Power Play: The Good, the Bad, and the Costly of Energy Policy

Energy policy impacts every American’s wallet and the reliability of the power grid. In Power Play, we break down which policies keep the lights on and energy affordable—and which ones drive up costs and threaten reliability. Hosted by Ryan Norris, of Americans for Prosperity Arkansas, and with guests Amy Cooke, President of Always On Energy Research and a national leader in free-market energy policy, and Glen Lyons, founder of Advocates for Consumer Regulated Electricity with 40 years of industry experience, this podcast brings insider expertise, real-world analysis, and no-nonsense conversations about the policies shaping America’s energy future. Whether you're a consumer, policymaker, or industry professional, this episode will help you understand how government decisions impact your energy bill—and what can be done to fix broken policies. Tune in for bold, honest, and insightful discussions on the fight for reliable and affordable energy.

To learn more and see how AFP-Arkansas can help you or your organization increase your impact in our state, email us at infoar@afphq.org or visit us at believeinar.com.

Transcript

Welcome to Believe in Arkansas, where we believe free people are capable of
extraordinary things.
Now, here is the host of Believe in Arkansas, Ryan Norris. Welcome to another
segment of Believe in Arkansas, where we believe free people are capable of
extraordinary things. And Today's topic is going to be about energy policy,
very timely conversation to be having as now Arkansas is in the middle of its
legislative session and energy is starting to make its way as a policy to be
determined here in our state. Now what is bringing this conversation to the forefront
are many factors, but just a couple of them are that Arkansas energy companies are
about to bring about 3 ,600 megawatts of coal -fired capacity offline by 2030,
3 ,600 megawatts. Currently only been able to bring up about 800 megawatts of solar,
totally different kind of concept there, intermittent versus dispatchable energy. That
is going to, has already put us into a bit of a deficit by the 2030 timeline. So
we need to be able to make that up. And then Arkansas is growing. We haven't seen
our population grow. People are identifying Arkansas as a place that they want to
move. And there are promises of economic development should Arkansas have the energy
to bring in new manufacturing and new industry. So to speak to us today about the
good, the bad and the costly of energy policy is Amy Cook, president of Always on
Energy Research. Welcome to believe in Arkansas. Amy. Thank you so much thrilled to
be here. And we also have Glenn Lyons founder of Advocates for Consumer -Regulated
Energy. Glenn, thank you very much for being with us today. My pleasure Well,
you both are energy researchers and experts on these topics and your credential is
massively impressive and definitely outpaces me and my knowledge of energy policy. But
one of the foundation pieces that we need to look at, and so here in the state,
just identified losing 3 ,600 megawatts of energy, people are saying we want to move
here, businesses saying we want to get here too, and we're going to need the energy
to cover that. But why does the U .S. need abundant, affordable, and reliable energy
to support economic growth and even national security? And then what role do you
think the free market and competition play in ensuring that supply?
Nothing like starting off with a big conceptual question on this. So thanks,
Ryan. Actually, I will say this. There are no thriving,
prosperous nations that use little to no no energy.
So there's a direct correlation between educational attainment, economic prosperity,
quality of life, and energy usage. So this idea that we should starve ourselves or
starve ourselves of energy as a way to prosperity is false.
We need to use energy to be prosperous and there's nothing wrong with that.
I mean, we have nothing to be ashamed of. I wrote a column one time. The 1970s
called and they would like their narrative back, put on a sweater, turn down the
thermostat. No, we should be using energy because when we use energy,
we innovate. That's where technology comes from that's when we thrive.
All you have to do is look at deep seek. Remember I mean everybody's talking about
how much energy AI platforms and data centers are going to be using and then all
of a sudden deep seek comes on to the springs on to the front of the line and
stock dive because they're saying hey wait a second we don't think we need that
much energy. Well, how does that happen? That happens because we all have access to
affordable, reliable, abundant energy. And I would say this too,
think about this. You know, and I was, I think it was Scott Brenner who said this
in one of his confirmation hearings, the new secretary of treasury or treasury
secretary, he said he was he was challenged. We're in a green arms race with China
and he said oh no we are in an energy race with China.
