Electricity is a basic human need. I think people already knew that on an abstract level, but widespread and long-term power outages after Hurricane Matthew made it more personal.
Even if you were among the lucky ones who never went dark, you worried about what you would do for your family if you did. And if you were a good neighbor — and thank God there were so many! — you offered to share your home’s electricity with those who were suddenly without it.
In just a couple of days, a hot shower went from a morning ritual to a real blessing.
Even keeping a phone charged was a major concern. That is most people’s primary connection to loved ones, let alone to news, weather, and alerts. Fortunately, the storm hit during the pleasant temperatures of early October, when like Baby Bear’s porridge it’s not too hot or too cold.
So this time we could, as my family did, go without central heating and air without discomfort. What a change from the ice storm of 2016, when temperatures were well below freezing, reaching the teens overnight. No electricity and no heat put some families in mortal danger.
‘Do I stay warm or eat?’
Electricity is a basic human need. You don’t want to do without a basic human need. You’ll give up something you might want in order to take care of a need, and usually that decision doesn’t even rise to the level of conscious choice.
But what if you have to choose between one basic human need and another? The poorer someone is, the more likely he faces a trade-off between needs, not just between wants and needs.
In 2015, electricity costs for the poorest North Carolina households (those earning less than $30,000 per year) averaged 9 percent of their after-tax income. That is a significant monthly expense.
Does that sound too big? Well, the poor have as much a need of electricity as everyone else, but they have much less income. Then you have to consider their housing options are usually not as well-built, insulated, and energy-efficient as upper-income housing.
Essentially, they end up requiring disproportionately more electricity for cooking, heating and cooling, having hot water, powering electronics, etc.
Imagine this choice, faced by residents of Wilson last year. Wilson is a high-rate, North Carolina Eastern Municipal Power Agency city. They were interviewed by WRAL after Gov. Pat McCrory signed Senate Bill 305 into law, cutting their bills by 10 to 15 percent:
“It costs me an arm and a leg — and somebody else’s body parts, too. It’s a lot,” said Shannon Taylor, an unemployed mother of three. “If I didn’t use any heat, my bill was still like $600 or $700. That’s like triple my rent.”
Retiree Gary Nevins, 72, pays $316 a month for electricity in his 1,000-square-foot apartment.
“Do I stay warm or eat?” Nevins said of the dilemma he often faced. “That’s a big choice.”
Eddie Hopkins, a veteran on disability, said his March bill was $849.
Electricity is a basic human need. That’s a key fact in the John Locke Foundation’s Agenda 2016 to explain why keeping consumers’ costs as low as possible is the No. 1 issue in electricity policy in North Carolina.
Why do we need to state the obvious? Because North Carolinians have no choice among utilities. They don’t get to comparison-shop. Their price is the price handed them by a monopoly provider.
The flip side of this is, in return for the state giving them a guaranteed consumer base (and guaranteed profits), electric utilities are expected to provide reliable power.
Now it used to be that they were also expected to provide the least-cost options of reliable power. If we guarantee utilities a rate of profit, it’s only fair to guarantee consumers a fair shake in rates. North Carolina’s rates have been among the most competitive in the nation.
That changed when the Renewable Energy and Energy Efficiency Portfolio Standards law passed in 2007.
The REPS mandate forced utilities to use an increasing proportion of high–cost electricity sources for noncost reasons: to diversify the sources used, to use in-state resources, to encourage investment in renewable energy sources, and to improve air quality.
Since the REPS mandate took effect in 2008, North Carolina’s electricity rates have been losing their historical competitive advantage. They’ve increased by over twice the regional average increase and about 2.5 times the national average increase. Worse, those increases happened under the lowest levels of the REPS mandate.
Two different mind-sets
When politics gets into basic human needs, it inspires two completely different mind-sets. One is the need to protect people’s access to basic human needs. That is why we remind politicians that keeping consumers’ costs as low as possible is the No. 1 issue in electricity policy.
And, of course, it was represented by the old standard of least-cost reliable power.
The other mind-set is the desire to take advantage of needy people. If people are compelled to buy something out of need, then a provider who can have politicians manipulate the rules a bit can make a lot of money. This mentality likes to excuse its greed by reminding politicians that, hey, it’s not a free market anyway.
And, of course, it is represented by a law forcing utilities to purchase a growing proportion of electricity from providers who can’t compete on cost.
As power is restored across North Carolina, we can be glad that the REPS mandate isn’t making us have to choose between one basic human need and another. Sitting in the dark without hot water, indoor cooking, and even social media isn’t fun.
But REPS is causing us more and more to choose between our need for electricity and our want for other things for our families. They’re things we could have under a least-cost environment, but unnecessarily higher-priced electricity crowds them out. Our purchasing power has fallen. And the bigger REPS gets, the more of those other things we’ll have to give up.
One mind-set thinks that’s wrong for poor families. The other mind-set says let’s cash in since it’s not a free market anyway.
Jon Sanders (@jonpsanders) is director of regulatory studies at the John Locke Foundation.