Abandon Free Market Principles to Save Competitive Energy Markets?

At the unveiling of the George W. Bush Presidential Center, former President Bush admitted to going against his “free market instincts” when he bailed out the banks following the financial crisis. “History shows that the greater threat to prosperity is not too little government involvement, but too much,” he added.

We couldn’t agree more.

Abundant, affordable energy is the foundation of modern prosperity. One of the most pernicious things that the Obama administration did was to interfere with the availability of affordable energy, lavishing subsidies and regulatory support on any trendy, inefficient and expensive technology or energy source that could be branded as “renewable.” The Obama administration’s government distortions raised costs for consumers and destroyed jobs in industries that did not gain government favor in an attempt to “finally make clean energy the profitable kind of energy.” This picking of winners and losers is no way to manage competitive energy markets in a free society.

The American Energy Alliance has not been alone in recognizing the baleful effects of government favoritism. Many clear-eyed politicians have also understood the negative impacts of excessive government intervention in energy markets.

In 2011, then Governor Perry exhorted voters to elect him president so that he could “level the playing field for all energy producers, removing Obama’s practice of picking winners and losers.”

In 2014, 55 House Republicans inveighed against a government subsidy which “has not only cost taxpayers billions, but has caused significant price distortions in wholesale electricity markets.”

In 2015, Rep. Alex Mooney spoke it plainly: “The government shouldn’t pick the winners and losers. What I object to is the government interfering in the market.”

In 2016, leaning on his experience as a state utility regulator, Rep. Kevin Cramer explained that “when ratepayers are subsidizing with an additional cost because of a mandate, that’s different. That’s punishing the ratepayer.”

This past summer, Rep. Keith Rothfus reminded us “the federal government’s role isn’t to pick winners and losers.”

Just a few weeks ago, Senator Shelley Moore Capito indicted the Obama administration for issuing “heavy-handed regulations to pick winners and losers among energy industries.”

Many of the companies that were targeted for harm by the Obama administration likewise stood with us and these political leaders against federal government distortions in energy markets.

FirstEnergy, one of the largest investor-owned utilities in the country, saw things clearly, noting “measures that restrict customer shopping or subsidize one electric generator over another are throw-backs to monopoly regulation. Such efforts that pick ‘winners’ and ‘losers’ in the energy market would create obstacles to private investment in generation and increase prices for customers.”

Earlier this year, the CEO of Murray Energy, correctly noted that under the Obama administration there was not a level playing field “the government has been picking winners and losers.”

Exelon, largest utility in the Fortune 500, has made clear its preference for outcomes based on free markets, “rather than through the government picking technology winners and losers,” and proudly declared itself “anti-subsidy.”

We couldn’t have said it better ourselves.

On September 29^th, the Trump administration Department of Energy released a notice of proposed rulemaking proposing a rule for action by the Federal Energy Regulatory Commission (FERC). This proposed rulemaking called for FERC to intervene in electricity markets to guarantee cost recovery for certain classes of electricity generation units. As we have stated before, we agree that baseload power generation is not adequately valued. We also believe that FERC can play a limited role in addressing this legitimate concern. The Perry proposal, in contrast, would: pick winners and losers, cause significant price distortions in wholesale electricity markets, constitute government interference in markets, punish ratepayers, create obstacles to private investment in generation, and increase prices for customers.

Today, we implore the politicians and companies who fought against the reckless energy policies of the Obama administration not to go against their previously stated free market instincts. EPA Administrator Scott Pruitt is working to undo a slew of unnecessary and burdensome federal regulations like the Clean Power Plan, which would have led to the federal takeover of the electricity grid. The House of Representatives is taking steps to rein in distortive subsidies like the wind Production Tax Credit.

Our focus should be on helping to unwind these distortive and destructive policies, not adding to an already broken system. Let’s heed the advice of President Bush and be on the right side of history by sticking with our free market instincts. In the end, everybody will be better off.