February 6, 2023
Rising Energy Costs in Pennsylvania
General inflation, fallout from COVID lockdowns, and PA’s poor history of regulatory and permitting clarity have caused a dramatic increase in energy costs for residents and businesses. The House Republican Policy Committee, and all Members of the Republican Caucus, have heard distressed calls from Pennsylvanians asking for an inquiry into rising energy prices. To learn why energy prices have risen, and what can be done legislatively to combat future increases in costs, Chairman Kail invited representatives from our major energy providers and consumers to express insight into their industries and to share their needs.
The testifiers that joined the Policy Committee were as follows:
Challenges Facing our Energy Providers Panel:
David Callahan -
President, Marcellus Shale Coalition
Rachel Gleason -
Executive Director, Pennsylvania Coal Alliance
Terry Fitzpatrick -
President and CEO, Energy Association of Pennsylvania
Impact of Energy Prices on Consumers Panel:
Rod Williamson -
Executive Director, Industrial Energy Consumers of Pennsylvania
Kevin Sunday -
Director of Government Affairs, PA Chamber of Business and Industry
Greg Moreland -
Pennsylvania State Director, NFIB
Mike Butler -
Mid-Atlantic Executive Director, Consumer Energy Alliance
To begin the day’s discussion the Committee was first joined by representatives of PA’s oil and gas industries, our coal industry, and an expert to speak on our utilities infrastructure. Natural gas is the current majority generator of electrical energy in Pennsylvania, followed by nuclear energy and coal, so the day’s focus was on what immediate means are available to ease the energy burdens being faced throughout the Commonwealth.
David Callahan, President of the Marcellus Shale Coalition, started the hearing by drawing attention to the fact that PA is the second largest natural gas producer in America. With our immense resources, and our status as a net-energy exporter, one would think the People of PA would receive lower energy prices, but this is not the case. PA law requires that certain proportions of our “Energy Portfolio” be generated by non-traditional energy, and loans and incentives provided to “alternative” sources have benefitted the few largely at the expense of those with lower incomes. Grants and loans for solar panels or government-approved home improvements mean little to the average homeowner or renter that is contending with their existing utility bills.
Mr. Callahan shared with the Committee that the Department of Environmental Protection (DEP) operates as an inhibitor of infrastructure expansion and energy extraction. Their environmental goals and regulations are absolutely necessary, but the immense wait-times for permits and regulatory confusion does not market PA to outside investors that desire stability and predictability. To address the ever-present issue of DEP permitting and regulations Mr. Callahan proposed a true “permit decision guarantee” for DEP to abide by, as well as investigating the utilization of 3rd party permit reviewers when DEP claims they are unable to meet the demands of our industries. Simply put, we have immense energy under our feet but must often wait years before State authorities approve a new drill site, pipeline, or containment facility.
“We need more infrastructure for our natural gas to supply domestic markets and international markets as well.”
David Callahan - President, Marcellus Shale Coalition
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Rachel Gleason, Executive Director of the Pennsylvania Coal Alliance, joined the Committee to share the current role of coal in keeping our homes warm and lights on. Coal, though not as prolifically utilized as it was in the past, remains a necessary component of our energy generation portfolio. The 2022 data has yet to be finalized, but it is projected that 25 million tons of coal, mined in PA, was purchased by US power plants this year for electricity production. 42 million tons of coal were produced in total to fill the needs of America’s industry and residential coal needs. Coal these days is rarely used in a home furnace, but the energy in coal is used to generate the electricity that flows into our homes and businesses to keep us comfortable.
Within the last decade, and particularly following the COVID pandemic, there have been far fewer new coal mines breaking ground and supplying the market. There is enough coal currently being produced to meet our immediate needs, but the over-production present in the past is no longer occurring, which results in increased prices. At the start of the COVID pandemic Governor Wolf briefly declared coal mining to be a “non-essential industry”, but this decree was quickly corrected once the Governor was educated on the stability, consistency, and necessity of utilizing our coal bounty to fuel our State. Coal powered electrical generation is exceedingly stable in its generation potential, and can be increased or decreased to meet the demands of the public minute-to-minute unlike newer competing “alternative energies”.
The crux of the price of coal-powered energy generation is production ability and a cooperative regulatory climate. Year after year coal producers contend with new regulations, permits for mines that take excruciatingly long to approve, and increasing demands to push their product out of the market. What those opposed to coal refuse to recognize is that coal-fired electric generation is THE ONLY source of baseload power that can utilize a substantial amount of on-site fuel to ramp up generation when the need arises. Increasing coal production, permitting new mines, and creating a more cooperative regulatory environment are the only means to decrease coal prices for our electrical generators and in-turn decrease electricity prices for Pennsylvanians.
