Ok, see if you keep up because it took me a few minutes to figure out what's going on. Missouri utilities are poised to charge consumers extra in order to fund promotions that encourage conservation.

Though it might seem illogical, the new energy efficiency charge has support from utilities, most lawmakers, the governor, environmentalists and even the state’s official utility consumer advocate. The charge covers the cost of utilities’ efforts to promote energy efficiency and cut power use.

The assumption is that charging consumers for those initiatives ultimately will cost less than charging them to build the new power plants that will be needed if electricity use isn’t curtailed.

If the efforts to promote conservation actually lead to reduced use, that may be true. However, what's really happening is more subtle. Most businesses don't encourage their customers to buy less of their product, but utility companies in America have been forced into this awkward position by environmental extremists. The more effective these conservation promotions are, the less demand there will be for the products these utility companies sell. Less demand equals lower volume and lower prices, the combination of which will eventually make a business unprofitable.

Of course, most of these utilities are natural monopolies that enjoy implicit government subsidies by the nature of their monopoly. That's why there are public utility boards that regulate the prices the utilities can charge. That these boards (and the state legislature) are now going to allow utilities to charge extra for non-production costs is quite a sea change. This new permission is an extension of the implicit subsidy the utilities already enjoy and is intended to offset the revenue that is lost as the utilities companies pressure their customers to buy less.

Legislation pending before Gov. Jay Nixon would set the criteria for state utility regulators to approve the energy-savings charges. If he signs the bill, the new law would take effect Aug. 28. ...

“To save power is the equivalent of making power,” Nixon said, “and it’s a pretty seismic shift” in Missouri’s energy strategy.

This statement by Nixon may sound wise on the surface ("a penny saved is a penny earned") but a little contemplation will reveal the underlying absurdity. In a free market, every bit of energy that is consumed is paid for by the consumer, which means that the consumer believes that the use he is putting the energy towards is more valuable than the price he pays for the energy itself (i.e., energy use is profitable to the consumer). Reducing energy use in this scenario means the loss of that profit. The more we "conserve", the more profit we lose. Producing more energy and then consuming it would lead to more profit; producing and consuming less energy would lead to a reduction in profit. (I.e., a reduced quality-of-life.)

(Our energy market is not free. The prices are regulated in such a way that many people pay artificially low prices. (This is done to ensure that poor people aren't priced out of the energy market entirely, despite the fact that the uses they put energy to are worth less then the energy they consume and therefore a net loss.) Unless we're willing to let the poor live in the dark there's no real way to avoid this market manipulation. Even with this inefficiency, however, a net increase in energy production and consumption will almost certainly create wealth.)

Unfortunately our public officials seem to be completely clueless, as usual.

“Any tool we can give a consumer to reduce their usage is a good thing,” [Public Service Commission Chairman Robert M. Clayton III] said, adding: “The trick is making sure the expenditure (by the utility) is a prudent expenditure and it’s going to achieve results.”

Haiti uses far less energy per capita than we do, maybe we can learn from them? The only way to make a significant dent in energy use is to significantly reduce our quality of life. Everything else is fiddling around the margins.

(Cross-posted to 24th State.)

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