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Blais: Green Energy - More than Just “Food for Thought”

Thursday, March 20, 2014

 

Rhode Island's representatives had a wonderful opportunity recently, to gain the perspective of national leaders. John Kennedy, Senior VP from CVS and Aaron Renn, entrepreneur and publisher of Urbanophile.com spoke at the House economic workshop. John Kennedy offered his insight on why " people just aren't thinking about RI " when it comes time to expand or locate a business. Mr. Kennedy told them that RI's high cost of energy is on a list of one of the top 4 reasons.

So why, then, does our General Assembly insist on putting forth legislation that only promises to significantly increase the burden of high energy costs here in the state. Last week, Senator Sosnowski's bill (S 2690) was heard in committee. She, along with Senators Walaska, Conley, Cool Rumsey and Bates, believe it will be in Rhode Island's best interest to increase the mandate for utility companies to purchase more of their electricity from renewables - which would be a good move if the cost of renewables were competitive. However, it's not. The state forces National Grid to make these purchases even though they cost significantly more than what the average rate is for gas or coal generated electricity. The Senators' bill refers to 15-20 year permanent tariffs to finance renewable energy. This increased cost is ultimately borne by the ratepayer.

Some light reading.

Have you seen the recent report, distributed by the RI Center for Freedom and Prosperity (in conjunction with the Beacon Hill Institute), that reviewed the economic impact of the renewable energy mandates already in existence? Under the mandates that are already contained in Rhode Island law, the study shows that, in just 6 short years, by 2020, the current mandates will have a detrimental effect on employment, will reduce disposable income, will decrease private investment in the state and will increase the cost of energy not just for households, but for business and industry. This seems to be diametrically opposed to what our elected leadership claims it wants to do in the current economy.

Even more importantly, because DeepWater Wind is not up and running yet, the conclusions of this report do not consider the impact that the estimated $350 - $500 million cost will have on Rhode Island ratepayers. DeepWater Wind alone will have a significant, detrimental effect on RI's economy. More lost jobs, because contrary to the claim of increased "green jobs", many reports cite that more jobs are lost in other industries than are offset by any new green jobs gained, and generally speaking, the majority of those new green jobs are temporary.

Take a look at the great green hope.

Even the great green hope, Germany, has a panel pushing to turn back the hands of time on green energy. Because of rising costs associated with an aggressive renewable energy program, Energy Minister Gabriel is recommending cutting the average subsidy for wind, solar and other renewable power sources. Chancellor Merkel agrees. According to 'The Economist' Germany's cost of electricity is rising as the 2000 law guarantees 20 years of fixed high prices for solar and wind producers (is that similar to Senator Sosnowski's 15-20 year permanent tariff?). The subsidy is costly. An average household now pays an extra $355 a year to subsidize renewables. Costs are increasing for companies and are making them less competitive with America. As disturbing as all of this is for an economy like RI's, the irony worth noting is the impact that moving to the costly renewables in Germany has had on the environment. Because wind and solar are so unpredictable, conventional power plants have had to remain in operation to ensure a continuous power supply. The green energy plan, known as Energiewend in Germany, has so far increased, not decreased greenhouse gas emissions!

The warning bell is sounded in Germany.

The former German Chancellor, Schroder, warns in his new book that the support for renewable energy through the electricity price will lead consumers, especially the ones near the bottom of the income scale, to eventually revolt and say "We can't afford this anymore”. Additionally, he writes that German companies are already reconsidering plans to build plants in Germany, and are considering setting up in low-price-energy locations instead. Sound familiar?

But if mandates for renewables and higher utility bills aren't enough, there's more green legislation.

Visualize the speck of Rhode Island superimposed on a map of the US, contiguously aligned with China and India. Then consider population - Rhode Island's population of 1 million (give or take) compared to the combined 3 billion of the US, China and India. Do you have the image of a speck in the universe? That is what RI's relative effect on worldwide climate change looks like when trying to regulate carbon emissions here in Little Rhody.

Death by bureaucracy.

Last week Representative Handy introduced a 23 page piece of legislation (H 7904) to hold back the tide. Representative Handy, along with Representatives Ruggiero, Walsh, Keable and Naughton believe that the pinprick on the map known as Rhode Island, can make a dent in the impact that climate change is theoretically having on the world. Handy was quoted as saying that this bill would "bring more certainty to families and businesses that their homes and investments are safer here than elsewhere". We wonder what households really think of legislation that would significantly add to the cost of their monthly bill by mandating a target of 25% renewables by 2025, up from the current 16% by 2019. Or how businesses would respond to building code regulations that mandate "climate change mitigation through reduced energy consumption" with targeted reductions in greenhouse gas emissions, in both existing and new buildings, to be 50% below 1990 levels in just 20 years and reduced 85% by 2050. Gulp.

