Everyone knows that when we watch television, charge a cell phone or surf the Internet, we use electricity.
Most people don’t think about where their electricity comes from—they flip the switch, the light goes on, end of story. But at your local electric cooperative, there is a lot of work that goes into making sure that reliable, affordable power is always there when you need it.
Your monthly residential electricity bill reflects the cost of three major components: the cost to produce the electricity (generation), the cost of shipping the electricity from the power plant to the substation in your community (transmission) and the cost of delivering the electricity to your home (distribution).
Of the three elements, your local electric cooperative really has control over only the distribution costs. Lawmakers in Washington, D.C., and in Columbia have a lot to say about the other two components, and the decisions they make can have major ramifications for your monthly statement. That’s why your cooperative keeps a close eye on the legislative, regulatory and legal issues of the entire utility industry.
Here are some of the issues we’re following on behalf of co-op members.
EPA regulations
Nearly 70 percent of the electricity distributed by co-ops in South Carolina is generated by coal-fired power plants, and a series of Environmental Protection Agency (EPA) regulations dubbed the “War on Coal” could have dramatic effects on future power bills.
The EPA regulations place strict new environmental controls on coal-powered generating plants, and the cost of complying with these rules is already forcing some facilities to close. In October, Santee Cooper, the state-owned utility that generates most of the power distributed by your co-op, announced the closure of its infrequently used Conway and Moncks Corner generating plants. Progress Energy announced the shutdown of its plant near Hartsville, and South Carolina Electric & Gas Co. has announced plans to shut down six coal-fired generating units in South Carolina by 2018.
These plants supply a small part of the power delivered by your cooperative, but over time, EPA regulations may affect more plants, raising your family’s electricity bills and hurting the bottom line of countless small businesses. Coal-fired power plants are currently one of the most cost-effective ways to make electricity, and if they are regulated out of existence, your electricity rates will rise because more expensive sources of energy will have to take their place.
This is not to suggest that co-ops oppose all environmental regulations. On the contrary, since the Clean Air Act was passed in 1970, electric cooperatives have reduced air pollution significantly and air quality has improved. Sulfur dioxide and nitrogen oxide emissions have been nearly eliminated by the use of advanced pollution-control technologies, more efficient plants and cleaner-burning fuels.
The last major revision to the Clean Air Act happened 20 years ago. Cooperatives support updating these laws so we can reduce power plant emissions more quickly and economically than we can under current rules. Co-ops also are working with Congress to enact legislation that will address these objectives while balancing America’s energy, environmental and economic needs.
Railroad shipping costs
If you’ve ever been stopped at a railroad crossing in South Carolina, that long procession of cargo cars passing in front of your windshield was probably filled with coal. Our state imports all of the coal used to generate our electricity, and rail cars arrive every day (and night) from the coal-rich state of Kentucky.
Shipping costs have exploded in the last decade, driving up the cost of electricity for South Carolina ratepayers and small businesses during the worst recession since the 1930s. A recent Department of Energy (DOE) study shows that coal transportation costs have risen 50 percent in the last 10 years.
The lack of competition among the major railroads is the culprit. The number of major railroads operating in the United States has shrunk dramatically, from 40 in 1980 to only seven today.
Because there’s little competition, the railroads are squeezing their customers, essentially saying pay up, or else. To make matters worse, railroads are virtually exempt from enforcement of the federal antitrust laws. The only other entity that enjoys such broad immunity is Major League Baseball.
Unless Congress steps in to make sure there is fairness, railroads will continue to squeeze their customers, and the end users—South Carolina ratepayers—will be the ones paying the freight.
Coal ash regulations
Coal ash is a natural byproduct produced when you generate electricity by burning coal. For more than 50 years, coal ash has been treated as solid waste, with nearly half of it recycled into everyday products such as cement, roof shingles, asphalt and drywall.
The EPA is proposing to reclassify coal ash as “hazardous waste.” Such an extreme change would mean that it could no longer be recycled, and a perfectly useful byproduct would be mothballed for no good reason. Power plants would lose the income derived from the sale of coal ash and face higher costs for storage and disposal under cumbersome hazardous waste rules. If the EPA takes this radical step, you will see your monthly bill tick upward.
Regulation of water heaters
For more than 20 years, electric cooperatives in South Carolina and across the nation have run an innovative program that uses water heaters to keep electricity bills low.
Approximately 120,000 South Carolina co-op members have agreed to install a switch that cuts electricity to their water heaters during peak demand periods when power costs skyrocket. With the right high-capacity water heater (typically 55 to 80 gallons), consumers still have plenty of hot water when they need it, and they see significant savings on their power bills.