China's putting new coal plants online every week. They are building they are
building I think it's 32 gigawatts of nuclear energy between over the next few
years. Energy, we can't defend ourselves without energy,
there is no mobilization of the economy to defeat a foe who wants to harm us
without access to affordable, reliable, abundant energy.
It's a must. Right, and when you're talking about a state like Arkansas that has
about an 18 % poverty rate. You need energy, affordable energy,
to keep those individuals, to help them out of poverty and to keep people from
going back into poverty. Energy affects not only your utility bill that you receive
at your house, but it affects manufacturing. It affects, you know, every aspect of
our economy. Our groceries are, have energy built into the costs of those.
So it's important that we get this right and we keep an eye towards, of course,
reliable, like you're saying, but affordability has to be the close second in that
conversation. Let me add one real quickly. We have said energy is the new economic
paradigm. It is not fiscal policy to all my friends who love doing tax policy.
But it is energy, as you said, right, is an absolutely think.
And over the last four years, the previous administration, energy prices rose even
faster than inflation, because we are strangling our producers, absolutely strangling
them. It's the worst way to to run your energy policy is what we have done over
the last four years. And what that has done to Americans, and particularly in a
state like Arkansas, is you see a widening between what I call the energy halves
and the have nots. Folks can afford it, are cutting back, and using less when they
actually need to be using more. - Can I jump in on that? 'Cause I think that some
people may misinterpret part of what you just said, which is, and when I think of
energy, so I spent my career at Eximoma, when I think of energy, I think of
everything, not just electricity, but when I think what you're talking about energy,
you're talking about like oil and gas, a free market has been strangled by
government, by regulation and we need to let those guys run because they are very
clever, very creative and we'll find new ways to bring us new supplies of energy at
even lower costs. That's very different than when we're talking about the utility
sector utility sector is a whole nother animal And I just want to make that
separation That's a good and I would also throw coal in there. I'd throw nuclear in
there. We are energy rich and Resource rich. We are policy bankrupt.
Yeah, we're have been in the past
Well, Yeah, well this sets it up for you know that that pivot from just the broad
energy at large to filtering it down to the utilities and Particularly,
you know, like electricity utilities The question I have is how do regulated energy
monopoly structure?
Affect the profits and what are the incentives do they have to increase cost for
consumers rather than drive efficiency and innovation. So question again is, how is
the profit structure of regulated monopolies contributing to potentially higher cost of
energy for consumers? So I will start on that one. So utilities basically make their
profit based on how much capital they have invested. It's actually quite that simple
like in if they invest more capital they make more profit so their incentive is to
invest more capital there's common thing common cases where utilities will overbuild
things they will gold plate it is a commonly used phrase to to make the cost of
it even higher because again, they're going to increase their profitability. It's a
weird kind of concept, but it's unique to the regulated world.
A lot of their expenses are simply passed through to the consumer.
So their incentive to manage expenses, manage fuel purchases,
for example, if they're buying a natural gas for their gas plants, they basically
just pass that cost right through. So they have very little incentive to manage
costs closely, and they have a tremendous incentive to overbuild gold plates,
overinvest. So everything they build that they can consider a capital asset,
they invest or return on equity or however you want, but there is a percentage that
they make that is kind of guaranteed. Yeah. And if you think about it, I mean,
here's, I think this helps people sometimes think about how weird that is. So let's
say you're Walmart, a good Arkansas company, and Walmart wants to build a new store
in my neighborhood. But
They're not going to make a profit based on how much money they invest in that
store. They're going to make a profit based on how effectively they've designed that
store for the area, how effectively they merchandise, how effectively they price,
how much competition there is. It's the utility world is just a very weird animal
all the way we treat these businesses. And again, back to just the primary point,
which is they're incentivized to build, to overbuild, to gold plate,
and they're not incentivized to manage costs too carefully. And I would add to that.
So for a long time, there was the social contract that utilities would provide
affordable, reliable power that was their contract with and you can even find that
in PUC mission statements, things like that, that the utility would provide
affordable, reliable power at a relative and for that they would get a guaranteed
market because it was, let's say it was done by, you know, scale on scale,
a large scale, so they would be guaranteed a rate of return and they'd be
guaranteed a market. And it wasn't really until this politicalization of the power
grid where you had groups coming in demanding we not use certain resources that you
started seeing, it was when politics came to play. And I think at first, you know,
just getting electricity to everybody was, you know, it was a novelty. But then it
was like, Oh, no, now we can play with it. And utilities have gone along with it.
