The Midwest Wind Surtax

| Monday, January 3, 2011 | |
The latest scheme to socialize
the costs of renewable energy.

by The Wall Street Journal

You'd think poor Michigan has enough economic troubles without the Federal Energy Regulatory Commission placing a $300 million to $500 million annual surtax on the state's electric utility bills. But on December 16 FERC Chairman Jon Wellinghoff announced new rules that would essentially socialize the cost of transmission lines across 13 states in the Midwest.

That region-wide pricing scheme, according to a study commissioned by utility companies, will force Michigan to pay about 20% of as much as $20 billion in new high-voltage transmission lines—though Michigan businesses and homeowners will get little benefit. Thanks to FERC's new tariff, nearly everything in Michigan—from cars and trucks to Frosted Flakes—will be more expensive to make. Indiana will also absorb new costs, as will industrial users and utility rate payers in Illinois, Minnesota and Wisconsin.

This is another discriminatory subsidy for wind energy that will raise electricity prices on everyone, notably on those who don't rely on wind for electric power. FERC's grand vision is to build hundreds of miles of transmission lines across the Midwest, linked to windmills in Iowa and the Dakotas. Mr. Wellinghoff says this new ruling "is the next step in the evolution of its transmission and cost allocation process."

In fact, this is the first step in a FERC scheme to socialize transmission costs nationwide. In June FERC drafted a rule to create a new national transmission pricing policy that would link wind and solar energy projects to the national electricity grid. (See our November 7 editorial, "The Great Transmission Heist.") Those rules are expected to be finalized in mid-2012.

Traditionally and by law, FERC has set prices on the economically efficient and environmentally sound standard that users pay for the cost of the electricity they consume. For at least 65 years, the courts have ruled that payment by the beneficiaries is the "touchstone in any legal analysis of FERC-approved rate schemes" (as the D.C. Circuit Court of Appeals has put it). The new pricing rule departs from that principle, because FERC would establish a new category of transmission lines called "Multi-Value-Projects." This would take into account broad "public policy goals," most notably increased use of so-called clean energy to comply with renewable energy standards.

Let's be very clear on what's happening here: Mr. Wellinghoff and FERC are trying to establish by regulatory fiat a national energy policy that Congress has refused to endorse. Last summer Congress rejected the Obama Administration's renewable energy standard law because it would have inflated power costs. So the fiefdom at FERC is unilaterally moving ahead to require that industries and homeowners pay a surtax on their utility bills for a nonexistent renewable energy policy. This is similar to the EPA's initiatives to regulate carbon even after Congress rejected cap and trade.



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