By Joe Petrowski
The public relentlessly focuses on the price of gasoline and crude. While the average person uses 700 gallons of transportation fuel per year—spending between $1,400 and $3,000 per capita per year—transport fuel is only 29% of our economy but electricity is 43% and growing.
The average household uses 1100 kWh per month or just over 13,000 kWh per year, and with the current average price of 16 cents/kWh the average household is spending just over $2,000 per year. That is almost as much as is spent for transportation, and in the Northeast, California (18 cents per kwh) and Hawaii (35 cents per kWh) it’s much higher. Yet we see no reporters standing outside a generation station on Memorial Day or July 4 like you see at gasoline stations and no investigations are launched as to why prices are so high. And, it is about to get much worse.
The Environmental Protection Agency under its Clean Power Plan initiative has targeted closing 50 gigawatts of coal plants in next five years. A gigawatt is a billion watts, or enough energy to supply 50,000 homes for a year. So we will lose power production for the equivalent of 250,000 homes. Taking into consideration the closing of nuclear plants, aging of our infrastructure, power needs for growth (autos, industry, our electronic households) and the need for backup resources to support less reliable resources such as solar and wind, it does not take Nostradamus to figure out where electric prices are headed.
What are we to do? Some will argue for higher prices, conservation and rationing (odd-even days for power usage?), but energy costs are a regressive form of taxation and vitally linked to growth.
With natural gas production at a record level and our reserves higher in BTUs than the entire Mideast combined, the solution is in front of us. More natural gas fired power plants, and the pipeline and storage infrastructure to support them. The states most impacted relative to coal plants–Pennsylvania (40) Ohio (37) New York (17) Marryland (9), New Jersey (7), and Delaware (4)—already have some of the highest power prices, large populations and a significant Industrial base. They also sit in the backyard of our ample natural gas supply.
Our public policy path should be
- Keep drilling
- Build pipelines,
- Fast track new power plants
Good government gets in front of a problem. Let’s avoid the second guessing and finger pointing that so often plagues our country.
Joe Petrowski has had a long career in international commodity trading, energy and retail management and public policy development. In 2005, he was named President and CEO of Gulf Oil LP and elected to the Gulf Oil LP Board of Directors. In October of 2008 he was named CEO of the now combined Gulf Oil and Cumberland Farms whose annual revenues exceed $11 billion and that now operates in 27 states. In September 2013, Petrowski stepped down as CEO of The Cumberland Gulf Group. He is now managing director of Mercantor Partners, a private equity firm investing in convenience and energy distribution.
