PragerU: Why Are Utilities So Expensive?

By  PragerU
PragerU Utilities

In the latest video from PragerU, Charles McConnell, former Assistant Secretary of Energy in the Obama Administration, addresses a question on many Americans’ minds: Why are utilities so expensive?

Though the price of natural gas has fallen by 43% and coal prices have dropped 11% since 2010, the price of electricity for residential users in the United States rose by 13% during the same period, McConnell notes. “Why does your electricity bill keep going up when the cost of producing electricity keeps going down?” he asks.

This is because, McConnell says, a portion of the substantial money that should have been saved instead “went to subsidize renewable energy,” with wind and solar being far more expensive than advertised.

“Perhaps if renewable energy was what made our air cleaner or what caused the dramatic reductions in CO2 over the last decade, you could say it was worth it,” McConnell argues. “But our air was already becoming dramatically cleaner long before wind and solar were identified as ‘environmentally critical.’ Emissions of harmful pollutants have decreased 77% in the US since 1970. And that had nothing to do with wind and solar. It was almost entirely due to the switch from coal to natural gas.”

Given that “we’re getting no cost savings from wind and solar and minimal benefits in terms of cleaner air or reductions in CO2,” McConnell then questions our continued obsession with these forms of power by exploring the three main parts of our electricity bills: generation cost, transmission cost and taxes and fees.

McConnell estimates that the cost of generating and reliably maintaining electricity “comprises about 50% of your power bill.” While “fossil fueled electricity is inexpensive, and the fuel can be stored or sourced on site,” making it available when needed, “wind and solar generate electricity based on the mood of Mother Nature,” providing us with the “intermittency problem.”

McConnell then describes what this means in practical terms, saying that wind and solar farms usually require fossil fuel facilities to make up for their intermittent energy supply, and “all that wasted money is reflected in your electricity bill.”

The cost to transmit electricity is “determined by the distance between the power plant and your home or business,” he explains. “This is one of the reasons fossil fuel and nuclear plants are ideally suited to power our large, dense cities and industries,” McConnell states. “They require little land space and can be situated near or within population centers, so they need relatively few transmission lines. But wind and solar resources require large tracts of land and are therefore usually placed in remote locations.”

Such remoteness introduces the requirement for expensive new infrastructure. For example, Texas “has already spent over $7 billion in new transmission lines to bring distant wind power to cities in the east and south,” and with further expenditure required, Texans are “already seeing those costs in their energy bills.”

Finally, McConnell looks at taxes and fees. “Most taxes are plainly stated on your power bill. State taxes, city and county taxes. Plus, a bewildering assortment of fees. Those are bad enough,” McConnell says. “But what you won’t see on your electricity bill are the Federal and, in many places, state taxes that you pay to subsidize wind and solar generation.”

“Federal subsidies alone for the wind and solar industries totaled more than $70 billion from 2010 to 2019. Most state governments kick in their own incentives. The subsidies for wind and solar are in a class by themselves and have been for decades,” McConnell warns. “We are not incentivizing new technology but are artificially supporting an industry. Take away the subsidies and very likely that industry does not exist.”

After explaining these three parts — the generation costs, the transmission costs, the taxes and fees — when they’re added together, “you’re paying a lot more than you should.” 

While some can afford it, many can’t.

“An electricity bill is a regressive expense, meaning it takes up a lot bigger chunk of the budget of a lower middle-class family than it does an upper middle-class one,” McConnell explains. “Many poor families devote more than 10% of their income after food, rent, and transportation to electricity, while the those further up the income scale spend only a few percent. A third of American households report having difficulty paying their electricity bills and 7 million families face the choice between putting food on the table or keeping their home warm during the cold winter months.”

McConnell concludes by suggesting that we consider the families struggling with these rising costs, instead of focusing on “expensive, inefficient wind and solar energy.”

“Yes, the wind and the sun are free,” McConnell says. “But wind and solar power are anything but.”

PragerU is the world’s leading educational nonprofit focused on changing minds through the creative use of digital media. You can make a tax-deductible donation here to help PragerU continue to reach millions of young people with their videos.

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