For 10 years, Illinois electricity rates were frozen as part of a comprehensive shift of disaggregation and some deregulation. The ComEd and Ameren utilities want the freeze from 1997 ended because cost increases, especially from recent electricity acquisitions, threaten profitability. Opponents claim utilities and their parent companies have profited inordinately, the recent acquisitions have been questionable, utility rates are too high as it is and would cause hardship.
The cost of energy is going up, whether we like it or not. In 1997, the average cost to utilities was the following: $29.11 for a ton of coal, $2.91 for 1,000 cubic feet of natural gas and $12.50 for a pound of uranium hexafluoride, the raw material for uranium fuel. In 2005, coal was $35.12, natural gas $7.54 and uranium hexafluoride $36. Much of the stability in coal prices has been because at relatively cheap and low-sulfur western coal. That commodity is getting less cheap and more difficult to transport, with most of the price increase occurring in the last two years.
Natural gas, always a volatile commodity, is increasingly imported from outside North America. Like fossil fuels, most concentrated and accessible uranium ore has been mined out, and most of whats left is in unstable regions like central Africa or Asia. There are also pollution control costs of mercury, excessive carbon dioxide, nuclear waste storage, or the impact of coal or uranium ore mining. Costs will go up, one way or the other, either through increased rates, subsidies, or ignored until some disaster comes along.
The desire to freeze electricity prices is understandable, but no business can indefinitely be put on hold. We are not likely to have a so-called California crisis, which occurred earlier this decade. Californias situation resulted from huge population and energy demand growth in areas that require power plants, high-voltage transmission lines and, most important, increasingly scarce water resources to cool power plants. But gone are the good old days of massive, centralized power plants churning out low-cost power with a reasonable rate of return from endlessly cheap energy sources.
There are essentially two choices. Either let the market work through the establishment of competitive forces that will take time to develop. Or transition to public power entities whose primary job is to serve the public, and not make a profit. Renewable energy can exist under either scenario. Public utilities, like Austin Energy and Sacramento Municipal Utility, have considerable solar and wind assets. Investor-owned utilities like ComEd buy wind power, and the utility with the most photovoltaic interconnections in the U.S. is investor-owned Pacific Gas and Electric. The real choice is long-term thinking versus instant gratification. The latter can occur in payouts to CEOs and shareholders, or bread and circuses for the masses. Or we can do whats best for everybody, in the long run.
Mark Burger is president of the Illinois Solar Energy Association, a chapter of the American Solar Energy Society, and principal of Kestrel Development Company, a renewable energy consulting firm and developer of zero energy building.
From the Nov. 22-28, 2006, issue