Because to Glenn's excellent point, they if they can continue to build because there
is a constituency that wants to use a certain kind of power. Excellent.
they can build it, they can socialize all of those costs onto all of the rate
payers and in return, they get a guaranteed rate of return or a profit. To me,
I look today and having thought back and actually written about the history of this,
at least in the state of Colorado,
it was really when public policy started playing with that and deciding that there
would be a political agenda, that contract was broken.
Utilities are to blame for it and they willingly went along with it. So in fact,
let me jump on that. So Ryan, your point about 3600 megawatt coal plant, you said.
So I'm going to probably get a little more complicated than I'd hope to, but it's
not just investing and capital's having that capital sit on the books. And so once
they make an investment in a power plant, it gets amortized or depreciated, let's
say 30 years. At the end of 30 years, it has zero value on the books. It no
longer is profitable to them. So if that coal plan is depreciated to zero,
it's no longer making them any profit. They would love an excuse to get it off the
books because then they can take this useful plant and then replace it with
something brand new that they can start making profit on. So that is a big part of
what's going on as well. So it has no value according to accounting for their
books. To their accounting only. It still has profitability to the utility consumer
because it can still produce energy that keeps their lights on their homes heated
and cooled.
It's the lowest cost energy. So it's like if I if I paid my car off I don't just
immediately go out and buy a new one. I keep it because it's good for me to have
that paid off but they're not incentivized to keep even potentially older but
productive plants online because again in the accounting of it and the depreciation
over time it now has an accounting value of zero to them even though it could and
be contributing to the grid. Yeah I mean again it's a weird phenomenon of this
utility world you go back to using Walmart as an example just because Walmart has
fully depreciated a store, doesn't mean that store is no longer profitable. Right.
Right. They keep operating it. But because of the incentive structure that exists in
here about capital projects, capital assets, having an ROE on that,
that's a guaranteed there is just this incentive to continually build and continually
gold plate or whatever it may be to keep those numbers high.
The least expensive power is the power you've already paid for the plant,
and you're simply paying for maintenance, upkeep, and fuel cost. And to what you all
have, as you've explained so well, it is the least cost for ratepayers.
It is also the least profitable for shareholders. Yeah. Well,
this teases up for the next question, which is, what does effective energy policy
look like? And how can policymakers ensure that it promotes competition, lower costs,
and prevents unnecessary government intervention in the market? Do I get that one?
You're smiling about it. Glenn, I'm going to let you have it. The best policy for
energy, whether we're talking oil, gas, coal, nuclear, wind, solar, or electric
utilities would be free market. The freer the market, the better. We have relatively
free markets for oil and gas. Coal is a little different because it's so heavily
regulated. I mean, oil and gas are heavily regulated too, but coal is even more so.
Wind and solar, they get this backwards incentive, tax incentive,
so you get overbilled on those things, which then causes problems with the stability
and the reliability of the grids. But when it comes to utilities, we have no
competition. We haven't had competition for 100 years or so. Whenever this regulatory
compact was entered into and states said, yeah, we're going to give you your
monopoly tariff,
to overlook the problem with the subsidies for wind and solar right now. But as far
as the construction and opportunities to build those projects, there's a lot of good
competition there. But on the electricity side, we have no competition. That's what
my organization is actually about, is trying to promote, create opportunities for
competition in the electricity sector so we can see a better management of cost,
better management of investment, better recognizing who's causing the cost,
they will incur the cost rather than sometimes, well, not sometimes costs tend to
get socialized throughout a utility. So even if you're not responsible for the cost,
you're going to end up paying for it. And then Perhaps the biggest problem thing
we're lacking because of this monopoly structure is that you have very little
innovation. You have little incentive to innovate, but it's also difficult to innovate
because you gotta get it through a regulator. Regulators are understandably, they have
to be careful and cautious about things. So that doesn't go hand in hand with being
innovative. And if you could get some competition going, I think you can see
innovation in the sector, innovation that we have denied ourselves for more or less
a century, you could see that really take off. Yeah. Um, and I add to that,
you know, Glenn is absolutely right. We don't have innovation in or a free market
in the electricity space. That is 100 % true.
