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Tom Davis: Responding To ‘Strange Bedfellows’ Criticism

“The objective here … is for consumers to pay rates that are a function of what competition in the energy production market dictates.”

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RE | Strange Bedfellows

Dear Editor,

I didn’t watch or participate in other parts of a recent forum at Furman University hosted by the Riley Institute, but with a couple of exceptions I generally have no quarrel with the author’s characterization of the comments I made during a one-hour panel discussion of potential reforms to our state’s energy-production model.

As the author correctly noted, I expressed “concerns about how electricity infrastructure was historically financed in South Carolina, vertically integrated monopolies, the disastrous $10 billion spent on Santee Cooper, and the need for more energy.” After expressing those concerns, I outlined how they led to me draft the Energy Freedom Act – which passed the S.C. General Assembly and was signed into law by Governor Henry McMaster in May 2019. That legislation, I explained, was our state’s first step away from the energy-production monopolies that have saddled us with some of the highest electricity bills in the nation, and toward real competition through an open market of many buyers and many sellers that will provide downward pressure on the cost of producing energy. The objective here, I further explained, is for consumers to pay rates that are a function of what competition in the energy production market dictates, as opposed to simply paying a mega-utility a guaranteed rate of return on its invested capital.

The author also correctly recounted my comments about coal: “We must have fair allocation of costs for coal generation. There are externalities with coal – polluting the environment … We must monetize those costs and incorporate them into what you are comparing.”

For prices to play their important role in a free market, a process famously explained by Friedrich Hayek in his essay, “The Use of Knowledge in Society,” all costs of production of a particular good must be accounted for. The author is simply wrong in characterizing that such cost-of-production allocations constitute “state government picking winners and losers.” On the other hand, the author is correct to point out “there are ‘externalities’ with solar, such as the energy expended and earth mining impacts required to produce solar panels, China’s involvement in their production and their inhumane labor practices, as well as the inevitable disposal of used solar panel issues, to name a few. Why aren’t these also part of the equation?” The answer, of course, is that they should be.

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The first quarrel I have with the author’s piece is the context (or lack thereof) it gives to this comment by me about how individuals can best advocate for reforms to our state’s energy-production model: “We need to acknowledge some political realities; South Carolina is a Republican/ conservative state and one of the things I have found in drafting the Energy Freedom Act and getting it passed – talk about it in terms that make them comfortable. So, what could be more Republican than talking about free  markets…?”

That comment was made in the context of me disavowing legislation – enacted by several other states, most recently North Carolina – mandating the production of certain percentage levels of particular forms of energy by dates certain. Such top-down planning is inefficient and must be avoided. Instead, I argued, we should allow markets to work and that an optimum outcome would obtain if there was true competition on the supply side and true choice on the demand side. My comment was not made, as the author’s column implies, as an incitement to some sort of advocacy subterfuge.

The second quarrel I have is with the author’s insinuation that I made approving comments “regarding the allocation of the so called (sic) Inflation Reduction Act incentives, which in our opinion is a way of implementing ESGs, is again picking winners and losers, and will increase inflation for everyone, which is extremely harmful to small business owners.” I think the ironically named Inflation Reduction Act is a very harmful piece of federal legislation; moreover, I have grave concerns about ESG in particular and so-called stakeholder capitalism in general.

As I say, though, the author’s piece on balance was otherwise fair, at least as it pertains to the comments ascribed to me.

Sincerely,

Tom Davis
Beaufort, S.C.

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