In the years before becoming our first president, Gen. George Washington fought two wars. The first was against the British. The second was fought concurrently against his employer, of sorts — the Continental Congress. During the nascent days of our republic, the unified states feared a powerful central government. That left the Congress with limited […]

Manager’s Viewpoint

Real math from Down Under

There is an old joke about a crafty accountant at a job interview. The interviewer asks him a tough question: “What is two plus two?” The accountant gets up, closes the door, draws the curtains closed, leans forward and asks, in a whisper, “What do you want it to be?”

The Obama administration recently released a plan to further regulate carbon emissions. In a twisted version of new math, the administration included in the cost calculations a new justification for a move to more stringent guidelines: the “social cost” of carbon.

Traditional economic analysis does not take into account this type of calculation, which, by another name, is no more than speculation. The social cost used by the administration is $36 per metric ton.

How does one arrive at the “social cost” of carbon? According to a recent Wall Street Journal editorial, “This figure was derived by guesses about how much carbon in the atmosphere may harm everything from agricultural productivity to human health to flood risks.”

The chief economist of the National Resources Defense Council says it should be as high as $266 a metric ton.

The effect of adding another cost component to carbon emissions is an effort to justify higher-cost alternatives. Congress rejected carbon cap-and-trade legislation in 2010. Furthermore, the move to include social costs for carbon emissions originated with the administration, not Congress. The use of a social cost helped justify changes to miles-per-gallon standards for the automotive industry.

Though the newest proposals at regulation are targeted mainly toward electric generation, they could just as easily be applied toward any process that creates carbon emissions. Your lawnmower most likely has an internal combustion engine. How much would that mower cost if the “social cost of carbon” were included in the purchase price?

Recently, I was discussing some of our energy and regulatory challenges with friends from South Africa and Australia. The gentleman from Australia said, “We just booted our prime minister out of office because of our carbon tax.”

Australia’s prime minister, Julia Gillard, was ousted by her predecessor in June. Voters are angry, in part, that her party introduced a controversial carbon tax in mid-2012, despite an election promise not to introduce one. The tax equates to about $24 per metric ton of carbon.

It’s true that Australia’s carbon emissions declined in the first full year of their carbon tax. However, it has declined for each of the past four years with lower electricity use and other factors — such as changes in the types of coal used for generating electricity — driving the decline. Interestingly enough, wind output also declined in Australia last year.

My Australian friend went on to explain how his electric bill had doubled over the past year due to the imposition of the carbon tax. That’s not speculation, estimation or sophisticated economic modeling. That’s real-world dollars and cents.

Consider the changes required to your household budget if your electric bill — not your energy use — doubled. And if your residential bill doubled, so would the bill for the factories and stores where you shop.

The “social cost” of carbon isn’t readily tangible. It’s an easily adjustable number — a guess — that could lead to a slippery slope of regulation that impacts virtually everything in your life.

What is tangible — and painful — is a higher electric bill. Our industry and our nation have been on track for reducing our carbon emissions. Reducing use and increasing alternative energy sources have been effective.

Next time you read about the social cost of carbon, think about the real-world, true cost to your family and our country. Encourage Congress to do the same.

Choices. Not quite as American as apple pie, but pretty close. Given the foundations and the relative wealth of our nation, we’re accustomed to having lots of choices in just about everything we do. We like to have choices, whether it’s selecting a movie to watch, buying a car, or deciding on chocolate, vanilla, strawberry […]

Always looking to expand my mind, I recently purchased an educational text on electricity. It is written on a level that takes this technically complex product and puts it on a down-to-earth level. The authors, both university professors, do a great job of explaining this innovative product and the ways it impacts people’s everyday lives. […]

When you’re immortalized in song, you can reasonably assume that you’ve made it. When a government agency is immortalized in song, well, that’s profound. The group Alabama did just that for the Tennessee Valley Authority with their 1988 hit, “Song of the South.” One verse reads, “Well Momma got sick and Daddy got down. The […]

From an early age, we’re taught to speak for ourselves. It’s part of the process of growing up and developing our own identity. “Please, may I have some more?” eventually gets you more food. Pointing out that your malicious sibling broke the lamp may keep you out of trouble. You gain confidence and a sense […]

My good friend Kent Lopez is manager of the Washington Rural Electric Cooperative Association, serving in a position similar to mine. Kent is a transplanted Tennessean, and he recently shared the following about his work: “My alarm goes off an hour earlier this time of the year. The State Legislature is in session. So I […]

By now we’ve all come to the realization that the Mayans were wrong. Or, more accurately stated, we were wrong about the Mayans. Just because their calendar ended on Dec. 21, 2012, didn’t mean civilization was going to end on that date. The lesson we all should have learned is that calendars just mark an […]

When we talk about our community, we’re usually referring to a town or neighborhood. The nation’s electric cooperatives have a somewhat different perspective on community. Our community is local yet it extends hundreds of miles away. A good illustration of that concept involves a Virginia co-op aptly named Community Electric Cooperative. Tennessee line crews have […]

With around $12 billion of annual revenue, the Tennessee Valley Authority ranks as one of the largest electric utilities in the U.S. More importantly for you, those dollars come from you and businesses located in the Tennessee Valley. The percentage varies a bit for each local utility, but in 2012 about 77 cents of each […]