“It all goes back to permitting, planning, and demand.”
Rachel Gleason - Executive Director, Pennsylvania Coal Alliance
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Terry Fitzpatrick, President and CEO of the Energy Association of Pennsylvania , joined the committee to share his insight from the perspective of our electric and natural gas distribution companies. In short, residential electric and natural gas prices were higher this winter due to increases in wholesale prices. Increases in wholesale prices stem from the following conjoined causes:
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Economic recovery spurred greater energy demand following the COVID closures. |
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The war in Ukraine impacting global energy markets. |
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General inflationary pressures seen throughout the free market. |
Terry expressed that increases in energy and transportation costs will increase the costs of goods, thus furthering our inflation and energy woes. The primary means to combat this across-the-board inflation in costs is to increase production of our core resources and make it easier to get those resources to our manufacturers, refinement facilities, and our homes. With this being said, the Federal Energy Information Administration’s (EIA) recent data shows prices beginning to fall, with expectations that these falling trends continue into 2024.
Pennsylvania law enables residents and businesses to choose their electricity provider, and not take whatever offer your grid operator decides. The ability to “choose your energy” provides competition within the market, and enables consumers to choose both how their energy is generated and the price they are willing to pay. Mr. Fitzpatrick urged all PA residents to utilize “PA Power Switch” and “PA Gas Switch” to compare offers and determine if their energy costs and means of generation align with their needs. Be wary when shopping for electricity and gas providers, as contract agreements differ along with the price.
“Some of the stigma put on fossil fuels is a drag on investment in the long term. That is a danger I see, and a danger I believe others see as well.”
Terry Fitzpatrick - President and CEO, Energy Association of Pennsylvania
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Following the testimony of our energy providers the Committee was joined by the major entities that utilize PA generated energy. The greatest calls for energy assistance are generally heard by homeowners and residents, but it should not be forgotten that our manufacturers and businesses utilize immense amounts of energy, and the price and availability of the energy they use often determine the location and survivability of their endeavors. Inexpensive reliable energy is an absolute necessity to business and population growth within the Commonwealth.
Rod Williamson, Executive Director of Industrial Energy Consumers of Pennsylvania (IECPA), shared testimony from the perspective of energy-intensive customers throughout PA. The 30 companies that IECPA represent spend over $300 million on energy every year, consuming over 3 billion kWh of electricity and over 30 billion cubic feet of natural gas. Pennsylvania industries exist in the commonwealth because of our reliable energy, but even with this being the case 30%-70% of industrial manufacturing costs are directly tied to utility costs. For the industrial members that IECPA represents a 1 cent per kWh increase in electricity costs can result in an increase over $10 million per year in energy expenses for the business!
With the impacts of minor energy price increases on our energy-intensive customers having been explained, the dangers of policy initiatives pursued over the last decade became apparent. Policy pursuits championed by Democrats, namely the Pennsylvania Alternative Energy Portfolio Standards Act (AEPS), onerous efficiency requirements and regulations, restrictions on fuel use, and the energy generation tax imposed by the Regional Greenhouse Gas Initiative (RGGI) pose tremendous harm to our industries and people. To retain existing business, and attract future entrepreneurs, these obstacles to inexpensive and reliable energy must continue to be combatted.
“We need reliable energy that is priced in a way that allows our Pennsylvania operations to grow and successfully compete in the global markets we serve.”
Rod Williamson - Executive Director, Industrial Energy Consumers of Pennsylvania
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Kevin Sunday, director of government affairs for the Pennsylvania Chamber of Business and Industry (PA Chamber), testified from the perspective of the Chamber’s nearly 10,000 members. These members constitute the largest broad-based advocacy organization in the Commonwealth and provide for family-sustaining careers and opportunity throughout the State. They, like all residents of the state, are heavily reliant on our State’s bountiful resources to generate their products and run their businesses and industry.
Kevin shared that while our businesses and industry increase production and energy utilization, emissions related to energy generation and industry are falling. Among all states, PA is second in greenhouse gas emission reductions since 2005, and the emission goals set under the Obama administration to be achieved by 2030 have already been met. These emission goals have been met even when the state is generating more energy than ever before, largely thanks to the increased utilization of clean burning efficient natural gas sourced from beneath our feet. The free market in PA has delivered positive environmental results faster and more efficiently than D.C. government planning could have ever imagined!
The PA Chamber believes that building a 21st century advanced manufacturing operation, and leveraging our energy resources responsibly, is only possible through a determined and bipartisan pursuit of reform to our state’s tax and regulatory structure. Furthermore, as heard in previous hearings, the need for stable finance laws pertaining to corporate net income taxes and carrying forward losses are necessary to retain and attract industry. With this being said, if energy prices continue to rise the point where existing industry cannot stay competitive we will lose our current job-creators and miss-out on future out-of-state investment and opportunity.
