Shopping for electricity can save you money, but did you know that it can also spur the economy and job creation? A new study from the COMPETE coalition shows that expanding electric competition can provide greater employment opportunities and spur economic growth at a time when everyone is focused on creating more jobs.

Monopolies are notoriously inefficient because there is no incentive to improve productivity and reduce costs. Electricity monopolies are no exception to the rule. Allowing monopoly utilities to thwart competition, whether by imposing unreasonable costs on customers who shop for electricity suppliers or negotiate bilateral agreements with favored suppliers, needlessly increases costs for businesses and slows economic growth.
Electric competition also offers transparent pricing, providing a measure of certainty, something that is sorely lacking in our economy today. Certainty is essential for capital-intensive, long-lived investments like power plants.

Additionally, lower energy costs have a positive ripple effect throughout the economy. Every business uses electricity, some more than others, making energy costs a key part of any budget and therefore a factor in a business?s ability to maintain employees and expand.

Some government agencies understand the relationship between energy prices and job creation. The Rhode Island Public Utilities Commission rejected a proposed power purchase contract between Deepwater Wind (a small offshore wind development) and National Grid in April 2010, because of the job?killing effects of higher electric prices. The Rhode Island PUC was not rejecting all wind generation, but rather a specific project that was far more expensive than other wind generation alternatives.

However, other government organizations still choose to ignore the benefits of market competition and risk losing jobs. The Massachusetts Department of Public Utilities approved a contract between National Grid and Cape Wind with a cost of over $250 per MWh. This despite lower contract bids from several companies. One offer was half the cost of Cape Wind?s bid.

Interventions in the market, like state policies that create subsidies for politically favored generators or mandate uneconomic investments, send a powerful do-not-invest signal to developers and drive out real competitors along with their job opportunities.

Regulators should not be fooled by promises of new jobs from these interventionist policies. The now well-known Solyndra debacle is a perfect example of how manipulating the market is detrimental to long-term job creation.  Such policies lead to higher long-term electric prices, slowing all parts of the economy.

By itself, electric competition cannot rescue a languishing economy, but combined with non-interventionist policies, electric competition can be a catalyst for economic growth throughout the nation.