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Manhattan Institute

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How California Promotes Energy Poverty

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How California Promotes Energy Poverty

National Review Online August 3, 2015
Energy & EnvironmentRegulationsClimate
EconomicsRegulations

For the state's elites, fighting climate change comes first — no matter the cost.

In a recent column in the Orange County Register, demographer Joel Kotkin wrote, “California is a great state in which to be rich,” but he added that affluence in California “co-exists alongside unconscionable poverty.” He pointed out that in the Golden State, the poverty rate for Latinos is 33.7 percent and for African Americans, 30 percent. Both those percentages are well above national averages.

Kotkin's column, which carried the headline “Putting climate change ahead of constituents,” excoriates the energy policies being promoted by California's liberal politicians, policies that he calls “environmental puritanism.” Kotkin (whom I am proud to call a friend) has it exactly right. California may be one of America's most liberal states, but its energy policies are regressive, and the state's headlong rush toward lower carbon-dioxide emissions and greater use of renewables will only make that regressivity worse.

Liberal Democrats across the country frequently talk about the plight of Latinos and African Americans, and the need to increase take-home pay for the poor and the middle class, but their energy policies are hurting those very same people. No state provides a better example of that than California. And no policy provides a better example of regressive energy taxation than California's renewable-energy mandate.

Californians already pay some of the country's highest electricity prices. In 2013, according to the Energy Information Administration, the average retail price of electricity in California was 13.5 cents per kilowatt-hour. That's 38 percent higher than the national average. If you exclude Alaska and Hawaii, no state west of New York comes close to matching California when it comes to expensive electricity. And California's renewable-energy mandate — which requires that one-third of the state's electricity be produced from renewable sources by 2020 — will cause those rates to climb yet higher. (In 2014, the state got about 10 percent of its electricity from wind and another 4 percent from solar power.)

Last week, the Manhattan Institute published a report by my colleague Jonathan Lesser in which he relates his finding that in 2012, about 1 million California households were living in “energy poverty,” meaning that they spend 10 percent or more of their income on household energy costs (excluding the costs of transportation-related items, such as gasoline).

Using Census Bureau data and electricity-pricing information, Lesser found that the highest rates of energy poverty are occurring in the most economically depressed parts of the state — the inland counties that largely depend on agriculture. For example, 15 percent of all Tulare County and Madera County households experienced energy poverty in 2012. So did 14 percent of all Imperial County households. By contrast, in the wealthy coastal counties (including the ones where Silicon Valley is located), energy-poverty rates averaged between 3 and 4 percent.

Energy poverty is pervasive in the inland counties not only because they tend to be economically depressed, but also because the climate is less hospitable, with summer temperatures often exceeding 100 degrees. For lower-income households, that means big summer electricity bills in order to keep cool, a problem exacerbated by California's tiered-rate system, which is designed to reduce electricity consumption. For the largest residential electricity users, summer rates can be over 40 cents per kilowatt-hour.

For example, in 2013, the average summer electricity bill for a household in Hanford, an agricultural town in Kings County — one of the poorest counties in the state — was over $500 per month. Meanwhile, in Mill Valley, located just north of San Francisco in wealthy Marin County, the average bill was just over $200. Thus, in Kings County, where the median household income is $48,133, residents are paying more than twice as much for electricity in the summer as are residents of Marin, where the median household income is $90,839 — 89 percent higher than the median in Kings County.

Despite the evident regressivity of the state's policies, Governor Jerry Brown has called for the renewable-energy mandate to be increased from 33 percent to 50 percent by 2030.

California's regressive energy policies go beyond electricity. They also hit the poor and the middle class at the gas pump. According to recent data from the American Petroleum Institute, California has the fourth-highest gasoline tax in the country. At almost 61 cents per gallon, California's gasoline tax is 24 percent higher than the national average.

Another regressive policy: California requires expensive boutique blends of gasoline. The latest data from the AAA's Fuel Gauge Report shows that on July 28, the national average price of regular gasoline was $2.70. In California, the average was $3.82, or 41 percent higher than the national average. In parts of Los Angeles, premium gasoline is currently selling for more than $5 per gallon. Indeed, California now has the dubious distinction of having the most expensive gasoline in the U.S., exceeding even Alaska ($3.48) and Hawaii ($3.31).

In short, by trying to address the intractable issue of climate change, California's politicians are making energy more expensive. In doing so, they are providing real-life lessons on how to punish the poor and the middle class.

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