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Andrew Cline: Sununu was right to veto corporate welfare bills



For the Monitor
Tuesday, September 11, 2018

New Hampshire has a booming economy, the fourth-lowest unemployment rate in the country and thousands of job openings. Even in the North Country, employment rates exceed the national average. Berlin has a lower unemployment rate than Worcester, Mass., Charlotte, N.C., or Phoenix, Ariz.

And yet the state’s biggest political fight this summer is whether legislators should force every Granite Stater to pay higher electricity prices for the purpose of subsidizing a few hundred jobs.

The subsidies come through Senate Bills 365 and 446. SB 365 would by law force utilities to pay above-market prices for electricity they buy from the state’s few remaining biomass power plants. SB 446 would expand a solar industry subsidy scheme called “net metering,” through which – again – utilities are required to pay above-market rates for power bought from certain favored generators.

When Gov. Chris Sununu vetoed the bills in June, he pointed out that “New Hampshire has some of the highest electricity rates in the country, placing financial strain on the elderly, those on fixed incomes and the business community.”

Rates absolutely will go up if legislators overturn the vetoes. The state Public Utilities Commission calculated that SB 365 alone would artificially inflate the cost of electricity by $24 per megawatt hour, amounting to an $18.7 million a year increase for Eversource customers and $2.7 million a year for Unitil customers.

The bill’s own fiscal note pointed out that municipalities – taxpayers – would pay more for electricity if SB 365 passed. Yet mayors of both political parties have asked legislators to override the vetoes in the upcoming special session on Sept. 13. What gives?

The mayors want SB 446, which would force ratepayers to subsidize large-scale solar power projects. In their letter, they suggested that the bill would increase efficiency in electricity markets and bring rates down over time because the subsidy would increase the supply of solar power.

They should know better. A 2014 Harvard study concluded that the type of net metering subsidy used in SB 446 “(c)onstitutes price discrimination in favor of an inefficient resource.” It also found that the net metering subsidy “(c)auses socially regressive economic impact.”

The Harvard research verifies that the governor’s veto statement was right. Lower-income residents will be forced – by their own legislators – to pay higher electricity costs if these bills pass.

But mayors want the bill anyway. Because they’re after the subsidy.

Without SB 446, municipalities can build solar arrays on public land and generate their own power. But with SB 446, they can build solar arrays of up to 5 megawatts and sell power to utility companies at an artificially inflated price.

Both of these bills make people pay higher prices for something – electricity – that the market would gladly sell them at a lower price. There’s a word for that. It’s called cronyism. (There are a few other words, too, but let’s stick to the nicer one.)

Both political parties claim to be against corporate welfare. But that’s just what these bills are. There’s no getting around that. A vote for them is a vote to take money from everyone and transfer it to a few politically favored businesses (and municipalities).

That’s why supporters talk so much about “jobs.” It sounds better than “corporate welfare.”

But jobs are not the real issue. Jobs are plentiful in the state right now. And subsidizing a few power plants to preserve specific jobs is the wrong way to show compassion for the roughly 400 people employed in the declining forestry and logging industries in New Hampshire.

(By comparison, about 70,000 people are employed in manufacturing, which would be hurt by the higher rates these bills would create. Ironically, passing these bills to “save jobs” will likely cost many more jobs in the long run than the bills would ever save.)

The most recent state wage data show that the New Hampshire logging industry’s average weekly pay ($966) is lower than that of many other industries. It is 9 percent lower than educational services, 15 percent lower than hospitals, 32 percent lower than manufacturing, 33 percent lower than construction, 36 percent lower than ambulatory health care services, 49 percent lower than wholesale trade and 53 percent lower than utilities.

These bills would subsidize a few businesses to preserve jobs that might offer worse economic prospects than others that are readily available. To do so, they would hurt the overall state economy as well as low-income families by forcing everyone to pay more for electricity.

Gov. Sununu was right. These bills would unjustly burden the ratepayers of New Hampshire. Legislators who vote for them are voting for a regressive, expensive corporate welfare program – and handing the bill to all of us.

(Andrew Cline is president of the Josiah Bartlett Center for Public Policy, New Hampshire’s free-market think tank.)