John Stoehr: Energy costs hold back state economy
Published 12:00 am, Sunday, July 16, 2017
A long time ago, I was the managing editor of a newspaper that’s now long gone. I had occasion to chat with the business side about what makes clients tick. Our advertisers were small firms: bars, restaurants, retail shops and entertainment venues. Naturally, the subject of politics would come up, as would complaints about taxes. But oddly, a recurring complaint was the cost of doing business.
By that, they meant energy.
I say “oddly,” because energy is usually not implied in serious discussions about the cost of doing business in Connecticut. When people say it’s too high, they usually mean taxes and fees and other things lawmakers can do something about if only they’d come to their senses. But we don’t usually mean the cost of electricity.
I don’t know but I suspect that’s because most of us believe politicians can do little about it. They can slash taxes. They can cut red tape. But they can’t force utilities to stop charging sky-high prices for heating and cooling our homes and businesses.
It’s in fact an open question. Utilities are a public good. Because they are, elected officials have a lot of say. When Eversource wants to raise rates, it must seek regulatory approval. Connecticut’s biggest power company usually gets its way, of course. Our energy needs are geographically defined. Like the rest of New England, we are far from sources of energy. We don’t have coal, oil or natural gas industries. We have to import, as it were, the energy we need.
This is a major problem, a structural problem. Connecticut is already suffering from a reputation as a bad place to do business. That reputation, deserved or not, is compounded by the reality of being the most expensive state to buy energy. A new report by WalletHub, a finance website, puts us near the top. Resident pay on average $166 a month for electricity. Only Hawaii pays more.
It’s hard to imagine this problem getting better when, all things being equal, climate change will make our winters more volatile and our summers hotter. Put these together and you have something small businesses really dislike: high fixed costs and uncertainty.
I have talked a lot in this column about what the state can and should do to goose an economy stagnating for a couple of decades. One is increasing competition. Two is spending on basic and advanced infrastructure. Three is workforce development. But another thing ought to be fixing the above structural flaw. We can cut taxes to the bone but that won’t have the desired impact if we still pay almost as much on average for electricity as people living on an isolated archipelago in the middle of the Pacific Ocean.
Gov. Dannel P. Malloy nudged us in the right direction. Love him or hate him (and there are many reasons for both), we should appreciate that the country’s second-least popular governor did the right thing in creating a department focusing on renewable energy.
It was a slow start. It took a while for the Department of Energy and Environmental Protection to license the state’s first anaerobic digester, in Southington, that burns gases released from rotting food waste. But the department appears to have worked the kinks out and is working with entrepreneurs to build more facilities. And it has played a central role in expanding solar and wind.
But we can do so much more. Most of the energy consumed in Connecticut comes from burning natural gas. That natural gas has to be brought into the state (we don’t have our own industries). And the need to import that natural gas means we pay out the nose. So the natural solution might be to stop importing.
My point is that energy independence is a goal worth exploring. I don’t know if that’s possible. There are more than 3.5 million people in this state, but trust me, if energy is cheaper, lots of things can happen. Ohio benefited greatly from its fracking boom. We don’t need to frack, though. Unlike Ohio, we have a coastline.
We can put windmills in the Sound.