U.S. CHAMBER OF COMMERCE

Energy Blog

Energy Blog

US Chamber of Commerce Blog

Heath Knakmuhs

When consumers pay their electricity bills each month, they probably don't give it much thought.  While many probably expect to see higher bills when the heat or air conditioning have to run, they may not realize how much variance there is between states in the cost of electricity.

Each year, the Institute for 21st Century Energy analyzes electricity prices around the nation and creates a map showing the wide variances.  We rely upon information from the Energy Information Administration from the prior calendar year.  While retail electricity prices typically do not vary significantly from year to year, trends are noticeable when prior years are compared.  In 2014, which is the most recent year with full price data, every single state, except for Michigan, saw its electric rates increase.  So, if you thought that your electric bills were a bit higher last year, you were right. Unfortunately, with the federal government on a march to impose costly new regulations on the power sector, this trend is likely to continue for many years to come. 

Besides bringing greater understanding to consumers, our map helps demonstrate how certain policies drive prices.  Let's dig a little deeper.

Not surprisingly, Hawaii again owns the dubious title of having the most expensive electric rates in the country.  Alaska comes in behind the Aloha State at second highest. Given their unique geographic circumstances and complete isolation from the diverse sources of electricity that exist across the balance of the country, that's understandable and doesn't tell us much from a policy perspective.

However, the lesson begins with the next two states on the list, Connecticut and New York, which both impose more than 16 cent-per-kilowatt-hour electric prices upon their residents.  For comparison sake, these prices are more than double the rates enjoyed by the seven least expensive states.  The balance of New England, along with New Jersey and California, round out the nine most expensive states in the lower forty-eight.

What do these states share in common? 

For one, each of these states has turned its back on one of our most reliable and affordable sources of electricity:  coal.  While the nation on average obtains 37% of its electricity from coal, the biggest coal user among this group is Massachusetts, at a mere 8.8% of electricity production

Second, every one of these states either is, or has recently been part of, a carbon cap-and-trade scheme such as the Regional Greenhouse Gas Initiative (RGGI) or California AB32.  Despite what proponents of these policies might say, these initiatives clearly drive electricity prices higher. 

On the other side of the coin, the ten lowest-priced states enjoy low rates predominately due to their use of coal to generate electricity.  Seven of the lowest-priced states (West Virginia, Wyoming, Arkansas, Oklahoma, Kentucky, Iowa, and Utah) rely on coal more than any other resource, using it for between 40% and 95% of their electric power.  Two of the remaining lowest-priced states (Washington and Idaho) are gifted with plentiful hydroelectric resources which result from unique geographic circumstances in those states. 

While many states are speaking out against the EPA's plan to impose its own version of cap-and-trade across the country, the few states vocally supportive of the EPA's efforts would appear to fall into the "misery loves company" camp.  We can certainly understand why these high-price states may see a benefit to driving prices up for everyone else. Nevertheless, for the sake of consumers and economic growth, both the federal government and states should pay close attention to what has happened to electricity prices in states that have chosen more stringent regulations.  And at the very least, consumers should realize that they will be the ones paying for those choices. 

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Sean Hackbarth Hydraulic fracturing site located atop the Marcellus shale rock formation in Pennsylvania.A hydraulic fracturing site located atop the Marcellus shale rock formation in Pennsylvania. Photographer: Ty Wright/Bloomberg.

When hydraulic fracturing opponents can't stand on legitimate science, they resort to absurdity [emphasis mine]:

Not only is fracking destroying the environment -- it's sexist, too. At least that's the idea that ecologist/social-justice hero Sandra Steingraber presented to more than 100 students at the University of Pittsburgh on Monday during a lecture titled "Fracking Is a Feminist Issue: Women Confronting Fossil Fuels and Petrochemicals in an Age of Climate Uncertainty."

"This is a feminist issue because [the chemicals used and released in the fracking process] are largely reproductive toxins," Steingraber said, according to an article in the Pitt News, the school's official student newspaper.

"Are we using women and their infants as nonconsenting subjects in an uncontrolled human experiment?" she asked.

Serious science says, "No."

