Standard Innovation

Posted on June 15, 2005
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How much power should Arizona electric companies generate from renewable sources?

The Arizona Corporation Commission (ACC) thinks it has the answer: 15 percent.

The ACC has proposed requiring utilities to produce at least 15 percent of their power from solar, wind, and on-site consumer sources. But there's nothing magic about 15 percent. In fact, the number is arbitrary and expected to impose heavy surcharges on consumers to the tune of $50 million per year.

Arizonans are naturally concerned about resource sustainability. But regulation has been a poor approach to sustainability, and this latest renewable energy mandate is no exception.

As Arizona Republic columnist Robert Robb puts it, "To be blunt, the politicians and staff at the commission have no particular insight about what will be the optimal energy mix for the production of electricity 20 years from now. Nor should it be their job to make such decisions."

Nobel laureate economist and Goldwater Institute senior fellow Vernon Smith has conducted path-breaking research on how a deregulated marketplace can increase efficiency and sustainability. He has shown how a regulated market can transition to a freer market without the undue interruptions experienced in places like California. Experiments in other states have saved consumers as much as 15 percent on their utility bills while reducing electricity consumption.

The ACC might revisit Dr. Smith's research, some of which the commission funded back in 1984. Doing so would help them avoid this latest misstep, and instead take a step in the right direction.

Key Links:
-Robert Robb: "Betting on renewable energy, with your $50 mil"
- Economist: "Economic man, cleaner planet"
-Goldwater Institute study: Hotwiring Deregulation
-Vernon Smith
-Cato Institute study: The Deregulation of the Electricity Industry

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