Politics & Policy

Maryland’s Low-Energy Chill

Those in poverty are hardest hit by Governor’s O’Malley’s green agenda.

Maryland would have felt lucky to get a lump of coal in its stocking this week.

Governor Martin O’Malley’s aggressive green agenda has favored expensive renewable-energy sources, driving up the cost of electricity. The 784,000 Marylanders who are living in poverty, and many more on the brink of it, have been particularly hard hit, even though sometimes the cost is offset by subsidies.

Since O’Malley assumed office in January 2007, residents’ electricity rates have increased by 43 percent, according to estimates from Change Maryland, a group chaired by Larry Hogan, a Republican who intends to run for governor. In comparison, electricity costs have risen 24 percent nationwide. Likewise, the Maryland Department of Legislative Services noted that while other states in the region saw average residential electrical rates grow by 34 to 41 percent between 1999 and 2013, in Maryland they increased by 49 percent. The average Marylander pays more than $125 a month for electricity.

Electricity has grown more expensive while incomes have remained stagnant, says Robert Strupp, the executive director of Baltimore Neighborhoods Inc., a nonprofit that helps tenants and landlords work toward fair housing. He says that residents regularly call in facing power shutoffs — and not just in the city of Baltimore. Earlier this week, a resident from affluent Howard County called in distress, he says. Though she’d already received a state voucher to help offset electricity costs, she was still struggling to keep the power on.

While myriad factors affect the price of energy, the governor’s radical environmental policies have undoubtedly contributed to its escalating expense. By 2020, O’Malley wants 18 percent of the state’s energy to be supplied from green sources, even though natural gas is at least 37 percent cheaper an energy source than onshore wind, and solar energy is at least 98 percent more expensive than conventional coal. Working toward this goal, the governor has backed several green policies, despite their impact on electricity prices.

An offshore-wind project that the Maryland legislature supported earlier this year would be among the most expensive to date. Taxpayers would fund the project, coughing up $1.73 billion in direct subsidies over the next two decades. Then they’d be forced to buy whatever wind energy the project manages to produce, at a premium; offshore wind is by far the most expensive energy source, costing at least two and a half times as much as coal or natural gas. The legislation’s fiscal and policy note estimated that offshore wind would add $1.04 billion to utility bills over the next 20 years.

Such skewed economics make sense to bureaucrats but not investors, so despite supporting legislation, the offshore wind project is unlikely to be built. While that program’s expense is currently theoretical, other green policies have been successfully implemented, driving up real energy costs.

Maryland’s Renewable Energy Portfolio Standard has created an artificial market for pricier alternative energy sources. Utility companies, forced to buy expensive energy, pass the cost along to their consumers. One analysis by the Institute for Energy Research found that in states with renewable portfolio standards, the price of electricity is almost 40 percent higher.

Maryland also participates in the Regional Greenhouse Gas Initiative, an interstate cap-and-trade program. Even the program’s advocates were forced to admit that utility companies in participating states shifted a $900 million initial cost to their consumers. Though supporters of the program claim long-term consumer savings, the argument rests in part on sticker shock that would compel households to use less energy.

That feeds nicely into other state programs, such as EmPOWER Maryland, which seeks to cut per capita electrical consumption by 15 percent by 2015. It allows utility companies to add an “implementation surcharge” to electricity bills. The law also accommodates utility companies at the expense of the consumer, ensuring that they don’t lose profits when energy use decreases. A “decoupling” policy divorces profits from sales. Practically, this creates a baseline guaranteed profit for utilities, and it often forces consumers to pay for electricity even if they didn’t use it.

The increased cost of energy isn’t just a side effect of Maryland’s environmental agenda; for radical green policymakers, it’s the point, explains Myron Ebell, the director of energy and global-warming policy at the Competitive Enterprise Institute. Already, consumption has decreased by 9.4 percent under O’Malley’s tenure, according to the Maryland Energy Administration.

“The purpose of [such green policies] is to make people poorer so they can’t use as much energy,” Ebell says. “They are making life very difficult for the lower-middle-class and working-class people and creating a greater divide between rich and poor, and despite the rhetoric that we need to reduce inequality, it’s really designed to do the opposite.”

Maryland’s poorest families could breathe easier if they were allowed to use cheaper energy sources.

The Maryland Budget & Tax Policy Institute has highlighted a “home energy affordability gap,” noting that energy is considered affordable when it costs less than 7 percent of household income. But in Maryland, people at 50 percent of the federal poverty level or below devote about 40 percent of their income to energy consumption, says Richard Doran, program director of the Fuel Fund of Maryland.

Only eight states had a bigger affordability gap, according to the Maryland Budget & Tax Policy Institute. Furthermore, it noted, “Maryland’s affordability gap has grown 198.8 percent between 2002 and 2011 (the most recent data).”

Right now, Doran says, at least 500,000 state residents are struggling to pay their utility bills. And Children’s HealthWatch, which provides nonpartisan policy analysis, reported in 2011 that 15 percent of Baltimore residents had been threatened with a shutoff and that an additional 18 percent were heating their homes with a cooking stove, had experienced a shutoff, or lived in an unheated home.

Of course, no one mentions that O’Malley’s ambitious green policy has an outsize and detrimental impact on the state’s most economically vulnerable residents. But as a long, cold winter settles in, O’Malley would do well to consider the human cost of his environmental agenda.

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.


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