A recent study by the website Wallet Hub lists Arkansas as among the nation's most inexpensive states when it comes to energy consumption, but an official with a local electric cooperative said that could change if proposed federal environmental policies are fully enacted.
The study ranked Arkansas as the eighth-least expensive state when it comes to energy costs, being beat by only Colorado, Washington State, Montana, Rhode Island, Nebraska, the District of Columbia and Pennsylvania.
The study said a typical Arkansan spends on average $319 per month on energy, with breaks down to $101 for home electricity, $36 for natural gas and $182 for automobile fuel. While the rating might appear good for Arkansas, the different components that made up the rating have both extreme highs and lows when ranked against other states.
One example is in the electricity consumption per consumer, where Arkansas ranks 44 out of 51, while the state's rank on price of electricity ranks 3rd least expensive in the nation and on price of fuel, the state ranks 5th least expensive in the nation.
THE WALLET HUB METRICS
Wallet Hub's John Kiernan explained in more detail how the rankings were compiled.
"We used six key metrics to examine the various factors — from the price and consumption of residential electricity to the price of fuel at the pump and number of miles driven — that affect energy costs in the 50 U.S. states and the District of Columbia," he wrote on the site.
He added that the following equation used to calculate the average monthly energy bill in each state using data from the U.S. Energy Information Administration, the Federal Highway Administration, the U.S. Environmental Protection Agency (EPA) and the AAA’s Daily Fuel Gauge Report.
"(Average Monthly Consumption of Electricity x Average Retail Price of Electricity) + (Average Monthly Consumption of Natural Gas x Average Natural Gas Residential Prices) + [Average Fuel Price * (Average Monthly Vehicle Miles Traveled / Average Car Consumption / Number of Drivers)] = Average Monthly Energy Bill Consumers Pay in Each State"
Greg Davis of Arkansas Valley Electric Cooperative said there is a simple reason why Arkansas' energy costs are low.
"There's a one word answer for that — coal," he said.
According to Davis, about half of the state's energy consumed during non-peak hours is generated by coal power plants.
"Coal is cheap because one, it's a domestic fuel source. We have (about a 250-year supply) of coal. We could be generating at current levels with coal and we have enough for another 250 years to do that,” he explained.
Part of the cost savings seen with coal deal with transportation, he said.
"It's domestic. Our coal (Arkansas Valley Electric Cooperatives) comes from Wyoming. The only transport costs are the rail charge to get it to the facility," he said.
A recent report by the U.S. Army Corps of Engineers could back up Davis' assertion about coal's inexpensiveness, as it showed coal shipments down along the Arkansas River, with one local port operator noting that it costs more to get coal out of the ground than it would sell for on the open market.
Davis said another 25% of the state's energy is provided by Arkansas Nuclear One near Russellville, which he said also contributes to the low costs for energy in the state.
"It is safe to assume the facility construction was paid for a long time ago and provides very low cost electricity. It certainly plays a role in the states’ lower than average electric rates," he said of nuclear power delivered by the Pope County facility.
Even though Arkansas Nuclear One has been a big driver in Arkansas' energy needs for decades (construction began in 1969 and the plant went online in 1974) and is likely to for decades to come, Davis said the same cannot be said of coal because of proposed new regulations by the Environmental Protection Agency. He said new EPA regulations aimed at reducing CO2 levels nationwide are going to have an adverse affect on Arkansas, increasing energy costs as coal is eventually phased out. The move, he said, is likely to impact everything from home energy prices to jobs.
"With the new EPA regulations, Arkansas will be tasked with a 44% reduction in CO2 emissions. So Arkansas won't have coal plants by 2030. We'll probably have some of the highest energy rates and that's an absolute fact," he said. "Manufacturing is attracted to where you have low energy rates. … So our rates will go up and it will certainly have a serious adverse affect on all economic activity."
He pointed to steel production as being a manufacturing sector that specifically came to Arkansas for its low energy costs, saying that could impact future manufacturer's decisions to relocate to the Natural State.
"Businesses look at a lot when look to build or relocate and energy costs are huge. The two biggest (energy) loads in Arkansas are steel mills. They use a ton of energy. Their decision to locate in Arkansas was based in large part on our overall energy costs."
MORE EFFICIENCY NEEDED
But Michele Halsell, director of the Applied Sustainability Center at the Walton College of Business at the University of Arkansas in Fayetteville, said costs do not necessarily have to go up for consumers just because the price of electricity is likely to increase. She pointed to an American Council for an Energy Efficient Economy study that showed Arkansas at 37th in the nation for energy efficiency.
"They say the typical Arkansas household could save 37% on average on residential energy bills. We're using way more energy than we should be. We use 25% more than the national average in terms of kilowatt hours," she said.
Halsell said by taking measures now to make your home more energy efficient through their energy providers, as well as state and local governments, Arkansans can prepare for the inevitable rise in energy costs.
"People who have been participating in those programs have seen their energy bills cut dramatically," she said. "The price of electricity, the price of a kilowatt hour is important, especially when you live in a leaky house. But when you live in an energy efficient home, that doesn't matter as much. So we need to get our homes, our multi-family apartment buildings, everyplace as energy efficient as we can because there's a difference in the price of a kilowatt and the bill."
MOVE TO NATURAL GAS
As for how energy companies like Arkansas Valley are preparing for the eventual switch in just more than 15 years to no coal, Davis said his company was making use of all sorts of different energy generation methods. Of hydro-electric, he said it helps but there are downsides.
"The hydro-electric power helps a little bit, but that's not base load. If we don't have enough rain fall, then hydro is not helping us whatsoever. But when we have a lot of rain, it helps out."
He said the Electric Cooperative of Arkansas has also invested in a gas facility in anticipation of the switch from coal power to other alternatives, but he said the switch over is going to impact just about every sector of the economy, again possibly bringing Arkansas off the top of the least expensive list.
"Of course, we're buying more wind and we've made some other preparations. But gas is more expensive and when everyone's generating with gas, supply and demand says that gas will get even more expensive."