Costello’s Questions: U.S. Energy Practices and Policies

Last week’s Weekly Commentary presented some questions I posed concerning issues in US energy and electricity policy. This week I am publishing questions provided by my associate Ken Costello who has been directly involved in a number of recent BTA assignments in the US and Africa. Ken is an internationally recognized regulatory economist whose reputation in economic regulation is based on his research, lectures and publications during his twenty-eight-year career at the National Regulatory Research Institute (NRRI), the research arm of the National Association of Regulatory Commissioners (NARUC). He holds an M.A. in economics from Maquette University and completed two years of doctoral studies in economics at the University of Chicago.  Here are Ken’s questions, some of which will be the subject of future commentaries. 

1. Why should a state foster a clean energy policy (primarily to mitigate climate change) that would drive up electricity prices and jeopardize reliability when science tells us it would have no discernible effect on climate? 

2. Would the promotion of electrification in the form of energy consumers switching from gas-powered vehicles to electric vehicles be beneficial to the environment? 

3. Why do we primarily still have volumetric rates when a different rate structure, by most accounts, would be more socially desirable given the recent developments in public policies and technological advances in the electric industry? 

4. Does grid modernization advance the “public interest” or is its main intent to enrich utilities (by expanding their rate base) and advance the agenda of special interests (like clean energy vendors, environmentalists and other advocates)? 

5. Are electric utilities over-investing in electricity resilience with large capital projects when cheaper alternatives would seem to be available?   

6. Should we be suspicious that agreements between utilities and environmentalists (akin to a bootleggers-and-Baptists coalition or a Faustian bargain) may not be in the public interest?

7. Have electric utilities become more like social agencies in expanding their activities to handle social problems that were previously tackled by government entities? 

8. Relatedly, have utility regulators drifted away from their primary function to protect utility customers from the monopoly power of utilities to advancing a broader social agenda? 

9. Have recent legislative and regulatory actions affecting the electric industry downgraded cost-benefit analysis, sensible economic principles, and sound public policy to a subordinate, if not nonexistent, role? 

10. Have recent public policies affecting the electric industry inherently placed more faith, as some observers would say, in the implausible benevolence and infallibility of government intervention than in the choices made by consumers and other market participants?