I suppose we should be grateful that Ron Binz is a moderate among those pushing for climate legislation.
Unlike activists on the environmental left, the chairman of the Colorado Public Utilities Commission doesn’t want to jolt consumersand the economy — with sharply higher prices that would follow the auctioning of carbon allowances under a full-blown “cap and trade” plan.
Binz merely advocates steadily rising electricity rates over the long term (such a deal!) under a policy he outlined recently in The Energy Daily.
Carbon allowances should be distributed to utilities at no cost, Binz argues, and their number then reduced over time. That will force technological innovation, he believes, as companies move to reduce their greenhouse emissions.
Of course, reducing carbon allowances will also inflate their value and nudge up the price of electricity, but Binz believes his scheme “will allow consumers time to adjust to changing prices.”
But adjust how? Reducing electricity use is not as simple or as cost-free as, say, cutting back on water use (especially if you have a lawn). Is giving consumers “time to adjust to changing prices” a polite way of saying, “time to get used to paying more”?
I’ve known Binz for years and have always considered him a smart straight shooter, so I asked him what he meant. Yes, he freely acknowledged, the “short-run elasticity of demand” for electricity is “fairly low” — meaning consumers are likely to use, and to feel they have no choice but to use, nearly the same amount of electricity despite rising prices.
Long-term demand may be more elastic, Binz added, once we “start pushing back on the efficiency of appliances” — but it’s still “not great.”
So the answer is what I feared: Households will “adjust to changing prices” mostly by writing bigger checks to their utility.
To be fair, Binz reminded me that most electricity goes to commercial and industrial users, which have a better chance of reducing consumption through innovation. Yet their efforts are unlikely to achieve long-term carbon reduction goals, too. So Binz also advocates a “research tax on carbon emissions within the electric sector” to generate “about $10 billion annually.” That, too, will hike bills, if by a relatively modest amount.
Binz said he wrote the article for Energy Daily, and a longer one on which it was based, “in the atmosphere of advocacy by others for an approach that would jack up rates much higher at the front end.” He’s hopeful, meanwhile, that the Senate climate bill authored by Sens. John Kerry, Lindsey Graham and Joseph Lieberman, whose release has been delayed, will adopt the sort of less punishing approach to regulation that he favors.
Still, it’s unnerving that the state’s chief energy regulator is a public advocate of rising electricity bills — surely a first for a PUC chief — given the implications for homeowners and the economy.
Nor is it clear where this all ends. Everyone favors “affordable” electricity rates in theory, but the word has little meaning if policy makers embrace every price hike needed to reach the green lobby’s goals. This year alone, state lawmakers passed two bills that will end up padding electricity bills.
“Meeting carbon goals for 2020 with today’s technologies will be difficult but possible,” Binz writes, but “progress beyond 2020 or 2030 requires major technological innovations . . . .”
Not to mention major hikes in utility bills, apparently — so long as they don’t occur too abruptly. That way, like the fabled frog in the pot of water, we won’t think to protest until it’s too late.
E-mail Vincent Carroll at vcarroll@denverpost.com.
