Could Market Pricing Have Saved New Mexico Gas?

I usually don’t write about things for which I don’t have all the facts, but I think the recent problems involving the loss of natural gas service throughout many areas of New Mexico and the subsequent backlash is one topic that demands some speculation.

Before getting into this, it is important to note that politicians are the first to cry “foul” when instances of “price gouging” come to light. Price gouging simply involves raising the price of a specific good when supplies are extremely tight. While this may sound cruel, it also signals that distribution of the limited good should be allocated to those who are most willing to pay for it.

The problem for New Mexico gas is that there is currently no way to price gas in a time and supply sensitive way. It is all handled through the PRC.

But what if customers had the benefit of real-time pricing data? Once that meter started to jump, customers could have drastically cut back on usage. My family, hearing of the shortages, made sure to start a nice, hot fire in the fire place. Could more New Mexicans have done this if pricing signals encouraged them to do so? At this point, all we can do is speculate.

However, the technology for real-time pricing is available. In a free market (admittedly this is somewhat difficult in the utility sector, but I believe it can be done or we can at least move toward it), utilities would have a strong incentive to increase usage at off-peak times and reduce usage at peak times. Pricing is the best mechanism for doing this.

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3 Replies to “Could Market Pricing Have Saved New Mexico Gas?”

  1. The problem was not pricing. Problem was rolling blackouts in Texas, they could not supply electricity to drive the NG compressors. Back it up from there. EPA has recently shut down 5 coal fired electrical generation stations, two in Texas. Meanwhile Obama gives a waiver to one coal fired plant, that just happens to be under the GE umbrella and appoints the GE CEO to his economic advisory council. Funny how they had electricity to run the Super Bowl and not enough to supply heat products to NM and AZ. It all depends whose ox is being gored. Even funnier is that some of the NG that should have been supplied was probably extracted here in NM.

  2. I agree with J. Cloudcroft. The whole shortage was bogus and not caused by New Mexicans at all. It’s just Big Business as usual, doing what they want without regard for the puplic or consumers at all. New Mexicans do not stick up for their rights enough. They are too laid back and nice. Paul Gessing you sound like a typical Conservative Repulican, always on the side of Big Bigness.
    That’s just my opnion

    1. Hmm…Brenda, I’m not sure what you are trying to say here and what you are basing your statements on. How was the shortage “bogus?” You think the Gas Company just turned off the gas for the hell of it? That makes no sense at all. Also, it certainly seems like the folks in Espanola and Taos are definitely giving policymakers and NM Gas an earful. The Governor has been active as has the Legislature, and I’m sure the PRC will weigh in as well.

      I was simply postulating that giving consumers pricing signals could have reduced consumption in a crisis and made it possible for everyone to keep their gas pressure up. I don’t know how that makes me a shill for big business.

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