A coal-plant subsidy that won’t die

FDR statueGovernment programs — any government programs — develop clients, people with vested personal interests in seeing them continue, even when the programs aren’t needed any longer, even when they’ve become counterproductive.

Which is why, according to the Washington Post, 3,000 people from the National Rural Electric Cooperative Association descended on Washington’s Capitol Hill last week. That’s about six for each senator and congressperson. All of them arguing for continued life for the descendant of Franklin D. Roosevelt’s Rural Electrification Administration.

In 1935, with the Depression raging, rural electrification was a massive make-work project that also brought modern convenience and industry to dirt-poor farmers, whom private utilities said they couldn’t serve economically.

Now it basically provides low-interest loans so people can build coal-fired electricity plants, and the co-ops it helps include suburban Atlanta and Dallas. According to the Post, the Rural Utilities Service provides loans at interest 2 to 2.25 points lower than the best commercial rates.

The beneficiaries of the government’s largesse — the nation’s rural electric cooperatives — plan to spend $35 billion to build conventional coal plants over the next 10 years, enough to offset all state and federal efforts to reduce U.S. greenhouse gas emissions over that time.

Digging the electricity portion of the RUS’s work out of its budget numbers is a challenge, but it seems (.doc file) to lend out about $1 billion a year and has about $27 billion in loans outstanding (PDF). With America’s rural parts now pretty much fully electrified, the official justification is that power needs to be kept cheap and reliable, and coal is, at current prices, the cheapest and most reliable way to provide it.

Writes GreenOptions.com’s Maria Surma Manka:

This is going to be a tough political issue for Congress to tackle. Both sides may have valid points, but the system must be restructured to be a more efficient process that emphasizes clean, renewable, local energy. If not, than all the state and federal goals, programs, and initiatives that aim to cut climate change emissions will be simply blown away.

I think this is much too generous. It’s not clear at all that the program any longer serves any legitimate purpose at all, to the extent it ever did. Guaranteeing cheap and reliable power in extremely remote areas — let alone populous ones — isn’t a proper function of government, and certainly not when it’s directly at odds with other government policy.

But on it lives, in part thanks to the bullying of the co-op association’s head, Glenn English. Reports the Post:

English rallied the association’s members to fight proposed laws on climate change that might hurt the rural co-ops. Such proposals would mean higher electricity rates, he said, and that would anger voters.

“So are we supposed to tell members of Congress that you’ve got to be willing to sacrifice your seat for the sake of energy efficiency?” he said. “I don’t think the political community wants to take out the knife and commit hara-kiri.”

Those voters. Totally uninfluenced by the coal-plant-owning co-ops, no doubt.

The long-term, big-picture lesson here is that ongoing subsidy programs, even in the form of cheap loans, are permanent bad news. The same thing will happen with subsidy programs for solar panels and wind farms.

(Photo credit: “FDR Memorial,” Flickr/dbking)


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