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Deregulation of the Electric Power Industry: The Earnings, Risk, and Return Effects

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  • Nwaeze, Emeka T

Abstract

This study tests whether recent reforms of the electric power industry reverse the predicted effects of regulation on profits, risk, and return for electric utilities. The analysis also considers potential variation in the effects of the reforms across utility sizes. The empirical predictions are derived from theories of economic regulation which argue that regulation reduces earnings variability and risk, and enhances share value by buffering the regulated firms against the profit effects of cost and demand shocks and by shifting the burden of inefficiencies to consumers. These views motivate an opposite argument that reductions of regulation would reverse the predicted effects of regulation. The results reveal (1) a reversal of the buffering effects of regulation, (2) the existence of subsidies attributable to regulation, and (3) a redistribution of shareholder wealth during the reforms. Copyright 2000 by Kluwer Academic Publishers

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  • Nwaeze, Emeka T, 2000. "Deregulation of the Electric Power Industry: The Earnings, Risk, and Return Effects," Journal of Regulatory Economics, Springer, vol. 17(1), pages 49-67, January.
    • Handle: RePEc:kap:regeco:v:17:y:2000:i:1:p:49-67
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    Cited by:

    1. Natália Monteiro, 2009. "Regulatory reform and labour earnings in Portuguese banking," Empirical Economics, Springer, vol. 36(3), pages 557-574, June.
    2. Daniel J. Tulloch, Ivan Diaz-Rainey, and I.M. Premachandra, 2017. "The Impact of Liberalization and Environmental Policy on the Financial Returns of European Energy Utilities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    3. Ibrahim Alotaibi & Mohammed A. Abido & Muhammad Khalid & Andrey V. Savkin, 2020. "A Comprehensive Review of Recent Advances in Smart Grids: A Sustainable Future with Renewable Energy Resources," Energies, MDPI, vol. 13(23), pages 1-41, November.
    4. Mark Frank, 2003. "An Empirical Analysis of Electricity Regulation on Technical Change in Texas," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(4), pages 313-331, June.
    5. Natália Pimenta Monteiro, 2004. "Regulatory reform and the Portuguese banking labour market: two decades later," NIPE Working Papers 10/2004, NIPE - Universidade do Minho.

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