Sunday, March 2, 2014

Rising electric prices are finally getting attention; PUC action pending?; MACT rule; 200 generating plants shut down

ABC27 (in Harrisburg) has reported on rising utility rates, refunds and PUC investigations:
Many of you have complained about bills that doubled, tripled and even quadrupled, and many of you are now getting refunds because of those complaints.
This story reflects the broader trend of rising electric prices and declining electric production:
The electricity price index soared to a new high in January 2014 with the largest month-to-month increase in almost four years, according to the Bureau of Labor Statistics. Meanwhile, data from the Energy Information Administration, a division of the U.S. Department of Energy, indicates that electricity production in the United States has declined since 2007, when it hit its all-time peak. The U.S. is producing less electricity than it did seven years ago for a population that has added more than 14 million people.
This development was predictable as long ago as May 2012, when the wholesale capacity auction for 2015 was held among utility suppliers.

These price increases result from the loss of over 200 generating plants across 25 states (between 2012 and 2017).

The primary cause of the massive plant shutdowns is the EPA's Maximum Achievable Control Technology (MACT) rule.

With the loss of 200 generating plants, this problem is not going away. Price increases will become more widespread and worse very soon. The Pennsylvania PUC has no power to repeal the MACT or to rebuild the 200 lost plants. If the PUC tries to solve the problem by restricting retail utility prices, the result will be shortages.

The effect upon real estate values is very hard to predict, as owners may be forced to sell their homes or face foreclosure. Buildings that use little electricity may rise in value. Buildings that use gas may not be immune, as wholesale gas prices have been affected as well. Regardless of the existence of alternative fuels, a sudden forced conversion of a large portion of the real estate of an entire region of the country will not be smooth and will create many disruptions in the real estate industry and beyond.