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The recent op-ed from a Cobb EMC member questioning the need for Plant Washington demonstrates a surprising misunderstanding of energy markets from someone who worked in the industry for many years. The economic case for the plant can be found by looking no further than media reports about U.S. energy demand and costs.
Under the ominous headline “Household electricity bills skyrocket,” a recent USA Today analysis found the average American household pays $300 more a year for electricity than it did five years ago. More onerous, residential electric costs hit a record high of 11.8 cents per kilowatt hour this year and now consume a greater share of Americans’ after-tax incomes than at any time since 1996.
Such increases have been driven largely by two factors. The first is a sharp increase in demand. After dropping in 2009, the paper found electricity demand rebounded to record levels in 2010. According to the U.S. Energy Information Administration (EIA), gains in the energy efficiency of household appliances are consistently offset by the proliferation of new electronic devices such as flat-screen TVs, DVRs, computers, game consoles and smartphones.
Electric rates also have increased due to costs imposed on utilities by new EPA regulations. Those same regulations are forcing many utilities to shutter older power plants rather than spend billions of dollars for upgrades that would push rates even higher. In Georgia, the state’s largest utility has announced plans to close numerous older power plants that provide hundreds of megawatts of affordable electricity. Unfortunately, a shrinking power supply combined with increasing consumption and rapidly escalating costs is not the recipe for stable, affordable electric rates.
Technological advances in shale gas production have resulted in an abundant supply of cheap natural gas in the U.S. But as federal regulators consider greater oversight of the industry — which always adds cost — many questions remain. Further, natural gas producers have shown little willingness to lock themselves into long-term contracts to sell their product at record low prices. What business would?
Natural gas prices have been volatile historically and expecting them to stay as low as they are today is naïve. In its 2011 Annual Energy Outlook, the EIA projects that the cost of natural gas could nearly triple in coming years (to $9.99 per million BTU in 2035 from $3.62 per million BTU in 2009). Building a diverse energy portfolio that includes coal, nuclear and, where economically viable without government subsidies, even renewable resources in addition to natural gas will help shield consumers from such substantial cost increases.
Although opponents would like you to believe that virtually no one is working to develop coal-fired power plants anymore, the facts tell a different story. According to the National Energy Technology Laboratory (NETL), 11 new coal power plants became operational in the U.S. during 2010, the most since 1985. As of July, 23 new coal plants are in the permitting phase, near construction or are under construction.
Why do so many utilities want to build and operate coal-based power plants? The answer, quite simply, is that coal is cheap and plentiful (the U.S. has the largest coal reserves on the globe — we have more coal than the Mideast has oil). And inexpensive fuel means affordable electricity costs for customers. The majority of “studies” that purport to show customers bearing a cost burden due to Plant Washington were paid for by opponents of the project and contain greatly exaggerated claims.
Georgia is no longer in a position to pick and choose between energy resources we like and those we don’t. Nor should ratepayers be asked to pay more for something as basic and important as electricity simply to satisfy the agenda of so-called environmentalists. We need all presently available generation resources, and must work to make all of our energy resources cost-effective and environmentally responsible. Failing to do so only ensures that electric bills will continue to skyrocket, with the greatest impact on those that can least afford it.