Rhetoric Without Reason: The Dangers of Divestment

Over the past several years, PACE has reported on the energy stock divestment movement, noting this misguided social activism’s potential to weaken university endowments and spread misinformation about energy. Today, we are releasing a new paper describing a renewed and expanded divestment push, now also aimed at pension funds and financial institutions. Today’s PACE blog is the white paper’s Executive Summary; please take a look and share this with colleagues and on social media.

Simply put, divestment is the selling of stocks deemed by an individual or institution as unworthy of holding. Over the past several years, a small but vocal faction of environmental advocates has seized on the idea of energy stock divestment. Reports earlier this year showed 701 global institutions managing assets estimated at $5.46 trillion divesting energy holdings.

While energy divestment first targeted university endowments, it soon spread to public pension funds. As the U.S. continues to back away from the Paris Climate Accord, and oil and gas pipeline projects continue to develop to serve growing demand, divestment activists have begun to target specific projects. In spring 2017, USBancorp issued a lengthy public statement announcing it would no longer finance oil and gas pipelines.

Cloaked in grassroots populism, energy divestment is one of the most anti-democratic social movements afoot today, gambling with the retirement security and education costs of untold numbers of U.S citizens. Arguments against divestment are clear and compelling:

  • University endowments are meant to support students’ education now and for the long haul. Endowments are not intended to be political vehicles.
  • Similarly, pension funds are created and maintained to support employees and their families in retirement. Employees deserve the most financially rewarding retirement possible; divestment advocates should not be allowed to use other people’s money to advance social causes.
  • When divestment targets specific banks and energy projects, costs rise for millions of consumers as much-needed energy may be delayed in coming to markets. This in turn may slow economic growth or recovery.
  • Divestment fails to accept the fact that fossil fuel-based energy is needed now and will be for decades to come, until technology enables widespread, viable alternatives.

In response to these trends, PACE has expanded our own examination of divestment. It is critical for regulators, lawmakers and consumers to understand that the spread of energy divestment isn’t a smarter way forward for pensioners, investors, or even for clean energy proponents. On the contrary, divestment threatens pension beneficiaries, investors, and may even deter leading energy companies from pursuing sustainable energy projects.


Vogtle 3 and 4 Still Common Sense for Georgia

The Georgia Public Service Commission is once again holding hearings and taking public testimony on the merits of proceeding with construction of Units 3 and 4 at Plant Vogtle. This week’s Vogtle Construction Monitoring (VCM) hearings have, as usual, included spirited debate, sometimes set to ukulele music. (As Florida’s sage Dave Barry used to say, “I am not making that up.”)

As the Commissioners and staff continue to closely and responsibly examine the costs and timelines for the massive construction project, they are being bombarded with half-truths and histrionics. But there are just as many rational voices in the debate, including that of Georgia’s esteemed former U.S. Senator Sam Nunn.

In November 2017, Sen. Nunn, who has devoted his post-congressional service to studying nuclear issues and global security, authored a memo applauding the Vogtle partners’ “unity and determined commitment to overcome remaining obstacles and to complete this important project which will be a long-term asset for Georgia and for our nation.”

Sen. Nunn continued, “There are many reasons to support commercial nuclear energy including – jobs created through nuclear construction – meeting the needs of citizens added to our rolls through Georgia’s dynamic growth – and providing for a diversity of electric options that assure power delivery over the long haul. From a climate change perspective, zero carbon nuclear power is important in its own right and as a backup for growing renewable sources of energy, including wind and solar.” He continued, saying that “…a viable commercial nuclear energy enterprise in the United States is essential to our national security.”

Sen. Nunn also quoted and strongly agreed with former Obama Administration Department of Energy Secretary Ernest Moniz, who has said, “Nuclear power development is a critical factor in global security. U.S. national security is enhanced if the public and private sectors work in tandem to shape the global spread of nuclear energy consistent with energy security, safety, environmental stewardship and geopolitical stability.”

A similar opinion is expressed by University of Georgia Associate Professor David Gattie, who writes in The Hill, “With respect to nuclear power and U.S. national security, the U.S. electric power sector is a vital and critical infrastructure.  The absence of a vibrant and robust civilian nuclear power sector would risk reducing the United State’s position of dominance and influence over the global nuclear energy cycle, which is the foundation to nuclear safety and nonproliferation.”

Debate will continue this week at the PSC, but so will construction at the Vogtle site. Every day, Georgia gets closer to a resource that will serve its citizens with safe, affordable, reliable energy for decades to come. I’m not making that up and neither are Sen. Nunn, Sec. Moniz, or the hundreds of witnesses across the years who have provided data that support moving Units 3 and 4 forward.


Energy Retail Deregulation Wrong Fit for Florida

This week, PACE was on the road in Tallahassee, visiting with several members of the Florida legislature and learning about energy issues likely to arise in the 2018 session. As always, it was enjoyable to be outside the D.C. beltway, with warmer temperatures and fresh Gulf seafood all around.

Snow is rare in Tallahassee, but consumers need to be wary of the potential for a snow-job. Outside interests are setting up camp here to push for electric retail deregulation. Their primary vehicle so far is Prop 51, recently introduced and the likely subject of ongoing deliberations by the state’s Constitutional Revision Commission (CRC).

Already, exaggerated claims about the benefits of electric retail deregulation are swirling about. The Florida Restaurant and Lodging Association has kicked off a grassroots online campaign asserting that deregulation “could save Floridians $2.5 to $5 billion each year on their electricity bills” and “bring about lower prices, more innovative products and better customer service.” Their letter also asserts that “[w]e’ve seen these benefits in other states where customers can choose their electricity providers.”

There are some important questions to ask about these claims. First, where do the dollar figures come from?  What does “could” mean? As well, what innovative products come with deregulation that aren’t already available to Florida’s electric consumers? Most importantly, what benefits of deregulation have they observed in other states?

In this column, I can’t answer the questions about the dollar figures and the definition of “could”; that responsibility lies with the proponents of deregulation. I can share that the neutral Energy Information Administration (EIA) tracks power prices for every state. For the year 2016, in 14 out of 16 cases, prices per kilowatt hour were higher in deregulated states than in Florida. I can also relate some findings PACE gathered this year that shed light on the supposed benefits of deregulation in other states.

In Texas’ deregulated retail market, consumers experienced brownouts in 2011, 2014 and 2015. In New York in December 2016, the PSC halted the sale of electricity and natural gas to low-income consumers, seeking to protect them from unscrupulous marketers. In 2014 in Connecticut, thousands of residents complained about their utility bills; deregulated suppliers were shown to charge nearly three times more than customers of the state’s two regulated suppliers.

Also, since I’ve benefited from reliable electricity supplied by the City of Tallahassee this week, I took a look on their website to learn more about innovative products and services. The City has its rate structure approved by the Florida PSC. Already, “[s]olar Net-Metering is available to all commercial electric customers who have a qualified solar photovoltaic (PV) system on their premises.” The city has rolled out updated rate structures, with “nights & Weekends Pricing, … [a] utility rate plan that offers cheaper electric rates during nights, weekends and holidays.”

Reasonable prices, innovation and longstanding relationships among Florida’s energy providers and millions of citizens are worth maintaining. Deregulation is the classic solution in search of a problem and the CRC should send it packing before the snow-job blankets Tallahassee and the state.