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Commentary


Renewable Portfolio Standards - The Latest Hidden Energy Tax

April 15, 2009
By Pete Sepp

This year Renewable Portfolio Standards, or RPS, have received a lot of attention from the Obama Administration and many Members of Congress, who believe that these new regulations are a smart approach to energy supply and security concerns. Now it's high time these same policymakers pay attention to the economic and fiscal harm that RPS will inflict upon America -- not to mention their negative impact on our energy future.

This plan will not solve our energy problems; instead, it will create new unnecessary increases in the cost of electricity for all Americans. But almost as troubling as this government-mandated increase in energy costs is the scheme's inflexibility. A federal RPS would represent a transfer of wealth from those states without access to renewable resources to those who do.

As a nonpartisan organization dedicated to working on behalf of limited government and economic prosperity, the 362,000-member National Taxpayers Union (NTU) opposes RPS. Since our founding in 1969, we have fought against ill-advised energy proposals such as price controls and windfall-profit taxes, which history has shown to be counterproductive and detrimental.

A one-size-fits-all approach does not benefit consumers. Some states would have more renewable resources available, creating a windfall for some states and a quandary for others. Power generation in the U.S. depends almost exclusively on coal, natural gas, and nuclear fuel; all sources that are domestically abundant. By defining what sources of energy work for everyone in America, without regard to the consequences to these existing industries or the ability of states to meet the mandates, the government is barreling down a slippery slope of picking "winners and losers" at a precarious time for our nation's economy.

Proponents don't use the word "tax" to describe RPS, but their proposal closely resembles a tax in two ways.

First, renewable energy sources, foreign and domestic, are a more costly alternative. Modifying current modes of electricity transmission and generation of energy is an expensive undertaking. A federal RPS will require significant investments; some estimates of the cost reach as high as $758 billion. NTU is concerned that these costs will be passed on to taxpayers as a result of a federal requirement for renewable energy sources. Washington may subsidize part of the cost upfront, or states may come begging to Congress for subsidies to implement the program.

This huge sum is not likely to be financed by spending reductions elsewhere in government budgets. Rather, as experience shows, elected officials will clamor for higher taxes now or issue more debt, which entails higher taxes later. Either way, taxpayers could be imperiled with another liability.

In addition to the tremendous infrastructure investments that will need to be made, taxpayers will also bear the ongoing burden of RPS regulations in higher energy bills. Wind, solar and other intermittent technologies are more costly than other sources of energy. More expensive electricity will also make U.S. industry less competitive in a time of increased global competition.

Furthermore, RPS consists of binding dictates imposed by the federal government that power providers may be forced to follow regardless of the price tag. To cope with this additional overhead, utilities must pass their costs along to end-users. These are residential consumers who must scramble to pay higher bills as well as businesses that must raise prices, cut workers, or disappoint middle-class shareholders to soften the blow of the added expenses. Taxpayers may not see the damage from RPS the same way they see the bite of income taxes in their paychecks or sales taxes on their grocery bills. But the burden of RPS is very real, and like a conventional tax, causes suffering for families who must pay up -- or else.

Whether they fall upon transportation, health care, housing, tax administration, or any other part of the economy, regulations and mandates thrown down from Washington eventually impact real, live people, often with no net benefit. Based on NTU's long experience, RPS has all the trademarks of a negative policy that will weaken our nation.

Note: For more information on NTU's energy policy work, visit www.nonewenergytaxes.com.