These homeowners aren’t the only ones who benefit. By lowering total system demand during peak hours, the water heater program lowers electric rates for all co-op consumers statewide. It also reduces the amount of carbon dioxide emissions from power plants supplying the electricity.
Unfortunately, the Department of Energy has adopted new water heater standards—scheduled to go into effect in 2015—that would effectively ban the high-capacity units that make the program work. In order to save this extremely successful load-management program, electric co-ops are urging DOE to create a new appliance category for grid-connected, large-capacity water heaters.
Energy taxes
Like a monster in a bad horror movie, the idea of taxing energy is a terrible idea that just won’t die. Every time you think it’s dead, it seems to come back to life. In the latest sequel, it’s called a “carbon tax,” and once again, some lawmakers are suggesting it will protect the environment and help reduce our national debt.
The “carbon” in carbon tax stands for carbon dioxide, a naturally occurring gas produced by trees, volcanoes, hot springs and from the combustion of fossil fuels, including coal, natural gas and gasoline. It’s also a greenhouse gas, meaning that in the scientific consensus, it is a significant contributor to global warming.
When you tax something, you discourage its use. Some politicians believe that a tax on carbon dioxide will reduce the use of fossil fuels by making energy more expensive. That’s one way to think about it. Legendary Supreme Court Chief Justice John Marshall put it another way when he famously observed that “the power to tax is the power to destroy.”
Politicians in Washington tried something similar in 1993 when a “Btu tax” passed the House of Representatives. The bill proposed an energy tax on every fuel source based on its heat content, measured in British thermal units, or Btu. Proponents of the tax argued that the revenues would be used to pay down the national debt and avoid cuts to our military and entitlement programs. Sound familiar?
Although the Btu tax died in the U.S. Senate, the idea is still hanging around. The Btu tax and the carbon tax are two sides of the same coin— the Btu proposal sought to tax fossil fuels before they were consumed, while the carbon tax is aimed at the carbon dioxide emissions produced from burning them.
Nearly 84 percent of the electricity distributed by South Carolina co-ops is generated from fossil fuels, including coal, oil and natural gas. Whether it’s called a Btu tax or a carbon tax, any new tax on energy would be a missile aimed squarely at the working class. The cost of electricity and gasoline could skyrocket depending on the amount of the tax. Food prices and transportation costs could go up, and everyday household items would cost more.
While the carbon tax idea keeps hanging around, it doesn’t seem to be moving on a fast track. But it’s something your electric cooperatives are watching closely. Should it gain traction, rest assured South Carolina’s electric cooperatives will be on the front lines fighting to protect your pocketbook.
Renewable energy incentives
Electric cooperatives in South Carolina do not generate electricity. In essence, your electric cooperative is a super-consumer, and, like you, it’s constantly looking for quality and value. For cooperatives, that means balancing three main factors: the reliability of the source, the affordability of the source and the degree to which that source is environmentally responsible.
Typically, renewable energy technologies score high on environmental responsibility, but lower on affordability and reliability (renewable technologies tend to be more expensive than most conventional sources and frequently are unpredictable without an energy-storage system, which adds to the cost). Conventional sources of energy typically score higher on affordability and reliability and lower on environmental responsibility (except for nuclear power, which scores higher on reliability and environmental responsibility but lower on affordability).
Cooperatives have looked for opportunities to invest in cost-competitive renewable sources of energy (like our Green Power program) and in research and educational efforts on renewable sources of energy (like offshore wind research and our Solar Schools program). While these sources of renewable energy continue to develop and move toward cost competitiveness, cooperatives in South Carolina have focused most of their efforts on helping their members use energy more efficiently. Investing in increased efficiency provides the most “bang for the buck” for consumers when measured across all three factors.
It is important that our elected officials make wise choices with regard to our policies on renewable energy sources and avoid any attempt to force consumers or generators of electricity to invest in one source or another. Weighing the three competing factors to derive the best value to consumers in a time of unprecedented uncertainty is difficult enough without the added constraint of regulations that favor certain sources over others. As technology and federal energy policy develop, the forecast for generation sources will begin to crystallize in ways that will allow energy consumers to make informed and reliable choices about where and how to invest their resources.
Election of Public Service Commissioners
South Carolina has a unique and innovative method by which its public utilities are regulated. At the heart of the system is a Public Service Commission, which is subject to the judicial codes of conduct, is rigorously screened and is elected by members of the General Assembly.
All of South Carolina’s electric-service providers are regulated by geography. Whether you get your electricity from a city, from an electric cooperative, from our state’s Public Service Authority (commonly called Santee Cooper) or from an investor-owned utility, your provider’s ability to serve is based upon where you live.