And people will say that they'll say, well, what about a regional transmission
organization? Arkansas is a part of what it sounds like. Okay,
so you're part of. And they'll say, you know, that's a free market. It's not.
It is just a, they called it deregulation, but it's actually re -regulation.
It's Regulated in a different way and so so the I when people say oh,
we have markets with regional transmission organizations No, you don't you you you
have Just regulated it in a in a different way. It's not a vertically integrated
monopoly system But it is a different type of regulation mm -hmm,
and really the design of those is to allow for regional utilities to access power
whenever they may need it, that there may be more of it over here, they need it
over here and they can kind of move it around a little more, was my understanding
of it. So it's not really a market, it's kind of like a way of filling in the
gaps
across that grid section. So that's really interesting. Again,
the free market component of it, we're not really in the free market.
Those agreements that they have regionally really aren't that. And there are ways in
which we could get into free markets. And we talk about that maybe at another time
in depth. But in all
What's really what it's really coming down to in Arkansas is What is the best way
to fund the large -scale in energy infrastructure projects without shifting?
Unnecessary cost under ratepayers are relying on taxpayer subsidies
Well again, I'm gonna point to what my organization is and I know this isn't the
point to this conversation, but the more you can bring private capital to bear on
these things, the more carefully that capital will be managed.
Private investors don't want to overbuild. They do not get incentivized to overbuild.
If they overbuild, they lose money. So that's a good thing. You want that market
discipline, and that requires opening up the electricity sector to more competition,
more true competition, not as Amy was pointing out, sort of this pseudo market
competition that you have in my so. Looks like a market, but it's kind of heavily
regulated and heavily centrally designed. And there's incentives for private capital
invest in, in energy. And I don't want to misattribute the quote,
but I had someone tell me recently that, that they had heard that Warren Buffett
said, if you, you know, you don't get wealthy investing in energy companies, but you
can protect your wealth because of that rate of return that's guaranteed, you can
protect your wealth by investing. So there is, There are those that are, particularly
as we, as our population ages, et cetera, they want safe bets like that for their
funds. Yeah. But okay. So let's, let's be careful about what Warren Buffett, I think
meant by that statement. I think what he meant by that statement is that utility
rate of return is a very steady predictable thing. It's very attractive relative to
the risk they take.
And because they're not subject to any competition. - Yeah.
- The regulator, you know, the original concept for regulation is it's supposed to be
a substitute for competition in the marketplace. And it's just nothing of the kind.
competition in the marketplace. I can tell you this from having, you know, spent a,
spent a career again at ExxonMobil. It's ruthless. It does not care.
Let's go back to, again, I keep using my, my Walmart example. I like that. If
Walmart builds that new store in my neighborhood and my neighborhood chooses not to
go there too bad, too sad, Walmart, that's, that's the way it goes. But if you're
a regulated utility, you're still going to collect your rate of return on that.
That's what Warren Buffett finds so attractive. And I, there's something else too,
with this part of this sort of monopoly utility structure. Part of that is that
they are charged with meeting the load, right? Like they have to meet demand.
And, and by the way, and they aren't too, they aren't incentivized to move quickly.
And so part of the tension we're seeing right now is you have AI platforms and
data centers that want power right now. I mean, they wanted it yesterday.
So they're making these demands and listen, they can write their private enterprise.
So what I love and I'll give a plug for what Glenn is doing so that It doesn't
seem shameless self -promotion, but it is an excellent idea. But think about this.
So you have these data centers or large users that need power right now,
and they just can't wait. Like speed is the number one issue for them. Well,
and they have capital. So why not let them build their own and therefore ratepayers,
you know, 18 % of Arkansas's population isn't bearing the cost of a large data
center that wants their power now and driving up the cost of utility prices for all
of them. Let the large end user who as Glenn pointed out.
