California Businesses Don’t Benefit from Abundance of Electricity

by | Feb 17, 2017

CaliforniaCalifornia likely is the leading state for promoting energy efficient operations and renewable energy generation. It seems logical that this would lead, over time, to lower electric bills for its businesses.

It’s logical – but wrong. In fact, ratepayers in the state are paying a lot more than those elsewhere, according to a story in the Arizona Daily Sun. The reason is simple: Though subscribers are cutting their use – through voluntary steps and state mandates – rate hikes to finance power plants already are on the books. The story says that those increases will come, regardless of the fact that the extra capacity is not needed:

Although California uses 2.6 percent less electricity annually from the power grid now than in 2008, residential and business customers together pay $6.8 billion more for power than they did then. The added cost to customers will total many billions of dollars over the next two decades, because regulators have approved higher rates for years to come so utilities can recoup the expense of building and maintaining the new plants, transmission lines and related equipment, even if their power isn’t needed.

It found that power plants in the state will be producing 21 percent more power than it needs by 2020. That figure, the story says, doesn’t even factor in the growing amount of solar energy that will further reduce demand from plants. The story looks at how this confounding scenario evolved.

The high cost of electricity in California is a common complaint of businesses It was cited by LA Biz’s Joseph Vranich as a reason that the state lost the headquarters of Nestle USA, which was in Glendale, to a combination of Virginia, Ohio and Missouri. Vranich, who calls energy prices in the state “stratospheric” (and in italics) referred back to the previous departure of an H.J. Heinz Co. processing plant from Stockton in analyzing Nestle’s move.

The plant’s location was perfect because of its proximity to the Central Valley, which is rich in tomatoes. Wrote Vranich:

A Heinz statement said nothing about energy costs, but it’s logical that they were calculated. For comparison’s sake, according to the U.S. Energy Information Agency, during the first eleven months of 2016 California’s average industrial electricity cost was 95 percent higher than Iowa’s and 79 percent higher than in Ohio.

The irony is that California is extremely energy conscious. For instance, it is in the process of adopting stringent rules on energy consumption by computers. The businesses in the state can be proud that they are leading the nation in the right direction. They won’t, however, benefit financially.

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