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Why Are Utilities So Expensive?

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The cost of producing electricity has dropped significantly in the last decade. So why haven’t we seen those price drops reflected in our electricity bills? Charles McConnell, former Assistant Secretary of Energy in the Obama Administration, answers this riddle.

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Script:

Why does your electricity bill keep going up when the cost of producing electricity keeps going down?

Since 2010, the price of natural gas has fallen 43% and coal prices have dropped 11%. And yet, the price of electricity for residential users in the U.S. has risen 13% over that time. Why?

Because almost all the money Americans should have saved (and we’re talking serious money) went to subsidize renewable energy. Wind and solar, it turns out, are more expensive than advertised.

Perhaps if renewable energy was what made our air cleaner, or what caused the dramatic reductions in CO2 over the last decade, you could say it was worth it. But our air was already becoming dramatically cleaner long before wind and solar were identified as “environmentally critical.” Emissions of harmful pollutants have decreased 77% in the US since 1970. And that had nothing to do with wind and solar. It was almost entirely due to the switch from coal to natural gas.

So if we’re getting no cost savings from wind and solar, and minimal benefits in terms of cleaner air or reductions in CO2, why are we so obsessed with it?

The question becomes even sharper if we take a close look at your electricity bill. It consists of three main parts. Part One: Generation Cost. Part Two: Transmission Cost. Part Three: Taxes and Fees.

Part One: Generation Cost

The cost of generating and reliably maintaining electricity comprises about 50% of your power bill.  ln order to keep the lights on, the demand for and supply of electricity must be satisfied at all times.

Fossil-fueled electricity is inexpensive, and the fuel can be stored or sourced on site—the electricity is there when you need it. In contrast, wind and solar generate electricity based on the mood of Mother Nature. This is known as the intermittency problem.

Here’s what it means in practical terms: For every wind and solar farm you build, you need a fossil fuel facility nearby to supply electricity on demand. This is what filmmaker Michael Moore and his team found out, much to their shock, when researching green energy for their documentary, Planet of the Humans. All that wasted money is reflected in your electricity bill.

Part Two: Transmission Cost

The cost to transmit electricity is determined by the distance between the power plant and your home or business. This is one of the reasons fossil fuel and nuclear plants are ideally suited to power our large, dense cities and industries. They require little land space and can be situated near or within population centers, so they need relatively few transmission lines. But wind and solar resources require large tracts of land and are therefore usually placed in remote locations.

That remoteness requires expensive new infrastructure. Texas, for example, has already spent over $7 billion in new transmission lines to bring distant wind power to cities in the east and south. And billions more will be required. Texans are already seeing those costs in their energy bills. But Texas is not unique. It’s happening everywhere.

Part Three: Taxes and Fees

Most taxes are plainly stated on your power bill. State taxes, city and county taxes, plus a bewildering assortment of fees—those are bad enough. But what you won’t see on your electricity bill are the federal and, in many places, state taxes that you pay to subsidize wind and solar generation.

Federal subsidies alone for the wind and solar industries totaled more than $70 billion from 2010 to 2019. Most state governments kick in their own incentives. The subsidies for wind and solar are in a class by themselves, and have been for decades. We are not incentivizing new technology, but are artificially supporting an industry. Take away the subsidies and, very likely, that industry does not exist.

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Tags big greencarbon taxchuck mcconnellclean airclimate actionclimate changeco2eco friendlyemissionsenergy industryenergy sectorEnvironmentfederal subsidiesfossil fuelsgovernment subsidiesgreen energymichael mooremother naturenatural gaspollutionpower plantprager universityprageruregressive expenserenewable energysolar energySubsidiessustainabilitytaxation is thefttaxesthe middle classtransmission lineswind and solar
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50 Comments

  4. Pretty disingenuous video. Disclaimer: I’m a huge proponent of renewables, however, they do have a huge issue with peak demand, I’ll grant that. Most likely the most reasonable robust utility will be a hybrid of renewables, fossil fuels and possibly nuclear. Nuclear is great, 1. If we can afford initial start up costs and if American public has the appetite, likely hundreds of billions per site for large scale utility generation. 2. What the heck do we do with the nuclear waste/rods when spent/exhausted of productive capacity? Note: fossil fuels receive massive government subsidies just like renewables do. If big G isn’t incentivizing drilling, companies won’t drill. Additionally, we all pay heavy taxes on carbon such as gas tax, so, although renewables are subsidized by big G, it doesn’t mean nat gas isn’t as well. Food for thought.

