Smart Policy gone STUPID — Rural Electricity run amok

Simply put, we can’t afford as a nation to be stupid anymore …

And, part of the path toward stopping stupidity is understanding when smart policy has gone awry and now is stupid … simply bad for the nation.

Truth be told, there are many programs and many arena where that is true. For an excellent example of this, see Devilstower’s masterful Earth Day: Drowning in Concrete. The national investment in highways might have made sense under President Eisenhower, but our continued massive overinvestment in concete is damaging us today and into tomorrow.

Well, another long-term investment program has moved from the bin of smart policy into dangerously stupid: From the brilliance of the New Deal’s Rural Electrification Administration to the too-often disastrous 21st century Rural Utilities Service.

While long aware of how RUS provides subsidized loans to some of the wealthiest communities in the nation, the lead article in today’s Washington Post highlights something that had not gotten on the radar scope before: the RUS is fostering a far more polluting approach to energy supply than what should be occurring. As per Federal Loans for Coal Plants Clash With Carbon Cuts,

A Depression-era program to bring electricity to rural areas is using taxpayer money to provide billions of dollars in low-interest loans to build coal plants even as Congress seeks ways to limit greenhouse gas emissions.

That government support is a major force behind the rush to coal plants, which spew carbon dioxide that scientists blame for global warming.

The beneficiaries of the government’s largesse — the nation’s rural electric cooperatives — plan to spend $35 billion to build conventional coal plants over the next 10 years, enough to offset all state and federal efforts to reduce U.S. greenhouse gas emissions over that time.

We — the American taxpayer — are subsidizing, via RUS, federal loans that are “2 to 2.25 percentage points lower than the rates for commercial loans”. When it comes to creating new power production, capital costs are a key factor. In this case, “budget experts say the favorable federal loans have reduced the cost of new power generation by 15 percent.” Now, if we were talking about wind or solar or wave power, or investments in energy efficiency, as a taxpayer, I’m ready to write the check. But for coal-fired electricity?

Now, let us divert to another angle on this issue — there might be a bipartisan path toward tackling this challenge. Consider the related 2004 Heritage Foundation report More Corporate Welfare Embedded in the Farm Bill.

The federally subsidized system of electric co-ops was created in 1935 during the depths of the Great Depression, which was especially severe in the rural parts of America. At that time, the availability of electric power was still largely confined to urbanized areas, and many rural and farm families still relied upon kerosene for light and wood for heat.

In an effort to get the economy going and provide relief for rural areas, President Roosevelt signed an executive order that authorized the USDA to provide low-cost federal loans to build the infrastructure – power plants and lines – to provide subsidized electricity to unserved farms and rural areas.

Seems that Heritage endorses this New Deal initiative … and, while not on board with much of the tenor of the analysis, this does ring true to me …

By the early 1970s, these electric cooperatives had accomplished their mission: electrification had reached about 99 percent of rural households and farms. But rather than declare the mission accomplished and disband the expensive subsidy program, Congress continued it and allowed it to become even more generous, as the gap between the government’s subsidized co-op lending rate and market rates widened.

There are, certainly, areas in the country that merit continued assistance in terms of guaranteeing power supply … efficient, distributed generation, renewable power supply … but these don’t include rich suburbs of Dallas or shopping malls.

Back to the Post article:

James J. Jura, chief executive of Associated Electric Cooperative, a co-op that has both government and commercial loans, said much of his region’s growth comes from retirement and recreational developments near lakes around Branson in southwest Missouri. The town’s Web site boasts of a 17-story luxury condominium complex, a new shopping mall, 17,000 hotel rooms and dozens of theaters. “No, this isn’t Manhattan or Las Vegas; it’s Branson, Missouri,” the site says.

Now, should luxury condos and 17,000 hotel rooms and ‘dozens’ of over-airconditioned movie theaters be receiving (heavily) subsidized electricity?

Glenn English, chief executive of the National Rural Electric Cooperative Association, said rural areas still need help to meet growing power demands at reasonable costs and that burning coal makes sense. He said per capita income of co-op members and consumers is 15 percent below the national average

Let’s separate this out:
1. “per capita income” — if we took out out of the program the now suburban, once rural, communities that are now rich, perhaps the ‘per capita income’ would be even lower and even more meriting of federal assistance.
2. “burning coal makes sense” — makes sense to who? Makes sense in what conception? At a time when the nation is soon (we hope) to turn to the necessary path of treating CO2/GHG emissions seriously, subsidizing coal — rather than taxing its emissions — does not make sense.

Now, is there an acceptable path forward?

English is quick to point out that taxable utilities get tax breaks to encourage wind farms or more-efficient coal plants, and that municipal utilities can sell tax-exempt bonds to raise money cheaply. English wants Congress to give the nonprofit, tax-exempt rural utilities similar incentives, such as no-interest loans.

A clear path exists to get back to Smart Policy from today’s stupid approach:

1. Do means testing for rural electrical / energy assistance programs.
2. Foster profit de-coupling in rural utilities, to encourage investment in energy efficiency programs.
3. Provide significantly favorable loan assistance for renewable energy capital investment
4. Eliminate any assistance to new coal-fired electricity production

Let’s not forget that this program emerged to solve — and it basically did solve — a real problem. This was (and remains, in many ways) a great success. It was and is a tremendous example as to the power and value of collective, societal action to turn things toward a better path, to create a better future.

We should recognize, however, when smart becomes stupid … and seek to get back on a smart path again. As We can’t afford as a nation to be stupid anymore … this Post article brings attention to something stupid — lets work to shift this to something that will help
Energize America toward a sustainable energy future.

Energy Smart

Ask yourself: Are you doing your part?

One response to “Smart Policy gone STUPID — Rural Electricity run amok

  1. Pingback: Coal: $35 million in Astroturfing « Energy Smart

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