Florida Energy Policy Offers Tax Cut Opportunities

Published January 26, 2011

Florida’s new Republican Gov. ernor, Rick Scott, has pledged to cut state taxes while simultaneously reducing the budget deficit. This iat’s a tall order, but opportunities exist. Florida The state’s energy policy offers a perfect example.

Economic Punishment
According to the U.S. Energy Information Administration (EIA), Florida electricity in Florida cost 20 percent more in 2009 than the national average in 2009. (2010 data are not available yet.). This raises the cost of doing business in Florida and the cost of living for Florida residents. Cutting electricity prices would boost the state economy as effectively as a tax cut, while having no negative impactwithout cutting on state tax revenues—in fact, boosting a state’s economy typically raises the amount of taxes collected.

Electricity prices are very important business costs. According to the EIA, Florida businesses and consumers pay much more for electricity than their counterparts in nearby states. Electricity in Florida is 28 percent more expensive than in Alabama, 30 percent higher than in Mississippi, 36 percent more expensive than in Georgia, and a whopping 41 percent more expensive than in Louisiana. Such high costs discourage businesses from starting up, relocating, or expanding in Florida.

Important Fuel Choices
The biggest reason Florida electricity is unnaturally expensive is that the state’s utilities provide far less of it from cost-effective coal than the national average. Coal powers roughly half the nation’s electricity but only 25 percent of Florida’s.

How much more expensive are other power sources? Tufts University Professor of Economics Gilbert Metcalf reports the production cost for natural gas is 48 percent higher than for coal, nuclear power is 57 percent more expensive, wind power costs 75 percent more than coal power, solar thermal is 570 percent more expensive than coal, and solar photovoltaic is 887 percent more costly.

Poor DecisionmakingDecision-Making
Reducing Floridians’ electricity costs would be as simple as restoring balance and common sense to the Florida Public Service Commission (PSC), which has authority to approve or reject power plant proposals. In 2007 the PSC caved to environmental activists and rejected a Florida Power and Light (FPL) proposal to build a state-of-the-art power plant in Glades County that was to be one of the cleanest, most environmentally advanced coal power plants in the nation.

Given that so little of Florida’s electric power is derived from coal, that the FPL plant would cut electricity prices, and that the FPL plant would be one of the cleanest coal power plants in the nation, the PSC should have enthusiastically approved the FPL proposal.

Instead, the PSC commission unanimously rejected the opportunity for cheaper, cleaner electricity. Then, less than a year later, the PSC doubled down on its expensive electricity policies by approving a solar photovoltaic power plant (producing the most expensive electricity possible) on the same site as FPL’s rejected coal plant.

Renewable Power Jobs
Renewable power advocates often claim that forcing people to pay more for renewable their favored source of electric power makes sound economic sense because jobs will be created during plant construction. A far greater number of jobs, however, would be created during construction of coal, natural gas, or nuclear power plants. In addition, conventional power plants produce far more permanent, post-construction jobs than do renewable power plants.

Holding PSC Accountable
The PSC consists of five commissioners, each of whom is appointed by the governor. Each commissioner serves a four-year term before the sitting governor decides whether to reappoint or replace the commissioner. Gov. Scott can dramatically lower business and consumer costs in the state, without affecting hurting the state budget, by sending a strong signal he will appoint and reappoint only commissioners who support affordable energy.

Many other states can benefit similarly by ensuring electricity generation companies are allowed to use environmentally safe and far less expensive fuel sources such as clean coal.

James M. Taylor ([email protected]) is managing editor of Environment & Climate News.