From Investopedia: Regulatory Risk: The risk that a change in laws and regulations will materially impact a security, business, sector or market. A change in laws or regulations made by the government or a regulatory body can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape.
What does this mean? Quite simply, while governments often attempt to regulate on behalf of consumers or the environment, the reality is that government regulators are often arbitrary, captured by special interests, and make decisions based on misinformation or biases.
Check out this story from Dan Mayfield at Albuquerque Business First in which the author discusses the downgrade of the stock of the company looking to purchase the New Mexico Gas Company. The analyst who downgraded the stock notes that the deal “adds ratebase in a less-favorable regulatory jurisdiction … the deal clearly adds to TECO’s overall regulatory risk and could widen the company’s discount.”
In other words, New Mexico’s PRC is a highly-volatile organization fraught with regulatory risk. Doing business with it may be harmful to your bottom line…Beware.
And with people like Karen Montoya residing on the PRC (having previously exempted convicted felon Manny Aragon’s house from property taxes), wouldn’t YOU feel a little leery doing business in New Mexico?