Conservatives crave an energy-policy reset. Timing is essential, and given last week’s decision by federal regulators to reject the Trump Energy Department’s proposal to subsidize old power plants, that time has arrived. The conservative answer to the administration’s anti-competitive bid lies in embracing future-shaping competitive forces, especially the ones driving old plants into retirement.
Regions with competitive electricity markets have seen aggressive investment in innovative resources, which has expanded customer options and lowered customer bills. From 2008 to 2016, electricity prices declined 8 percent in competitive states, compared with a 15 percent increase in monopoly states. No state has performed better than Energy Secretary Rick Perry’s home state of Texas.
Elsewhere, bad decisions by monopoly utilities and their regulators have stifled innovation and yielded costly investments, leaving captive customers to foot the bill. For a telling example, look no further than the $10 billion sunk into a South Carolina plant that will never reach completion. This is déjà vu for the electric industry, which saw monopolies botch similar big-ticket investments in the 1970s and 1980s. These mistakes motivated conservatives to push for competitive markets in the 1990s and early 2000s. And here we are again.
Markets unleash new low-cost investment and push high-cost power plants, such as those the Energy Department sought to save, into retirement. Indeed, the technical lead of the department’s 2017 grid-reliability study underscored that “as a root cause of retirements, wholesale competition worked as intended.” The resulting price reductions have created tens of billions of dollars in savings, which has attracted the attention of big tech companies, retailers, and manufacturers, not to mention homeowners and small businesses.
Yet competitive power markets have been a political victim of their own economic success. While driving new investment, they also drive out unprofitable power plants with strong political loyalties. This tempts elected officials to pick winners and losers — a trap into which the Trump administration and some states have fallen. State bailouts of unprofitable power plants, which have harmed customers and the environment, have too often faced little conservative resistance. Meanwhile, the Trump Energy Department’s proposed plan merely selects as winners those his predecessor deemed losers.
What made America great in the 1980s and 1990s was not that government picked the right winners, but that we pushed reforms to shift investment decisions — especially their risks — from government to the private sector. We put our confidence in market forces; we didn’t let fear undermine liberty. Unfortunately, the Energy Department’s rejected plan played the fear card — arguing that retirement of aging power plants would cause blackouts — instead of offering a positive reform agenda to break down entry barriers and encourage innovation. Now the Trump administration has a second chance to get things right.
Principled conservatives recognize that simply picking different winners than the Left would pick is not conservative, it’s just playing the big-government game in reverse.
Fortunately, principled conservatives recognize that simply picking different winners than the Left would pick is not conservative, it’s just playing the big-government game in reverse. There’s nothing conservative about coal and nuclear power, nor anything liberal about renewables and energy efficiency. Progressives use the coercive power of the state to influence investment decisions; conservatives — principled ones — want private capital to flow through free markets to meet customer needs. If there’s any consolation from the Energy Department’s Hail Mary, it’s that it forced the conservative movement into action. And respond we will.
Although briefly distracted, the conservative movement has reawakened. Conservative officials, think tanks, and activists have begun reorienting their efforts to advance energy competition and customer choice. These groups are pushing competitive reforms in places such as Nevada, Florida, and the Midwest while resisting power-plant bailouts in the Northeast and Middle Atlantic. They also seek reforms to enhance competition in federal power markets. And they’re finding a lot of company.
The conservative energy movement is redefining itself at a critical time. The Trump administration is right to put America’s economic interests first. But we do that by reducing regulation and encouraging competition, not by subsidizing the past.
— Devin Hartman is the electricity-policy manager at the R Street Institute. Pat Wood is a past chairman of the Public Utility Commission of Texas and was the chairman of the Federal Energy Regulatory Commission under George W. Bush.