Energy Trap

A growing propensity for state regulators to continue the practice of deficit energy consumption may cause catastrophic failure of the regulatory system. More and more utilities are being asked to defer collections of its full costs to future years on the hope that prices will somehow be lower at some point in the future. West Virginia has already employed this strategy for gas utilities. Ohio and Illinois have postponed their day of price reckoning by freezing rates consumers pay for certain periods for electricity.

The problem is that freezing the rates or granting only particle cost recovery only postpones the day when consumers will have to pay the piper. If prices for energy suddenly move lower and lower levels are maintained for extended periods, then and only then could this strategy provide some relief against future increases that far exceed anything imagined by the consuming public.

What results from all of this is that utilities, on behalf of the rate payers amass huge deficits that rate payers will eventually be responsible for. In addition, the utilities are entitled to interest and a rate of return for carrying the debt on their books which only serves to compound the problem and raise costs. Much in the same manner that government spends more than it collects in revenue leaving the deficit for future generations, this deficit energy policy creates debt that future rate payers will eventually have to pay.

While it is remotely possible that deficit energy consumption will ultimately prove beneficial overall, it is not likely that it will result in any difference than that of government deficit spending. The folks who use the energy tomorrow are going to pay part of the energy costs of today.