Each of these entities must also answer to a higher authority based upon how it is formed. For a city system, the council elected by the citizens who live in the city is ultimately accountable for the rates and actions of that system. For Santee Cooper, a board composed of citizens from the counties it serves and the state at large oversees its operations. For member-owned electric cooperatives, a board of trustees elected by the members ensures the cooperative is always run the very best it can be. For investor-owned utilities, which may or may not have a connection with our communities or state, the Public Service Commission monitors their actions and policies.
Members of the Public Service Commission are elected by the General Assembly, a process that ensures accountability to the public at large while also providing the opportunity for a thorough examination of candidates in order to find the most qualified people.
In 2004, the pursuit of qualified commissioners was further enhanced by the General Assembly’s passage of Act 175. This legislation created the State Regulation of Public Utilities Review Committee (PURC), which was charged with intensively screening all candidates for the Public Service Commission according to enhanced statutory qualifications. Now, before any candidate can be voted on by the General Assembly, the PURC, which contains members of the S.C. House, the S.C. Senate and the public at large, must thoroughly vet the person and declare that he or she has the requisite knowledge and demeanor to serve.
In addition to creating the enhanced screening process, Act 175 took the advocacy arm of the Public Service Commission and separated it into the Office of Regulatory Staff, which argues on behalf of the state and utility consumers on all issues that come before the commission. The act also made commissioners subject to the same strict code of ethics to which our state’s judges must adhere.
Members of the Public Service Commission make important decisions that affect the rates and rules for investor-owned utilities and serve as leaders in the formulation of our state’s energy policy. Having a well-qualified group of people with expertise on our Public Service Commission affects all electricity consumers in South Carolina, regardless of whether we are directly regulated by their decisions. That makes every election for commissioners an important thing to watch.
Elimination of the sales tax exemption for residential electricity
In November 2011, the S.C. Supreme Court heard arguments in a lawsuit that could change the tax structure in our state. The lawsuit challenged the constitutionality of the state’s 78 tax exemptions. The court has yet to rule on the matter, and it could decide that some, all or none of the exemptions are forbidden by the constitution. There are myriad exemptions, from groceries to missile-assembly materials, but one that would affect everyone is the exemption on electricity sold to residences.
The elimination of the sales tax exemption on residential electricity would mean an immediate increase of between 6 percent and 8 percent on a typical monthly electricity bill. According to the South Carolina Board of Economic Advisors, removal of this exemption would mean South Carolinians would pay more than $208 million in new taxes.
The prospects for this exemption to be removed by the General Assembly on its own are slim. A bill that would have removed certain tax exemptions was introduced last legislative session and passed the House of Representatives but could not gain enough support to pass the Senate. That bill kept the sales tax exemption for residential electricity intact. The fact that the S.C. Supreme Court has yet to rule on the matter makes it one to watch in 2013, however. If the court were to strike down the residential electricity exemption, the question would then become whether there was enough support in the General Assembly to reinstate it. Absent court action, the exemption is likely safe.
Criminal theft of electricity
In 2012 the General Assembly passed a bill aimed at curbing the theft of copper. It was the fifth year in a row in which copper theft was a topic of legislative action, evidence that it has been costing insurance companies, churches, utilities and, ultimately, each citizen a great deal of money.
The bill that passed in 2012 put the finishing touches on what may be the toughest laws in the United States on the theft of copper. It received tremendous bipartisan support and was the result of the hard work of a group of stakeholders, ultimately led by the S.C. Sheriffs Association and representatives of the scrap-metal recyclers industry. It wisely combined tough (but fair) penalties on those who steal, with regulation and record-keeping requirements for those who recycle metals. This multi-year effort was a great victory for the citizens of our state and will hopefully serve as a model for all stakeholders as we approach the next painful intersection between the provision of essential utilities and criminal enterprise: theft of service.
It is against the law in our state to steal electricity, gas or water by bypassing the meter installed by a service provider. This law has been on the books since 1962 and was last amended in 1995 to increase the fines for those convicted. Unfortunately, theft of service is still a misdemeanor offense, and overworked solicitors may not have the staff to prosecute cases.
When the law was written, it made sense to classify the theft of electricity as a misdemeanor offense. It would typically entail only a small amount of electricity, and the cost to ratepayers was likely to be small. Today, however, many instances of electricity theft occur in the context of much larger criminal enterprises. It is an increasingly common occurrence for electric service providers to discover “grow houses” that have circumvented the metering process to avoid paying for the electricity they use while also avoiding detection by authorities. “Grow houses” are homes that use electrically powered light sources to grow marijuana indoors. They hide in plain sight, frequently appearing in nice neighborhoods and using significantly more electricity than an average home.
The law as it relates to the theft of electricity simply doesn’t contemplate these more serious instances of theft. This is certainly an issue that will arise in 2013 and one that will hopefully garner the kind of bipartisan and stakeholder support seen on the issue of copper theft.