“Our State’s energy resources have helped dramatically improve the nation’s energy security, and that of our allies, as well as significantly reducing our emissions.”
Kevin Sunday - Director of Government Affairs, PA Chamber of Business and Industry
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Greg Moreland of the National Federation of Independent Business in Pennsylvania (NFIB) joined the Committee to speak on the impact rising energy prices play on our small businesses. The NFIB, which represents 13,000 members in Pennsylvania alone, is charged by its members to promote and protect the right of entrepreneurs to own, operate, and grow their businesses. Current energy prices, and the last two years of COVID related regulations and “orders” have created an unprecedented challenge for our small businesses.
Mr. Moreland began by reminding the Committee that nearly three years ago many small businesses contended with Governor Wolf’s capricious “essential vs. non-essential” business orders that threatened their very existence overnight. These forced closures lasted far longer than the initial two weeks, and countless small businesses went on to never open again. Those that prevailed now contend with supply-chain disruptions, ever-increasing inflation, increased energy costs, labor costs, and higher Unemployment Insurance tax bills. The most recent NFIB member survey, conducted in December 2022, found that when all these business problems were considered 68% of NFIB members overwhelmingly blamed rising input costs as the main cause of their need to increase sales costs. Input costs are composed of inventory, supplies, labor, and energy. As energy prices continue to rise businesses are left with little flexibility to make up those costs. Small businesses, in particular, do not have the economies of scale to absorb the increases we are all experiencing.
NFIB is agnostic towards any specific energy source. Businesses, like most of us, are most concerned with the price of their energy, and the source is a secondary concern. If an NFIB member is concerned about the price or source of their energy, just like a PA resident, they are urged to utilize “PA Power Switch” and “PA Gas Switch” to compare offers and determine if their energy costs and means of generation align with their needs. Just as other testifiers had shared, poor policy pursuits such as RGGI and onerous regulations will only further force businesses to roll costs downhill to the end-user. NFIB members are exceptionally clear in their predictions of the future, their energy and material input costs must decrease before their product costs can decrease. The Commonwealth needs consistency, clarity, and certainty within our energy policy if we wish to retain and attract small business.
“Our members care about energy sources that are reliable, effective, clean, and cheap, because it directly affects their ability to survive as a business.”
Greg Moreland - Pennsylvania State Director, NFIB
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The final presenter for the day’s Energy Consumer Challenges panel was Mike Butler, Mid-Atlantic Executive Director for the Consumer Energy Alliance. Mike spoke on behalf of the 500,000 members of the Consumer Energy Alliance (CEA), with 30,000 in PA, that represent every sector of the US economy. He shared the perspective of CEA, which is that irresponsible energy policy, largely originating in D.C. through lofty goals such as the “Green New Deal”, are leading to higher energy bills, service disruptions, and an increase in income inequality. Furthermore, the energy and environmental policy being proposed in D.C. and here at home are often not aligned with achieving the true environmental and social progress we all desire.
Energy policy should consider the needs of consumers first and foremost, while also enabling the development and utilization of state-of-the-art technologies and methods. Forcing new regulations and purchases on residents and businesses harm those with lesser means to adapt, and only furthers economic disparities. To put this into context, the average PA home energy expenditure is $2,890 per year, per capita. 12% of PA lives at or below the poverty line, so this $2,890 yearly expense constitutes nearly a quarter of their annual income. Furthermore, as of 2020, 27% of all US households reported difficulty paying energy bills or reported keeping their home at unsafe temperatures due to cost concerns. Considering Pennsylvania is a net-energy exporter, with a tremendous amount of resources yet-to-be extracted, these statistics were quite alarming and show a failure in state and federal energy policy.
“We are witnessing irresponsible policies and proposals that have the unfortunate consequences of increasing prices and harming reliability while failing to achieve environmental goals.”
Mike Butler - Mid-Atlantic Executive Director, Consumer Energy Alliance
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The day’s hearing did not contain all the answers to our rising energy price woes, but pointed the Committee in a direction that will surely benefit the people of the Commonwealth. We have the resources beneath our feet, we have the know-how to extract and utilize them, and we have enough infrastructure to meet our current needs with room to grow. A majority of the obstacles to inexpensive energy are derived from a small vocal minority, and it must be known that the needs of the people come first and not unrealistic political goals and grandstanding. The House Republican Policy Committee will continue to champion our energy generators, extractors, and end-users as we know any future growth in the Commonwealth will be reliant on the availability of inexpensive energy and the means to produce it.