Alternatively known as "The Climate Change Adaption and Mitigation - Resilient RI Act of 2014", the name alone should be enough to make every RI taxpayer and businessman shake in their shoes. This bill cites the "rising sea levels" and the "more intense storms driving worsening floods", along with "measurably longer and hotter summers and heat waves" and "increasingly damaging coastal storms" as the premise for increasing the power and authority of 36 state departments, offices, commissions, councils, agencies and instrumentalities and creating a new Climate Change Science Advisory Council and a new Climate Change Adaptation Planning and Implementation Coordination Committee. All of this in addition to the existing State Planning Council, RI Greenways Council, RI Office of Energy Resources, and the RI Energy Efficiency and Resources Management Council. Of course, all of this will be coordinated with the now defunct Economic Development Corporation (EDC), currently known as the RI Commerce Corporation. A lot of bureaucracy, but to what end?

An Octopus only has 8 tentacles.

Then there's the "guidelines" to be developed by the Public Finance Management Board for use by the state and municipalities with their myriad departments, agencies, authorities and other bureaucracies, all for the purpose of considering the effects of climate change on any asset financed through the issuance of bonds. These guidelines will also be used by the Chair of the House and Senate Finance Committees, the Committee on Municipal Government and the House and Senate fiscal advisor.

How much would all of this cost and what would be the impact on RI's economy?

While the RI Center for Freedom and Prosperity has begun modeling the effect of mandating the reduction of carbon emissions and the increased usage of renewables, OSTPA has reviewed the state legislative website and cannot find any evidence of modeling that has been performed by the legislators proposing the bills. Perhaps it is a work in progress. Calculating an estimate of the impact on Rhode Island is necessary to make a determination as to whether the cost of implementing such sweeping change is offset by the benefits to Rhode Island.

So what will Rhode Island's leaders do in the face of a national perspective?

When CVS' Mr. Kennedy noted the top four issues that companies look at when determining where to locate their business, they were nothing different from what RI's own local economists, economic advisors and taxpayer groups have been focusing on for years - the state's fiscal stability (ie. employment and long-term budget projections), the cost of doing business (the tax burden, the regulatory environment and the cost of energy), the quality of the work force, and the infrastructure. At the end of the economic workshop, House Speaker Fox said the workshop offered "food for thought". Mr. Kennedy made it clear, that from a national business perspective, when companies have a choice to locate anywhere in the country, RI is not even 'food for thought'. Will making RI a leader in carbon emission reduction, at the expense of increasing the cost of living and doing business here, create an environment where companies want to expand or relocate?

Just think about the lack of interest in the I-195 land development on display recently and the answer for Rhode Island's leaders becomes crystal clear.

Lisa Blais is a board member of OSTPA, a taxpayer advocacy organization in Rhode Island.

 

Related Slideshow: The Ten Biggest Issues Facing the RI General Assembly in 2014

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#1

The Budget

The latest report by the House Finance Committee illustrates that Rhode Island will start the next fiscal year, which starts in July 2014, with an estimated deficit of $149 million. The report shows the FY 2014 Budget contains numerous overspending problems—meaning that the General Assembly will have to cut costs somewhere.

So where will the cuts come from? Lawmakers will have to examine the state's costliest programs. According to the Rhode Island Public Expenditure Council, the most expensive government programs in Rhode Island are Elementary and Secondary Education, Public Welfare, Pensions, Higher Education, and Interest on Debt. Click here to view a comprehensive list of the state's costliest government programs.

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#2

Bankrupt Communities

The state may be two years removed from Central Falls filing for bankruptcy, but 2014 could be the year that other financially strapped Rhode Island communities follow suit—most notably Woonsocket and West Warwick.

With bankruptcy on the table in both 2012 and 2013, this year poses more financial uncertainty for the cash-strapped city of Woonsocket. Earlier this year, the city's bond rating was downgraded due to the city's numerous financial issues—including a growing deficit, increasing unfunded pension liability, and a severe cash crunch.

Similarly, the embattled town of West Warwick faces a variety of financial questions in 2014. With its pension fund set to run out by 2017, the town must address its unfunded liabilities this year if it hopes to regain financial stability. That, coupled with an increasing school department deficit, make West Warwick a contender for bankruptcy.

Look for Woonsocket and West Warwick's elected state officials to address their respective cities' financial issues in the upcoming legislative session.

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#3

Sales Tax

With the Special Joint Legislative Commission to Study the Sales Tax Repeal set to report their findings to the General Assembly in February, the possibility of sales tax repeal in Rhode Island could become a reality in 2014.

"Our sales tax is killing small businesses, especially those in border communities," said Rep. Jan P. Malik (D-Dist. 67, Barrington, Warren), the commission's chair. "How can Rhode Island continue to compete at 7 percent, with Massachusetts already lower than us and considering reducing its sales tax even farther? How can Rhode Island restaurants compete at 8 percent? They can’t. We need to find a way to fix this, and a serious discussion of our sales tax is a discussion we need to have, now, before more small stores close their doors."

