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How the Renewable Energy Grinch Stole Your Christmas Budget

Christmas is a time where friends and families come together to appreciate each other during the holidays. However, Christmas can also be a stressful period of time, especially for parents, because of the impact holiday spending has on their finances. Unfortunately, this financial stress has been exacerbated by Minnesota’s mandates for renewable energy which have driven up the cost of electricity.

Minnesota families used to have electricity prices that were nearly 20 percent below the national average, but this changed dramatically beginning in 2005 when Xcel Energy was first required to add renewables to their system. The trend became even more pronounced in 2007 when Minnesota enacted a law requiring 25 percent of our electricity come from renewable sources by 2025. Now, federal data show Minnesota families pay 6.5 percent more than the national average for their electricity.

This amounts to a significant reduction in household income. Federal data show yearly electricity expenses are more than $250 higher today than they were in 2004, even after adjusting for inflation. Furthermore, this does not account for higher prices families must pay for goods and services—like groceries—that are the result of businesses raising their prices to offset their own rising electricity costs.

Considering a recent LendingTree survey found the average American expects to spend $602 this holiday season, the current renewable energy mandates have gobbled up more than 41 percent of what people plan to spend on the holidays.

Unfortunately, Minnesota families with Xcel Energy as their electricity provider can expect another visit from the Grinch once the company gets approval to increase its electricity prices by 17.75 percent over the next few years. These price hikes would pay for $466 million in spending on wind facilities, transmission and distribution lines, increasing corporate profits, and Xcel’s plan to raise prices on electricity because people are using less energy.

Some news outlets have reported this price increase will cost the average Minnesota family in Xcel’s service territory an additional $110 per year, but this is incorrect. Xcel Energy documents submitted to the Minnesota Public Utilities Commission show a family using slightly less electricity than average would see their electric bills increase by $168 per year, and the average family in Xcel’s service territory would see their bills increase by nearly $200 per year.

This means nearly 75 percent of the average American’s Christmas budget will be consumed by higher electricity prices in Minnesota. While it is true that not all of Xcel’s price increases were meant to pay for renewables, Xcel plans to spend more than $2 billion on wind in the near future and preliminary estimates for the massive transmission upgrades needed to allow more wind and solar to come on the system are estimated at $12 billion. The electricity price increases needed to pay for $14 billion in new spending will make an additional $200 per year seem microscopic in comparison.

Reducing your electricity consumption won’t stop the Grinch from visiting you, either, because companies like Xcel are government-approved monopoly utilities. This means you are forced by the state of Minnesota to buy your power from the electric company in your area, even if they are more expensive than other companies. We see this in the real-world data, where electricity bills continue to reach new highs (in inflation adjusted dollars) even though Minnesotans use less electricity than they did in 2007.

If some people want to pay extra for wind and solar to feel merry and bright about the electricity they consume, they should be welcome to do so. However, other people, including the 61 percent of Americans who report feeling financially stressed this holiday season, should be able to opt out of the extra costs associated with these sources of energy and prevent the renewable energy Grinch from stealing their Christmas budgets.

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