The Democrats Are Taxing Your Power Bill… and That’s Okay For Now

Posted by J. Alexander Mitchell on 04.04.2009

Senator Waxman’s “Cap and Trade” system will increase your energy bill… but the question is “for how long”.

Republicans have and continue to fight against a "Cap and Trade" system to reduce energy emissions . With the Senate leaving open the option to force the issue via the "reconciliation" process, it appears with each passing day that this potential revenue stream – with the bonus side effect of helping clean up our environment - will be used to help further the President's Energy Plan and balance a lot of the spending used to get the country out of debt. Of course, there is a huge drawback – higher electric bills for you.

Here is the question – is this a problem?


The cap and trade program works as follows (or, at least, as best as a non-scientist like myself understands): The government would set specific limits as to how much greenhouse emissions (i.e. the carbon dioxide released into the atmosphere from things like, say, using coal to create electricity) a given company can generate. A given company would be given a certain number of "credits" that can be "spent" to be allowed to… well, pollute more. If a company can stay under environmentally friendly standards, nothing really changes, and, in fact, they may "re-sell" their credits for a profit. Conversely, if a company is over the limit, they can either reduce their carbon emissions or buy credits from a company that isn't using them.

Here is where your electric bill gets hit: In order to buy the credits, they must spend more money beyond the amount spent on typical work. Of course, they are not simply going to eat the loss to their profit margin, so the price gets passed on to the consumer. Ergo, you end up with a higher power bill. Note that this applies to any company that generates greenhouse emissions, but I'm limiting the discussion to power companies for the purposes of direct impact on the consumer. I'm also glossing over the fact that a large amount of the revenue generated by this will go to offsetting the costs on the consumer, as the main vehicle presented for this, the "Making Work Pay" program, does not directly address this increased cost.

So, if we know that these laws will increase the electric bills on the average American – the 95% of people that were supposed to see their taxes go down as a result of President Obama's plans – why is it even a possibility that this may be okay?

In my adopted state of Texas, there is a company called Green Mountain Energy. Green Mountain Energy specializes, as you can guess from the name, in generating renewable energy. The prices are fairly comparable to current competitors; their all-wind plan is just a touch higher than a rival company, and their 85% Water / 15% Wind plan is a touch lower than the same rival company.

I don't know if this is a publicly traded company, but as soon as I finish writing this, I'm going to see if it is. It is about to make a lot of money.

This is the nature of why I question how much of a problem this will be. Conservative thinking states that the market will be able to balance itself through competition. Those companies that generate few emissions or none at all will be able to leave their prices at an attractive point while those companies that are stuck depending on coal and the like will flounder. This is the exact same sort of reasoning that many (including myself) feel should have been applied to AIG or GM, so why not apply it here? In addition, many companies will retool themselves to ensure that they are able to survive in a newer, greener America. That means more jobs to offset those lost by companies unable to retool. As a whole, this is a short-term expense of higher power for the long-term benefit of jobs, revenue, and the environment.

Admittedly, there are a lot of states that are almost wholly dependent on coal power. More than half of the country's current power comes from coal, after all. However, I also do not doubt that someone is going to go to Wyoming, West Virginia, North Dakota, etc. and see a gold mine by tapping into renewable resources to offer power at a lower cost than the current archaic systems. The question isn't one of whether or not the average citizen would be affected, but instead it is "for how long".

If you are on the West Coast or Northeast, you're probably in great shape. I've already given a solution for my fellow North Texans. For everyone else in the middle… well, grab an extra jacket in the winter, at least for this year. Someone will have figured out a profitable solution to your problem by this time next year.

On a totally unrelated note, as this should be up before Wrestlemania – I watched Smackdown on Friday, March 27th with my stepdad (a big wrestling fan like myself), my girlfriend (not a fan), and my mother (not a fan). When Shawn Michaels came out in his Bizzaro-Undertaker entrance, my mother immediately asked me and my stepfather why they were having a Klan rally on the wrestling show. As I tried to explain while stifling my laughter about Shawn Michaels being the Christian opposite of Undertaker – hence the blazing cross iconography - I was reminded by my girlfriend that the Klan started out as a Christian group, and that the whole "blazing cross" thing only made it even worse. I am amazed that no one else saw that, and it made that interview all the more entertaining, for all of the wrong reasons…

(Edit: According to Sprint's wonderful Politics section in their phone service's online feature, the Senate could not get enough votes to be able to use reconciliation to pass cap and trade. However, I can't find a reference to this online for the life of me. Can a more-connected reader hook me up with a news article one way or the other on this?...)