They're not going to overbuild. That doesn't do them any good. They will build for
what they need. It is a great way to meet that additional load without doing it on
the backs of rate payers because they're going to make, and by the way, they're
going to make much better forecasts about their business than the utility will
because the uses incentive ice to get it right. Tility,
if it's socialized cost against across all ratepayers, doesn't have the incentive to
get the load forecast accurate. I'm not saying that they're gonna go out and
intentionally make, do it wrong, but they don't have, they're not sweating as to
whether or not they got it right. - Yes.
- Well, yeah, I will just say, I mean, it all comes down to incentives. Yes, I
don't want to suggest that, you know, they're not, that they're somehow being devious
or underhanded. You're just responding to their incentives. And another good point
just is that the whole regulatory space is so heavily laden with rules and they're
complex rules and you could spend a career trying to figure them all out.
It's complicated and they do.
manipulated monopolies have, how the free market could be interjected into that to
make the costs lower for consumer ratepayers particularly. So the final question that
I kind of have for us to discuss is, what are some recent examples of bad energy
policy and how have they increased cost, reduced reliability or stifled innovation in
the energy sector?
Well, I'll tell you a tale about my home state. [BLANK _AUDIO]
gave the utility everything it wanted without knowing costs, without knowing how much
the buildout was going to be, but essentially it was fuel switching. Shut down our
coal plants, build out natural gas, and now build out 100 percent wind solar plus
batteries. The state of Colorado is staring down about a
probably $500 billion build up. And wrap your,
across just a handful of rate payers, 1 .5 million rate payers for the monopoly
utility, but let's say 5 million, 6 million people overall in Colorado, you're
talking about $1 ,000 a month utility bills. And this isn't just the modeling that
my company did. This is also being, we're now hearing it from the Colorado Energy
Office that Colorado's electric rates are going to be skyrocketing.
The head of the PUC called this, he actually used these words.
These are words you never want to hear out of your PUC chairman. He called the
cost mind boggling. Wow. And that's what, that's what Colorado payers are looking at
and then at the same time they've said reliability that this new plan will barely
meet reliability standards. So you have developers in downtown Denver saying
reliability is their number one issue besides financing. I mean we're not talking
about you know downtown Aleppo we're talking about downtown Denver. Wow.
Building not being able to have reliable power. Just yesterday, out for over an
hour, my power is out for over an hour, fortunately, we have battery backups and I
have a generator so we could keep the house warm and freezing here right now.
So, and then let me close with this about Colorado and then I'll get to what does
a good policy look like?
The legislature, because the monopoly utility has promised to build out all this
stuff. And now we're on the hook for it. The legislature gave them a writer,
you know, the writer that, and it's a blank check.
What we originally thought was gonna be a few hundred million dollars just to
improve the distribution system is now up to
billion dollars between now and 2030. That's across 1 .5 million rate pairs.
Now add on top of that $43 billion additional for distribution,
another $38 billion for transmission, and we haven't built a single plant yet. Wow.
The costs are staggering. So what should you do? We'll do what the state of North
Carolina did, which is say, Listen, we want lower emissions, but we're not going to
tell anybody what resources to use or anything like that, and we're not giving you
a blank check. Here's what you need to do. If you're going to shut down an asset,
you have to replace it with a reliable asset. So you put reliability and
affordability into... Those are the guardrails. You don't go telling them what they
can and can't build but you put reliability and affordability into it. Those are the
guardrails and then you let the smart folks figure out what that should look like.
But if they can't meet those criteria, can't meet that, then no, you can't build
it. It has to meet those. That's how you safeguard rate payers in a system where
you have a monopoly utility, monopoly utility where they don't have, they can't just
go out and choose their provider. But,
and then also put in there, say you've got to review your plan with your PUC every
24 months and you have to show us where you've reviewed new technology that has
potential to lower cost. If you do that, you at least are protecting your rate
payers. Doesn't mean the utility isn't going to get a rate of return. They still
get the rate of return, and they're still building new assets to meet the load, but
you've protected rate payers. But the thing that if you really want to be good,
add in what Glenn's group is doing so that large end users get their power quickly,
and it's not socialized across low income rate payers or rate payers of any kind,
small business or anybody else. Let those large users that have the capital and
wanna come to Arkansas, let them invest in Arkansas by building out that
infrastructure for themselves. And the utility can be a partner in that. It just
doesn't go across small business and residential customers.
