In New Hampshire, you pay more for electricity thanks to legislators - Granite Grok

In New Hampshire, you pay more for electricity thanks to legislators

BY ANDREW CLINE  (reformatted, emphasis mine  – Skip)

electricity-procurement1In a market, consumers have numerous opportunities to pay more for products or services they value, even if lower-cost alternatives are available. Consider how the market for beer works. While most people buy low-cost, mass-produced beers, hipsters and beer snobs can enjoy artisanal IPAs, provided they’re willing to pay the a premium price for a premium beer. If craft brewers struggle to compete, they have choices, too. They can find ways to cut costs and drop their prices. They can change their offerings to respond to public demand. They can try to attract more customers by convincing people that their products are worth the price. If they can’t compete, they close. Smuttynose Brewery, a signature New Hampshire craft brewer, went out of business last year after finding that it had misread the market.

It’s unlikely that many beer drinkers would have supported subsidizing Smuttynose by raising prices on all other beers. Yet most people probably don’t know that the state has just such a subsidy program for some niche New Hampshire businesses. Had Smuttynose been an artisanal energy supplier rather than an artisanal brewer, it would have been kept alive by subsidies. Every time you pay your electric bill or your employer pays its electric bill, you pay an above-market price for energy. The difference between what you pay and what you would have paid in a free market is distributed to businesses and programs you might not support if given a choice.

New Hampshire over the years has created layers of subsidies for expensive energy sources preferred by politicians. The Regional Greenhouse Gas Initiative, the Renewable Portfolio Standards plus numerous state directives that transfer ratepayer revenue to various “renewable” sources all involve politicians forcing people and businesses to pay higher rates for electricity. For a great example of how these wealth transfers work, consider a few bills in the Legislature this session that would expand these subsidies.

Biomass facilities and solar generators are among those entities that you subsidize through higher electricity rates. Senate Bill 446 would expand a subsidy scheme called “net metering” to give these entities more of your money even if you’d prefer lower electricity rates instead. Net metering forces utilities to pay the retail rate or another rate close to it – rather than the wholesale rate – for power generated by small solar arrays, such as the ones people put on their rooftops.

SB 446 applies these net metering subsidies to the state’s six remaining biomass power plants. These plants are not home hobby projects. They are businesses, often owned by larger corporations.

At a public hearing on the bill last month, no one disputed an estimate that the bill would cost ratepayers about $20 million a year – on top of existing subsidies for biomass plants and solar arrays. The stated reason for the subsidy? These plants can’t compete against plants that run on natural gas and other lower-cost fuels. To keep them alive, the bill’s supporters want the state to raise electricity costs by about $20 million a year ($100 million every five years!) to save the few hundred jobs these plants support.

Another bill, Senate Bill 577, would encourage ratepayers to further subsidize the Burgess Biopower plant in Berlin. Under pressure from legislators, Eversource agreed in 2011 to pay the plant at above-market rates for power until the total above-market cost hit $100 million. That $100 million tab is approaching quickly, so some legislators introduced SB 577, which pressures the Public Utilities Commission to lift the $100 million cap so ratepayers can subsidize the plant indefinitely.

Sidenote: [This is TRUE Corporate welfare that the Democrats decry.  Yet, who is leading the charge?  Senator Woodburn (D) (appropriate name, eh? -Skip]

The plant, owned by Cate Street Capital, cost $275 million to build. If SB 577 passes, the amount consumers overpay for electricity to keep this plant open could surpass the plant’s total construction cost.

A third bill, Senate Bill 365, would compel utilities such as Eversource, Liberty Utilities and Unitil to buy some of their default power from the state’s biomass plants. This also will raise rates. By compelling ratepayers to subsidize uncompetitive businesses, legislators have deliberately raised New Hampshire’s electricity rates, helping to make them among the highest in the nation. Far from helping the state’s economy, these high rates discourage out-of-state companies from moving here and in-state companies from expanding.

High rates make it harder for low-income families to make ends meet and for small businesses to survive.

Advocates for these subsidies claim they will save 900 jobs. For the moment, perhaps. But in the process they put in jeopardy thousands of jobs in other industries. Manufacturers alone employ 69,000 people in New Hampshire. The state is already losing manufacturing jobs because of its high electricity rates.

This is a bad tradeoff. It would cost less to retrain every employee in the wood products industry for new work than to continue these subsidies.

New Hampshire would be better off if legislators treated the energy industry a little more like it treats the beer industry. If it did, Granite Staters could afford more beer and more electricity. Win-win.

(Andrew Cline is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.)

(H/T: Concord Monitor )

 

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