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When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Reply

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  • Steve Cicala

Abstract

The average effect of deregulatory policies on fuel prices at coal-fired power plants is strongly influenced by plants that were initially paying the highest prices for fuel. Primary sources document that these plants were locked into long-term, high-cost fuel contracts, and only secured market rates post-deregulation. While these plants' fuel costs were unusual, their response to deregulation was not: both coal- and gas-fired plants reduce fuel prices one-for-one with the amount they were initially paying above their neighbors' costs. Our understanding of deregulation is not improved by excluding those who stand to benefit most.

Suggested Citation

  • Steve Cicala, 2021. "When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Reply," American Economic Review, American Economic Association, vol. 111(4), pages 1373-1381, April.
    • Handle: RePEc:aea:aecrev:v:111:y:2021:i:4:p:1373-81
    DOI: 10.1257/aer.20201872
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    Cited by:

    1. Vilhuber, Lars, 2023. "Reproducibility and transparency versus privacy and confidentiality: Reflections from a data editor," Journal of Econometrics, Elsevier, vol. 235(2), pages 2285-2294.

    More about this item

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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