Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency
AbstractThis paper explores the empirical effects of competition on technical efficiency in the context of electricity industry restructuring. Restructuring programs adopted by many U.S. states made utilities residual claimants to cost savings and increased their exposure to competitive markets. We estimate the impact of these changes on annual generating plant-level input demand for non-fuel operating expenses, the number of employees and fuel use. We find that municipally-owned plants, whose owners were for the most part unaffected by restructuring, experienced the smallest efficiency gains over the past decade. Investor-owned utility plants in states that restructured their wholesale electricity markets had the largest reductions in nonfuel operating expenses and employment, while investor-owned plants in nonrestructuring states fell between these extremes. The analysis also highlights the substantive importance of treating the simultaneity of input and output decisions, which we do through an instrumental variables approach.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0472.
Date of creation: Nov 2004
Date of revision:
Note: CMI, IO
Contact details of provider:
Web page: http://www.econ.cam.ac.uk/index.htm
Efficiency; Production; Competition; Electricity restructuring; Electric Generation; Regulation;
Other versions of this item:
- Nancy L. Rose & Kira Markiewicz & Catherine Wolfram, 2004. "Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency," Working Papers 0418, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-12-12 (All new papers)
- NEP-COM-2004-12-12 (Industrial Competition)
- NEP-ENE-2004-12-12 (Energy Economics)
- NEP-REG-2004-12-12 (Regulation)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Supawat Rungsuriyawiboon & Spiro Stefanou, 2008.
"The dynamics of efficiency and productivity growth in U.S. electric utilities,"
Journal of Productivity Analysis,
Springer, vol. 30(3), pages 177-190, December.
- Supawat Rungsuriyawiboon & Spyro Stefanou, 2004. "The Dynamics of Efficiency and Productivity Growth in U. S. Electric Utilities," Working Papers 0711, University of Crete, Department of Economics, revised 00 Aug 2006.
- Goto, Mika & Makhija, Anil K., 2007. "The Impact of Competition and Corporate Structure on Productive Efficiency: The Case of the U.S. Electric Utility Industry, 1990-2004," Working Paper Series 2007-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- FitzGerald, John & Keeney, Mary J. & McCarthy, Niamh & O'Malley, Eoin & Scott, Susan, 2005. "Aspects of Irish Energy Policy," Research Series, Economic and Social Research Institute (ESRI), number PRS57, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb).
If references are entirely missing, you can add them using this form.