Gov. Rick Scott has pledged to cut state taxes while simultaneously reducing the budget deficit. This is a tall order, but opportunities exist. Florida energy policy offers a perfect example.
According to the U.S. Energy Information Administration, electricity costs 20 percent more in Florida than the national average. 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 impact on state revenues.
Electricity prices are very important business costs. According to the Energy Information Administration, 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.
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? Gilbert Metcalf, an economics professor at Tufts University, reports the production costs for natural gas, nuclear power, wind, solar thermal and solar photovoltaic are 48 percent, 57 percent, 75 percent, 570 percent and 887 percent, respectively, more expensive than coal.
Reducing Floridians’ electricity costs would be as simple as restoring balance and common sense to the Florida Public Service Commission, which has authority to approve or reject power plant proposals. In 2007 the commission caved to environmental activists and rejected an 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 Florida 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 commission should have enthusiastically approved the FPL proposal.
Instead, the commission unanimously rejected the opportunity for cheaper, cleaner electricity. Then, less than a year later, the commission 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 advocates often claim that forcing people to pay more for renewable 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.
The commission 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. Scott can dramatically lower business and consumer costs in the state, without affecting the state budget, by sending a strong signal he will appoint and reappoint only commissioners who support affordable energy.