Energy Firms Hold NY Taxpayers Hostage, Cuomo Pays the Ransom

Energy Firms Hold New York Taxpayers Hostage; Cuomo Pays the Ransom

by Dan Smith

If energy policy makes your eyes roll back into your head, I get it. And if all the regulations, bans, subsidies, taxes combined with all the different forms of energy leave you confused, I get that, too.

It’s likely by design.

That’s because the players probably wouldn’t like you taking too close of a look at the big bucks at stake ($40 billion per year in New York) and how it’s all tightly controlled by state and federal officials—giving way to lots of favors and taxpayer handouts, as we’ll see.

One should probably start with New York’s 2015 Clean Energy Standard. By 2030, 50% of electricity generated in New York will be from renewable energy sources: wind, solar, hydro, nuclear, biomass, et. al., up from 24% in 2016. That’s a big gap to close, so it’s phased in starting in 2017 and grows each year until 2030. Companies which produce non-renewable energy—oil, coal and natural gas, face a significant and growing tax (called “alternative compliance payments”).

The Clean Energy Standard is a big reward for energy companies to immediately start increasing investment in wind and solar, among others. Renewable energy technologies are being given special privilege over coal, oil and natural gas, who are quickly facing a big, new cost for failure to switch. Such an advantage is a call for investment money to start rolling in from banks and other private investors to fund the expansion into renewable energy in New York.

Unfortunately, there’s one big investor who is funding a lot of this: New York taxpayers, via Governor Andrew Cuomo.  

Governor Cuomo has promised $5 billion of New Yorkers’ tax dollars to the Clean Energy Fund—subsidies which are being given to renewable energy firms.

Setting aside whether or not you like the rule requiring more renewable energy, this situation begs the question:

Why do we need both . . . the Clean Energy Standard and also taxpayer funded subsidies?

Put another way, the Clean Energy Act was put in place to reward those who invest in Governor Cuomo’s vision of moving toward renewable energy, so why must taxpayers also payoff renewable energy companies now, before the fact, as well?

I believe there is no good reason. It’s just another excuse for Governor Cuomo to hand out more taxpayer money to cronies and for him to gather more power.

But there’s got to be a stated reason. New York renewable energy advisor, Phoenix Energy cites a common storyline, “generators of renewable sources . . . warned they would sell their generated energy to other states, and wind farms even went so far as to threaten authorities with a complete shutdown if subsidies were not granted . . . and New York Governor Andrew Cuomo announced that 11 large renewable energy projects would be getting a total of $360 million in subsidies.”

Did you get that?

The companies who know they’re needed under Cuomo’s law, who were given the huge business advantage in 2015, had the audacity to come along in 2016 and threaten New Yorkers’ access to electricity if they didn’t get taxpayer money to subsidize them, as well.

They held New Yorkers hostage. Andrew Cuomo capitulated.

Let’s examine the threat. There are a great many problems in believing it. It’s easy to imagine this was all designed to get Cuomo’s cronies a $5 billion taxpayer payday.

But taking the claims at face value, the first problem is that wind and solar already have been receiving generous federal subsidies which should have seen them through their industries’ formative years. Why should New Yorkers pay more on top of that?

Further, individuals and businesses themselves can receive New York tax incentives for installing things like on-grid solar energy facilities, smaller, off-grid residential and commercial solar installations and small wind turbines, thereby getting some taxpayers to fund expensive panels and installation  for others.

But what’s most curious is that it makes no sense for them to move away from New York at the moment they were being handed a big regulatory advantage—one that would allow them to undercut competitors and/or raise prices when their non-renewable competitors had to pass their compliance tax onto customers.

Wind and solar weren’t alone in the “take New York hostage” game. Separately in 2016, several upstate nuclear power plants threatened to shut down if they didn’t get their own subsidies. Always generous with New Yorkers’ money, Governor Cuomo rewarded them with $500 million per year going forward. Reports are that the nuclear plants’ excuse for requiring the subsidies is that they can’t compete with another renewable energy source, biomass.  

This is becoming insane. Why should New Yorkers subsidize one renewable energy source and punish another? Isn’t the goal getting renewable energy . . . does it matter which one?  

And don’t lose sight of the irony here—nuclear is a less efficient and more costly than biomass and Andrew Cuomo has forced New Yorkers to back the less efficient technology. This isn’t isolated. It’s happening across the board, as New York’s energy efficiency has fallen from third in the nation in 2013 to seventh in 2017, and is expected to continue falling under these policies.  And inefficiency means higher energy prices, on top of the big tax bills Governor Cuomo is leaving us with.

One would be quite reasonable to start questing these policies and believe that taxpayer money could be better spent elsewhere. Perhaps someone should consider investigating how this all came about.

But is this the way one earns goodies from Andrew Cuomo—threaten to do something deeply illogical and hope New Yorkers don’t recognize the silliness of your empty threat?  Do we have to hand out taxpayer money and also see higher electricity costs as the “benefit”?

Sadly, it appears this is the way business is done in New York.

The subsidies themselves make no sense to anyone with a basic understanding of economics.

Governor Cuomo has piled billions in New York taxpayer funded subsidies on top of favorable mandates and rules which are on top of a many years of other federal and New York state subsidies which themselves run into the tens of billions of dollars.

And basic economics also instructs us that energy prices are very likely to go up as the non-renewable tax is passed on to consumers and wind and solar are free to raise their prices in response. When combined with our falling efficiency, that spells trouble for New Yorkers’ electric bills.

So New Yorkers can expect to get hit now and later, just as Californians have with the nation’s most-aggressive renewables programs and, not coincidentally, the nation’s highest electricity costs—paying 41% more than the national average.

These policies make sense only in the world of corruption and wasteful spending of Albany under the direction of our governor, Andrew Cuomo.