In addition to Malik, proponents of sales tax elimination include the Rhode Island Center for Freedom and Prosperity and Forbes Magazine.

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#4

EDC Reorganization to Commerce Corporation

On January 1, 2014, the Rhode Island Economic Development Corporation will be replaced with the Rhode Island Commerce Corporation—a move which has the potential to impact to adversely affect recipients of federal funding contracts made possible currently through the EDC.

This could include the state's Broadband Initiative, Brownfields program, and other contracts made through the EDC. As a result, recipients will now be required to re-apply for federal funding as of January 1st.

The massive overhaul of the EDC was prompted by the 38 Studios debacle, which is projected to cost Rhode Island taxpayers $102 million. 38 Studios, the now defunct video game company, filed bankruptcy in May 2012 just months after securing a $75 million loan from the EDC.

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#5

Marijuana Legalization

With the state's marijuana decriminalization law going into effect this past April, Rhode Island may be a candidate for marijuana legalization in 2014.

Legislation to legalize marijuana has been introduced in each of the last three years, but has never been voted on. Earlier this year, Rep. Edith Ajello (D-Dist. 3, Providence), who is chair of the Judiciary Committee, introduced the bill in the House. Roughly half of the Judiciary Committee supports the measure.

The bill also has the support of the Marijuana Policy Project, an organization focusing on drug policy reform, which hopes to legalize marijuana in ten states, including Rhode Island.

Approximately 52 percent of Rhode Island voters support legalizing marijuana for recreational use, according to a Public Policy Polling survey conducted in January.

Marijuana is currently legal in Colorado and Washington.

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#6

Constitutional Convention

Come November 2014, Rhode Island voters will likely be asked whether they wish to convene a constitutional convention, which involves individuals gathering for the purpose of writing a new constitution or revising the existing one.

Every 10 years, Rhode Island voters are asked whether they wish to amend or revise the constitution. Voters rejected this opportunity in 1994 and 2004. Although rare, Rhode Islanders can vote to hold a constitutional convention and in effect, take control over the state government.

If approved, a special election is held to elect 75 delegates, who then convene to propose amendments to the Rhode Island Constitution. These amendments are then voted on in the next general election.

The likelihood of this occurring highly depends on if the General Assembly does its job to ensure residents that the state is heading in the right direction financially and structurally.

Rhode Island’s last constitutional convention took place in 1986. It proposed 14 amendments—eight of which were adopted by voters.

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#7

Education Board Structure

Less than a year after the General Assembly created the 11-member Rhode Island Board of Education to replace the Board of Regents for Elementary and Secondary Education and the Board of Governors for Higher Education, there are multiple questions surrounding the structure of this newly consolidated agency.

Although lawmakers voted to merge the state's two education boards in June, the Board of Education now wants to split its agency to create two separate councils—one with the statutory authority over kindergarten to grade 12 and another governing higher education.

The Board of Education will present its proposal to the General Assembly during its next legislative session and lawmakers will once again determine how the agency should be structured.

The Board of Education currently governs all public education in Rhode Island.

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#8

Sakonnet Bridge Tolls

Rhode Island may have implemented tolls on the Sakonnet River Bridge this past year, but they could be gone by 2014.

On January 15, the East Bay Bridge Commission—which was established to allow lawmakers and officials investigate various funding plans, potentially eliminating the need for tolls on the Sakonnet River Bridge—will report its findings to the General Assembly. The General Assembly is then required to vote on the issue by April 1.

The commission was established in July following the General Assembly's approval of the 10-cent toll.

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#9

Superman Building

Located on Westminster Street in Downtown Providence, the former Bank of America Building (commonly referred to as the Superman Building) may be the tallest building in the state, but as of right now, it's just a vacant piece of property.

The building's current owner, High Rock Westminster LLC, was most recently looking for a total of $75 million to rehabilitate the skyscraper—$39 million of which would come from the state.

With the sting of the 38 Studios deal still fresh in the minds of lawmakers, a $39 million tax credit appears unlikely.

The question of what will become of the Superman Building remains to be seen. 

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#10

Master Lever

Championed by Republican gubernatorial candidate Ken Block (while head of the RI Moderate Party), the movement to eliminate the Master Level, which allows voters to vote for all candidates of one political party with a stroke of the pen, is poised to heat up in 2014.

Despite Block's strong push to repeal the 1939 law, the measure did not get a vote in the General Assembly last session.

In October, Block told GoLocal that he believes that House Speaker Gordon Fox is responsible for the General Assembly not voting on the proposal.

“Despite the support of a majority of 42 state Representatives, thousands of emails from concerned RI voters and unanimous testimony of more than 100 people who came to the State House in person to testify that the Master Lever had to go, the Speaker personally killed the bill in the most unaccountable way possible—he did not allow the House Judiciary Committee to vote on the bill,” Block told GoLocal.

Speaker Fox has stated on multiple occasions that he believes the Master Level is a legitimate tool that many voters use.

 
 

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