Washington is strapping itself to California’s costly and unstable energy policy
by Todd Myers, Environmental Director, Washington Policy Center
With one of the highest costs of electricity in the country, California residents pay more than double the rate we do in Washington state. And yet, they have trouble keeping the lights on. Last summer, California faced widespread blackouts due to a shortage of reliable electricity. Only a last-minute reduction in usage by homeowners avoided a more serious crisis.
What is remarkable, however, is that Washington state wants to become more like California, following their lead on renewable energy and tying our energy policy more closely with theirs. We are already seeing what that could mean for Washington residents.
When California’s energy crisis hit, spot prices on the market, which are based on supply and demand at a given time, increased dramatically and spread to Washington state. The spot price of electricity in California jumped from about $177 per megawatt-hour (MWh) up to $1,200. During that same time in Spokane, prices jumped from just over $100/MWh to $1,130/MWh. The spot market provides a relatively small portion of electricity, but Washington consumers paid the price for California’s poor energy policy.
This could get worse if Washington decides to join California’s CO2 market as Governor Inslee would like to do. In addition to the higher cost of electricity, Washington residents would have to pay a tax on electricity generated by natural gas or coal should this come to pass. Currently, Washington taxes electricity based on how it is generated, adding the CO2 tax on coal-generated electricity from Montana. If we apply that same model in our agreement with California, Washington residents would pay more and California could pay less.
During the summer, California buys electricity from other states, including Washington. We send them hydropower, which would not be subjected to the CO2 tax. In the winter, however, the weather in California is mild and Washington imports electricity, including natural gas electricity from California. So, we would have to pay the CO2 tax on the energy they sent back. This imbalance of Washington’s exportation and importation of energy – sending surplus hydro and importing natural-gas generated electricity – means we would bear a larger burden of new CO2 taxes.
This doesn’t mean we shouldn’t block trade with California (we probably couldn’t anyway). Trade is good for many reasons. It does mean that the more connected we are to California’s energy policy, the more we will be impacted by their rates, which are dramatically higher than ours.
Similarly, California’s gas prices are the highest in the nation. In the first week of December, California’s average price for regular-grade gasoline was $4.56 compared to Washington’s $4.19 and the national average of $3.39. Adding a CO2 tax that matches California’s, would push our costs toward theirs.
California’s high costs and poor record of electricity reliability should be kept in mind when politicians like Governor Inslee claim that his climate taxes and regulations won’t have much of a cost even as they promise to tie our energy policy to theirs.
Washington residents are certainly willing to pay to help the environment – reducing the risk from climate change, recovering salmon, reducing pollution. But strapping ourselves to California’s approach, with its very high costs and unreliable electricity, comes with a very high cost and puts us at the mercy of decisions being made by legislators and bureaucrats we can’t hold accountable.