” on the market. They’re also popular for burning “waste oil” directly. I expect (*) that they have also been used for pumping crude oil along pipelines over long distances.
(*) I’d check but I’m about to head off for a free lunch.
Australia, and boy am I lucky to be here. It’s mid-winter, but the sun is shining. Birds are dropping in to the birdbath or to nibble on the seeds or eat the nectar on the trees. I have reliable (if expensive) gas, electricity, water and wireless internet.
Imagine if I’d been born in Somalia.
And yes, your points about regulatory creep are very well made. Regulatory creep is a significant contributor to the ever increasing cost of life’s necessities.
Roger Sowell says:
July 6, 2013 at 1:56 pm (Edit)
Ah, my error, you are correct. As you point out, what I should have written was “Roger doesn’t do questions in this post“.
Sorry for the misunderstanding, thanks for the clarification,
w.
“Smart meters” are entirely the wrong way around, obviously. Power vendors should provide the information and customers should control their responses to it. Market opportunity?
At 95 cents a kilowatthour the economics are there to buy a home generator set run off of propane. It used to be that you could never produce electricity cheaper than the utility but at California prices it certain looks like the economics are there. You don’t have to run 24/7 either, just run the generator during the peak charge period of the day. This is what we call in the commercial building trade as peak shaving.
Now I am confused on one point, doesn’t Anthony have a solar system to mitigate this expensive pricing structure? Isn’t the point of the CA pricing plan to push all home owners to get a solar system? Not that this approach works for the poor who don’t have the resources to buy a solar system or home generator setup. So CA being a liberal run society, I would assume they have some means tested program to install a solar system? A program subsidized by the rest of the rate payers via really high time of use rates?
johanna says:
You’d have thrown a net over the birdies, plucked and gutted them ready for cooking over a fire of dead tree branches.
When my father worked at the electric company, they wanted to charge extra during peak hours because it cost more to generate. Most of the units used inexpensive coal, but the peaking units used natural gas which was more expensive at that time, all things considered. Each coal-fired unit was very expensive. Peaking units were even more expensive per KWh, but allowed small quanta of generating capacity increase, so you could bridge over to the point that you had to add another general load unit somewhere in your service area. Of course, they were also being whipsawed — installing better scrubbers, moving from coal to oil, then back again when the OPEC embargo hit, having already invested decades to get approval for nuclear units and jumping through some insane requirements for that (and then some of them being shot down after all that investment when, e.g. the ignorant or corrupt construction crews failed to X-ray the welds as happened at Moscow, Ohio).
By the late 1970s, when I was working at the state utility commission, there was some move to allow co-generation and leaning toward loosening the monopolies. DoE was already investing a bit in experiments with solar and wind-power, and so did super-computer firm Control Data.
In the early 1980s, firms were starting to create and test idiot-meters to allow/enforce peak hour pricing (the company could shut off individual households/businesses for 10-20 minutes at a time during peak hours), to which firms and individuals could voluntarily opt-in, in exchange for lower rates. They finally started forcing on people over the last 5 years or so.
There are very inexpensive natural gas generating units, now, so it’s all political.
Yes, they told us that electricity, natural gas, and telecomm, were “natural monopolies”. Insull and Vail spent a lot of money and effort on that propaganda campaign, just as the Sili Valley execs spend a lot on the “STEM talent shortage” propaganda campaign today. But the reality is that none of these things is a NATURAL monopoly, but artificial, government-backed, -supported, and -imposed monopolies.
Walter J. Primeaux of U of TX and later U of IL, did the best economic research on these unnatural monopolies starting back in the 1970s, but other economists have, also. At one time I built up a bibliography of 130-200 books and articles.