Necessary skyrocketing

Here it comes.  DirectorBlue (Doug Ross) has a superb summary of recent updates on the colossal increase in electricity prices being imposed by the Obama EPA.  With the ongoing and prospective shutdown of coal-fired generating plants throughout the Northeast, the recent power-capacity auction for the year 2015 produced a market-clearing price of $136 per megawatt, or eight times the price from the 2012 capacity auction.

For northern Ohio, the price was a surreal $357 per megawatt – because northern Ohio has been heavily reliant on coal plants that will all be shut down by 2015.

These increases can only be passed on to the consumer – or taxpayer.  Again, this is what bidders actually committed to pay for power generating capacity.  As Doug Ross reminds us, this isn’t information from a model; it’s a real-world, market-driven data point.  It’s going to cost that much to generate power without the coal plants.  If you want electric power, you’re going to have to pay the rate that makes it possible to generate power at that cost.

And, of course, almost no one can afford to do that.  Suppose the eight-fold increase in the auction price produced a commensurate eight-fold increase in the unit price of a kilowatt-hour for the consumer.  (It may not, but it will produce a significant increase, probably on the order of 500-700%.)

Imagine the average $120 or so monthly electric bill of Northeasterners exploding to $960 a month.  The 500-700% increase would produce average bills running from $600-720 a month.

Even just doubling the amount of people’s electric bills would entail a huge economic shock.  The eight-fold-increase numbers are hard to get our minds around, but supposing that the increase no more than doubled or tripled the amount of the average electric bill – with the residue being absorbed by taxpayer-debt-funded government programs – it would still have a very disruptive effect on social cohesion.  Only a small percentage of Americans would riot in the streets, but millions of Americans would begin fleeing the areas where they could no longer afford to live.

Those who already live in rural parts of northern Ohio would no doubt turn exclusively to diesel generators, propane heaters, and wood fires.  (Which we can expect would then be outlawed.)  They and their rural confreres in the neighboring states would be joined by more and more refugees from the cities.  Suburbanites would go off-grid to the extent they could, but would remain captive to urban regulation.  Many in the Northeast and Midwest would make the long delayed decision to move elsewhere – south and west – even if that meant losing the investment in their homes.  Still others would begin considering the move for the first time.

What Americans will not do is blithely revert to living in 19th-century conditions in the cities.  More than household electric bills will skyrocket:  the cost of everything in life that relies on electricity – in other words, everything – will skyrocket as well.  Retailers, no matter what they sell, will have to charge much, much more for their products, not only because making them costs the producers more, but because keeping the lights on or the machines operating in the retail facility will cost so much more.

This electricity increase will force thousands of businesses to shut down.  Even many big businesses can’t handle this cost increase.  It will kill more jobs than anything has to date, making the Great Depression look like a roaring recovery.  It will make things we take for granted, like fresh produce, impossible to obtain unless you live right next to a farm (and live outside of the Northeast, where commercial farming will die out entirely) – but it will also distort and suppress all kinds of sophisticated and packaged production, including those related to the most basic necessities.  The price of gasoline may remain comparatively stable, but if there are far fewer retailers to ship products to, many truckers will still go out of business.

Doug Ross cites the North American Electric Reliability Corporation (NERC) predicting that the massive shutdown of coal plants will compromise the reliability of the power grid in the Northeast.  But we must also consider the likelihood that power companies will lose so many customers, and lose so much revenue, that they will go under.  “Saving” them with big bailouts would only make the areas they serve more beholden to their “patrons” in the federal government.

These are mostly first-order effects.  As distortions mushroomed in the Northeast, we can assume that the federal government would not stand idle.  If its priority remained limiting the people’s access to electric power, it would do whatever was necessary to ensure that there would be no benefit from fleeing to the other parts of the country.

The bottom line on this prospective skyrocketing is that it cannot happen without tremendous social disruption.  That doesn’t mean the American people will turn violent or undisciplined – a small minority would, and they are already displaying their character as we speak – but it does mean that we cannot continue life as we know it, with almost everyone in the northeastern part of the country artificially priced out of the convenience of central-grid electric power.

Keep in mind, this is entirely artificial.  This is government policy, made independently of any sort of outside crisis.  Nothing imposes this on us except the Obama administration’s acceleration of hallucinatory ideological extremism.

Ross notes that after NERC published its estimates on the reliability problems of the future power grid, it was promptly investigated by the Federal Energy Regulatory Commission (FERC).

J.E. Dyer’s articles have appeared at Hot Air’s Green Room, Commentary’s “contentions,” Patheos, and The Weekly Standard online.

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