Sunday, December 11, 2011

Letter to CPS Energy

In today’s San Antonio News Express, I read about plans CPS unveiled to build a 400 Megawatt solar plant in San Antonio – “CPS Sees strong interest in solar.”   According to the article, this plant would be one of the largest of its kind in the world.  While many of the details about the plant are understandably sketchy, the article does highlight some facts that I find particularly disturbing.

It seems that one requirement of the proposal would be to obligate the selected company to create at least 800 jobs with a minimum payroll of $30 million.  This is nonsense.  Labor is a cost that should be minimized, especially when ratepayers are footing the bill.  Any requirement that forces a firm to maximize a cost for no apparent reason goes against sound business principles, and would ultimately hurt ratepayers by forcing them to pay higher costs.  A firm’s business model, one that is subject to the market discipline, should dictate the amount of necessary labor, not a foolhardy mandate.

Another troublesome item is the cost of solar power.  The article reports that CPS currently pays about $0.15 per kilowatt hour for solar.  On the other hand, costs for natural gas produced electricity run about $0.04 per kilowatt hour.   This begs the question: if CPS can access cheaper, more reliable forms of energy and pass those savings onto its customers, why would it do otherwise?  Choosing to purchase more expensive and less reliable solar power in a state that leads in the production of natural gas defies explanation. 

America’s natural gas industry has been resurrected thanks to advancements in drilling technology.  Officials now estimate that America sits atop a 100-year supply of this clean burning, domestically produced energy source.  It’s even predicted that America may one day become a natural gas exporter.  And one obvious benefit is that natural gas prices have fallen drastically over the past 12 months, saving consumers hundreds of millions (perhaps billions!) in reduced energy costs.  And a reduction in energy costs is a boon to individual consumers, manufacturers, and the economy as a whole.

For CPS to seek out ways to purchase the most expensive power and to pass those costs on to its ratepayers when cheaper, abundant and more reliable sources are available is wrong.  CPS should reconsider its plans to invest in solar and instead look for more affordable and reliable options including natural gas.

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