Steingraber based her claim on a paper by veterinarians Michelle Bamberger and Robert Oswald. The paper was declared to be "an advocacy piece that does not involve deep...analysis of the data gathered to support its case" by Dr. Ian Rae, co-chair of the Chemicals Technical Options Committee for the United Nations Environment Programme. So you can toss that aside.

Researchers who have done thoughtful work on this topic have concluded the exact opposite of what Steingraber and her ilk preach: Hydraulic fracturing is safe.

Two cabinet members, who understand the science, back these conclusions. "To my knowledge," Energy Secretary Ernest Moniz (and MIT physics professor) said, "I still have not seen any evidence of fracking per se contaminating groundwater." Interior Secretary Jewell, a former petroleum engineer, has also said hydraulic fracturing "can be done safely and responsibly."

More importantly, hydraulic fracturing's benefits don't discriminate. All Americans have gained from the able to produce more energy safely:

Hydraulic fracturing has delivered "an increase in welfare for natural gas consumers and producers of $48 billion per year." By 2025, shale energy will support 3.9 million jobs. American energy security has improved because of the shale boom.

To say hydraulic fracturing involves any sort of identity politics is absurd. It's a valuable technology that is improving the lives of all Americans.

Sean Hackbarth An oil pump jack near Corpus Christi, Texas.Photo credit: Eddie Seal/Bloomberg.

The Wall Street Journal's Holman Jenkins recently speculated that without hydraulic fracturing and the energy boom it has driven, "Western economies would likely be in free fall. The grudging U.S. recovery would be in retreat."

We've seen a dramatic shift in how we look at energy. When once we worried about ever-increasing oil imports from unfriendly regions of the world, we now have begun discussing the efficacy of exporting U.S. crude oil.

It might be helpful to take a look at the state of American petroleum development with a few charts.

1. The U.S. is the King of Hydrocarbons.

The Energy Information Administration concludes that for the third-straight year, the United States produced more oil and natural gas than any other country in the world.

eia_toppetroleum_producers_2014.jpg  Top petroleum-producing countries in 2014.EIA: Top petroleum-producing countries in 2014.Source: Energy Information Administration. 2. 2014 Was a Record Year in U.S. Oil Production Growth.

U.S. oil production rose by 1.2 million barrels per day (mbb/d) to 8.7 mbb/d, the most since records began being kept in 1900.

eia_annualchangefieldproduction_crudeoil_1960-2014.png  Change in U.S. field production of crude oil (1960-2014).EIA: Change in U.S. field production of crude oil (1960-2014).Source: Energy Information Administration. 3. The States Ranked by Oil Production.

The top five oil producers are Texas, North Dakota, California, Alaska, and Oklahoma. 

state-oil-production-2014-amount_chartbuilder.png State oil production in 2014 State oil production in 2014

If the federal offshore areas in the Gulf of Mexico were counted at its own state it would rank #2 (1396 Mbb/d).

4. Hydraulic Fracturing is Getting More Efficient.

In most of the major shale plays, the amount of oil and natural gas produced per rig is rising. Energy producers are improving hydraulic fracturing techniques and using new technologies to get more energy out of the ground.

eia_oil_natgas_productivity_2014.jpg  Oil and natural gas rig productivity.EIA: Oil and natural gas rig productivity.

At the same time, we are getting more energy with a reduced environmental impact. As natural gas production has increased, methane leakage from natural gas rigs--a brickbat of hydraulic fracturing opponents--has fallen

5. Faster Job Growth in the Energy Sector.

Besides more energy for consumers, the most tangible benefit from the shale boom has been job creation. The oil and natural gas industry supports 9.8 million jobs, and job growth in the sector has been faster than the economy as a whole.

api_oilnatgas_jobgrowth_800px.jpg  Job growth in the energy sector.American Petroleum Institute: Job growth in the energy sector.

All this is happening with an administration that refuses to embrace the domestic energy wealth we have. Imagine what can be accomplished if we have better energy policies in place? Like avoiding duplicative federal regulations on hydraulic fracturing or expanding offshore energy development.

We've only scratched the surface of what America's energy renaissance can be.