The Biggest Billion Dollar Corporate Ripoff You Never Even Heard Of
The “Single market clearing price” is based on the HIGHEST cost bid
So called “Capacity Payments” Are a Rip-off That Provide Over $1.5 Billion In Corporate Profits
NJ Spotlight reports today that energy prices consumers pay will rise again.
Predictably, Spotlight blames climate and renewable energy policies, while ignoring corporate profits and the rigged and corrupt auction that sets those prices.
The rate increase takes effect June 1, the latest increase in utility bills driven by a variety of factors, including the state’s efforts to electrify the transportation sector, modernize the electric grid and transition to cleaner ways of producing electricity, such as solar energy.
The fact that Spotlight somehow can’t even mention – never mind quantify – corporate profits (and “shareholder value”) and the energy auction process itself as among the “variety of factors” driving price increases absolutely exposes their pro corporate bias and animus towards renewable energy and climate policies.
Tom Johnson constantly writes about the so called “high prices” of renewable energy, and rarely if ever mentions the benefits of those policies or the catastrophic costs of climate chaos (called the “social cost of carbon” by economists).
In fact, right now in Washington DC, the Biden administration’s attempts to restore the concept of the “social costs of carbon” – which was withdrawn by Trump’s Executive Order – is under severe attack by corporate lobbyists, see NY Times:
Tellingly, a second term Trump policy agenda, which is laid out in the corporate think tank Heritage Foundation’s “Project 2025” Report, would repeal the social cost of carbon, and virtually dismantle EPA climate programs, see:
Yet that entire debate is never mentioned by NJ Spotlight, as it would expose their journalistic malpractice.
In addition to ignoring all that, here’ how Spotlight portrays the corrupt energy auction:
Each year, the auction aims to buy electricity for the year beginning in June and melds that price with the two prior years to come up with the cost for the new monthly bill. This year’s price was below the previous year’s but is 26% higher than the amount purchased in 2022. In last year’s auction, prices rose from 3.3% to 6.9%.
‘’Overall, the auction was successful,’’ said BPU President Christine Guhl-Sadovy, who described the price increase as moderate. “We are very satisfied.’’
We have written to expose the “BGS Energy Auction” that sets energy prices in NJ as a corporate profit driven scandal, see:
So today we’ll repeat that work, as we correctly predicted these rate increases and we correctly predicted that NJ Spotlight would not mention the flaws in the auction process:
The Murphy BPU is preparing to conduct the annual power “auction” that determines the prices you will pay for energy. I’ve tried – unsuccessfully – to warn about this before:
6. The price of power is set based on the HIGHEST COST GENERATION SOURCE
When I first read about the PJM power auction, it was so absurd that I was sure that I was misunderstanding how the auction set the [wholesale] “market” price of power.
I don’t think the public has a clue about how the so called deregulated “free market” in energy actually works or how the so called competitive “BGS power auction” actually works. …
In a must read story, David Kay Johnston exposes how the auction markets are rigged by industry fraud.
But PSEG explains clearly how the auctions lead to high prices and consumer ripoff even when they work as designed and are not rigged:
“The price that each generator receives for the power it produces is not ordinarily established by its own bid. Wholesale markets operate on the principle of the “single market clearing price.” All generators are paid the same price based on the bid of the last unit that “cleared the market,” that is, the most expensive unit needed to meet demand. “
Did you get that? The price is set based on “the most expensive unit needed to meet demand. “ This is a statement of fact by PSE&G itself, not an accusation from me.
You won’t read about any of this in the standard puff piece from NJ Spotlight about the price outcome of the annual “Basic Generation Service” (BGS) power auction. That auction does not simulate a “competitive market”, it creates a cartel.
Finally, Spotlight vaguely alludes to another scandalous policy that is driving energy prices and stoking corporate profits, know as “capacity” charges. Here’s how Spotlight obfuscates the capacity payment issue and again blames renewables:
For larger commercial customers, bills also will rise, largely due to increased costs for providing capacity and more renewable energy in their generation mix. Capacity deals with ensuring there is enough electricity to maintain reliability of the power grid. In January, the state also boosted the percentage of electricity in the mix from 21% to 35%.
But here is what’s really going on with so called “capacity” charges: corporate profits:
While many whine about the so called “high costs” of and consumer subsidies for renewable power, the above table shows how NJ residents and businesses paid over $1 BILLION in what are known as “capacity payments” last year and will likely pay $1.5 BILLION this year (2013). (Source: Rate Counsel).