Great. Glen, what would be your response on that? I'm going to come back with
something that's a little more narrow and small. But, and I know it's part of the
conversation in Arkansas. And I think it's also very important to kind of highlight.
So legislators who are pro economic development and you know as a result will often
want to see reductions to regulation which I am very sympathetic to and there's a
difference between reducing regulation in a competitive industry and reducing regulation
on a monopoly utility industry in the former where there's competition,
it self -regulates. And, you know, you got competition, competitors, ruthlessly trying
to steal customers from one another. And then you got the customers at the end of
the day, they're kind of the king. And they go, you know what? I don't want to
buy for many of you people. - Right. - The utility, the only thing checking them is
the regulator. Again, I think I said this earlier that Additionally, the concept was
we are substituting, we're giving you a monopoly, Mr. Utility or Mrs.
Utility, but we're going to substitute the competitive marketplace with our regulator.
That regulator is supposed to substitute for the punishing ruthlessness of the
marketplace. It does not do that and anything you do to take your foot off their
ability to press on the gas or the brakes, whichever way you're thinking, really
only adds more advantage to a utility that is not subject to any competitive
pressures whatsoever. Right. Let me throw one more thing in that is so true and
regulatory capture among public utility commissions is very, very real. If you've ever
intervened in one of these, it's difficult to get in. There isn't a lot of
transparency. It's heavily weighted towards the utility, which by the way, they can
pass those costs along to the rate payer, whereas if you're an intervener,
you know, you're passing it along to no one, you know, you're paying for all of
it. So what makes a great point about that? Well, this is very timely,
again, conversation for here in Arkansas, where currently in the process of designing
what the future of Arkansas's energy policy will be for the next decades,
potentially. And so we need to get this right. And we need to make sure that it
is at a cost that the ratepayers can bear. And so we brought a lot of concepts
about the incentives that regulated monopoly utilities have,
the free market components that potentially could be out there that would help to
decrease that, talking about how large energy consumers like manufacturing and industry
could pay for that to help get it quickly up to speed for them, and that could
be, again, not centralized across the ratepayers there. And then, of course, good
versus bad policy. We do not want to end up like the situation that Amy's in in
Colorado with, you know, $500 billion build out, definitely at a number that our
Kansans could not afford if that was spread out across ratepayers there. So we need
to get this right. So just as we conclude, you know, Amy, any final thoughts that
you would give to our Arkansas decision makers that are currently in this
conversation about how they should guide their thoughts towards producing a good piece
of energy policy. One I would ask, whatever this legislation is,
give me a cost. Your constituents deserve to know what they believe the cost is.
Not it's only going to raise rates, but what is the cost? What are they looking at
at a cost? And I'm sure that that your utility has penciled that out somewhere. But
even with that, knowing that that if you if the legislators do nothing else but
prioritize affordability and reliability above everything else must be affordable and
it must be reliable. And you And you can actually define those and there are states
that have examples of that.
You are going to avoid, your utility commission then has the power to not allow the
utility to over build on the backs of rate payers. Very good. And Glenn,
same question to you. How would you advise us as we build out this policy? What
should we be looking at looking for and demanding of that piece of policy.
- Utilities today have a sweetheart deal. We know that because the Warren Buffett
quote, "Utilities won't make you rich, but they'll keep you rich." They're going,
they get a very attractive rate of return for the risk that they take.
You should not be looking at any policy to help make that attractiveness even
greater. You should be looking at policies to open up the marketplace, create greater
economic opportunity rather than economic certainty for the utilities.
- Great, great points to end on. So Amy Cook of Always on Energy Research,
thank you so very much for being a guest here at Believe in Arkansas and Glenn,
founder of for Consumer Regulator and Energy. Thank you for being a guest as well.
- My pleasure. - Thanks. - Well, we look forward to seeing you all and talking to
you all even more as this conversation goes on. And just remember everyone listening
out there that we believe in Arkansas because free people are capable of
extraordinary things. - Thank you for joining us for Believe in Arkansas,
where we believe free people are capable of extraordinary things! If you believe in
Arkansas and would like to help unlock our state's potential, go to www .believeinar
.com to learn more and join the movement today!