Electricity subsidies as economic development an unwise move

We at the Rio Grande Foundation view economic development and growth as the most important issues facing New Mexico. But that doesn’t mean that every idea on bringing jobs and economic growth to the Land of Enchantment makes sense. Take a recent legislative proposal that has generated some attention in the Albuquerque Journal. The idea is to allow utilities like PNM to provide electricity at discounted prices in order to attract businesses to the state. It is being sponsored by Democrat Moe Maestas HB 296 and Republican Stuart Ingle SB 283. Recent articles supporting the proposal include an op-ed from NAIOP and this one.

As outlined in the second article, we agree with the big-government advocacy group AARP which is rare indeed.

Sounds great, right? Businesses save on their electric bills and create more jobs. It might work, but it could also result in cost-shifting from businesses to average New Mexicans. After all, PNM has to make money somehow and they don’t make it from a group of major consumers, they may be forced to pass those costs along to the rest of us. That’s not exactly fair.

More importantly, to the extent that electricity costs are an impediment to businesses locating here (our prices are in the middle of the pack among states), policymakers should remove costly regulations like the renewable portfolio standard (RPS) which unnecessarily raise electricity costs for all New Mexicans. Of course, that would require intestinal fortitude to stand up to the wind and solar lobbies, not to mention AARP which, despite pleas against overt subsidies for business’ electricity costs, tends to support regulations like the RPS which drive the cost of electricity higher for the seniors they purport to represent.

And then there is former Public Regulation Commission member Douglas Howe who bizarrely claimed in a recent article (which I blogged) that electricity prices have no bearing on economic growth.