  5. I'm an essential worker, but my electric bill RATE per kwh was raised so high at the beginning of this year that last month's electric bill alone siphoned away ALL the gas money I need to get back and forth to work. SO NOW I HAVE TO QUIT MY JOB AND WAIT UNTIL THE END OF THIS YEAR WHEN I'LL FINALLY TURN 62 TO START GETTING MY EARLY RETIREMENT PAYMENTS. If we can't deport all past, present, and future lazy, non-working, parasitic Eversource CEOs out of the US and back to the UK, then we should have the right to force them to do grueling manual labor jobs in concentration camps until they off themselves. Just last month's electric bill alone (keep in mind, we have gas heat and NOT electric) extorted 23 HOURS OF GRUELING MANUAL LABOR OUT OF ME !! SO THEY NEED TO GET OUT OF OUR COUNTRY AND GO BACK TO ENGLAND AND IRELAND !!

  7. Citing a 70% drop in emissions since the 1970s having nothing to do with renewables but is instead due to dropping coal and switching to natural gas is a strawman argument. Coal is still a substantial percentage of energy with utilities. Natural gas is cleaner, but still has substantial CO2 and more importantly, methane emissions to worry about. Electric costs have increased, but haven't the costs for everything else? What is the current and expected reduction in emissions from natural gas or coal being displaced by renewables?

    Solar PV cells are the cheapest method of electric production in existence and wind is not far behind. The setup costs are worth in in the amount of lead, nitrogen, CO2, and other toxic chemicals not put in the air by fossil fuels. Intermittency is a problem. Natural gas and nuclear can handle baseload while renewables can't. Whenever renewables are operating pollutants are not being ejected into the air. Tech needs to get better with battery storage to capture energy when the wind is blowing and the sun is shining so that it can be used for later need. To address the heavier burden on homes struggling with electric, maybe a progressive fee structure based on income/home value is a necessary reform.

  10. the cost of generating cost should include maintenance of generation lost territories due to pollution and a lot a lot of other factors, that is just ignorance right there.
    what about the cost of transporting the oil? isn't it saved using renewables ?
    2:20 nope, you can just build giant batteries.

    transmission:
    again nope. you cant really build it next to population because it creates pollution that harms citizens.
    while you can build a lot of solar and even small wind energy generators within civilian population and even on top of roofs. remoteness is of the polluting energy generations factors.
    Texas did this shticks in order to show you the GOP suckers that "hey look it doesn't work" instead of building civilian based energy generating renewables.

    subsidies eventually pays itself with the pollution that reduced along with cancer asthma and other diseases. and the building of competition in the future.
    in the future there will be no oil so its good to build the economy of renewables. just like investing in stocks.

  16. The taxes are more than the electricity I use. I envy the people living in a car. small rv,tents, and staying in place. GREED will have us all homeless. The Stimulus is being stolen by landlords, utilities, food purchases, etc. etc.

  23. First off it’s called the green tax and it is necessary. Man made climate change is real, I hate giving the government more power but we really do need to decrease our overall use per person. And yeah nuclear is a lot better not perfect but better. We need to stop using fossil fuels no matter how efficient we have become using them. Engineers are trying to come up with ways to clean the air as fast as possible but there is only so much they can do.

  24. First off it’s called the green tax and it is necessary. Man made climate change is real, I hate giving the government more power but we really do need to decrease our overall use per person. And yeah nuclear is a lot better not perfect but better. We need to stop using fossil fuels no matter how efficient we have become using them. Engineers are trying to come up with ways to clean the air as fast as possible but there is only so much they can do.

  25. In Hawai’i, the electric company IS a monopoly; unless you are rich enough to afford renewable energy such as solar (which most people don’t realize also need electricity to produce)!!! I’m going to repeat a motto which a lot of people have said here in the comments: “Stupid is as stupid does.”

  28. Did PragerU seriously just call utilities a regressive tax because they make up a larger percentage of low income households' income? This is the same PragerU that has promoted a flat tax on multiple occasions, an actual regressive tax that makes up a larger percentage of low income households' income? What an incoherent ideology.

  35. Note – This doesn't applicable Universally
    Countries Like Bhutan Nepal ,India ,China gets Renewable Energy Cheaper than Fossil
    Cost of Solar Generation in India have fallen to 2.5 Cents per Unit
    All thanks to Capitalists ,In Bhutan and Nepal it's all about Hydropower

  36. ANY bill will take up a larger portion of a lower class family’s expenses than an upper class one. They make less money, so a similar sized bill will obviously be a larger portion of their income. Does that mean all taxes/bills are “regressive”? This word means nothing.

  37. Ah yes because population centres love have coal or natural gas plants near or within them. What are you talking about?

    They are often situated further away and increase transmission costs because they are terrible for air quality and people’s health.

  42. The USD has literally inflated by 21% since 2010, and they're claiming energy prices have gone up by 13%. That's literally a relative DECREASE in energy prices. PragerU donors want you to use natural gas because they made their billionaires by creating mini-earthquakes while fracking.

  44. I agree that the energy sector is very inefficient and subsidies to coperations are too large, that is exactly why it should be nationalised!

    btw placing nuclear power plants in the middle of population centers is bound to go wrong