New Power Choices for Delaware Should Take In Account Long-Term Cost
Whether it's through an expensive electric bill or a decline in air quality, all of us here in Delaware feel the effects of how our electricity is supplied. The Public Service Commission (PSC), the state agency that regulates investor-owned utilities, has recently ordered Delmarva to review bids from a variety of in-state power suppliers with the goal of finding a cost-effective, environmentally friendly, long-term power source. This process was mandated by the Electric Utility Retail Customer Supply Act of 2006 (EURSCA), passed by the Delaware General Assembly last spring.
Now the bids are in, for three sources of electricity: gasified coal, natural gas, and offshore wind. The review process is occurring now, and a supplier should be picked by the end of February. The winning bid will be selected jointly by four Delaware agencies: the PSC, the Department of National Resources and Environmental Control, the Controller General's Office, and the Office of Management and Budget. The final result may be the construction of one of these three types of new power facility.
EURSCA gave priority to evaluating bids that would cost-effectively produce "energy price stability, reductions in environmental impact, and benefits of adopting new and emerging technology" as well as being feasible to site and other terms that are acceptable.
I submitted written testimony to the PSC during the pre-bid hearings because I was concerned that the rules being set up did not clearly reflect the goals of EURSCA. In particular, there was less weight given to price stability and environment, particularly to the potential costs of expected climate change regulations.
Obviously, all of us seek the lowest prices; at the same time, EURSCA specifically mentions the importance of price stability. Focusing on price stability would better ensure long-term savings for Delaware ratepayers, as well as other benefits to our state.
The basis of my concern related to price stability and climate change is that the US Congress may soon have before it several bills that would either restrict or economically penalize power plants. This is because power plants that burn fossil fuels are the largest producers of CO2 in the US economy, and CO2 accounts for the most of the human-created greenhouse gasses.
The incoming chairs of three of the most important Congressional Committees dealing with energy and climate change have said, "When the 110th Congress begins in January, we pledge to work to pass an effective system of mandatory limits on greenhouse gases." Businesses in many states are planning power production accordingly, and Delaware should do the same.
To the same point, a recent analysis by the Department of the Treasury in the United Kingdom estimates the economic cost of climate change could be as much as 20% of its gross national product. It is logical to conclude that, if this analysis is confirmed, governments around the world will be highly motivated to penalize facilities that contribute to climate change.
Should the US penalize CO2 producing power plants, Delaware ratepayers may bear the burden of these costs for years to come. Aside from the financial costs, Delaware's location as a low-lying coastal state makes it especially vulnerable to climate change and its harmful effect of sea level rise.
The pending federal legislation, existing state law, and emerging scientific and governmental studies suggest that early in the lifetime of these facilities, perhaps even before construction is completed, we will be in a business environment that places far higher penalties on CO2 emissions. Under current policy, these penalties would be passed on to consumers.
I recommend that as the PSC and the other agencies evaluate the various proposals for a new power facility in Delaware, they strongly consider the importance of price stability, new technology, and reductions in environmental impact (especially greenhouse gas emissions). They should take a long-term view of cost-effectiveness, considering not only today's business environment but the business environment in which these facilities will operate during their entire functioning life.
If the winning bid is picked with this long-term perspective, Delawareans could avoid the increasing electric bills and environmental damage that may otherwise result.
Sincerely,Jack Markell
Delaware State Treasurer
