This is from a month ago, but I held onto it because it just flabbergasts me. It shouldn't, I know, but the hubris of interventionists seems to know no bounds.
Ormet Corp will immediately close its 270,000-tonne-per-year aluminum smelter in Hannibal, Ohio, a casualty of historically low metal prices and "uncontrollable" power costs, the company said on Friday.
The move follows a ruling on Wednesday by the Public Utilities Commission of Ohio (PUCO), which approved some major changes to Ormet's power contract with energy supplier American Electric Power Co Inc.
The state power regulator listed a number of conditions, including requiring the company, which filed for bankruptcy protection in February, to employ at least 650 full-time workers through 2018. [emphasis added]
Under those terms, costs would have increased by some $108 million next year, rather than falling by $54 million as outlined in Ormet's plan.
Due to the decision, Ormet cannot emerge from bankruptcy and must immediately shut down operations," Ormet said in a statement.
It isn't really clear, but as I read this news item from early October, it looks as if the Ohio Public Utilities Commission is telling the firm, "We will give you a low price for electricity, but only if you guarantee that you will hire more people than you otherwise would hire.
I find this approach disturbing on two counts:
- Offering electricity at a low cost to preserve jobs is inefficient. All consumers should be charged at least the marginal costs of providing the electricity. There is no good reason to ask other consumers (or the taxpayers in general) to subsidize the stockholders and (in this case) the bondholders of a firm to preserve jobs that shouldn't exist. At the same time, if the low price for electricity more-than-covers the marginal costs of providing the additional electricity, then the Ohio PUC should have offered the price without the jobs stipulation, for now they will lose some contribution to their overhead costs when Ormet shuts down.
- But even if you disagree with my first point, using the electricity provider to implement a jobs policy is inefficient. If the gubmnt wants to subsidize a firm's stockholders and bondholders in an attempt to maintain employment in an otherwise failing firm [which seems blatantly foolish to me], they should do it with direct subsidies rather than go through some convoluted pricing scheme that is far less obvious to consumers and taxpayers.