Did residential electricity rates fall after retail competition? a dynamic panel analysis
AbstractA key selling point for the restructuring of electricity markets was the promise of lower prices, that competition among independent power suppliers would lower electricity prices to retail customers. There is not much consensus in earlier studies on the effects of electricity deregulation, particularly for residential customers. Part of the reason for not finding a consistent link with deregulation and lower prices was that the removal of the transitional price caps led to higher prices. In addition, the timing of the removal of price caps coincided with rising fuel prices, which were passed on to consumers in a competitive market. Using a dynamic panel model, we analyze the effect of participation rates, fuel costs, market size, a rate cap and a switch to competition for 16 states and the District of Columbia. We find that an increase in participation rates, price controls, a larger market, and high shares of hydro in electricity generation lower retail prices, while increases in natural gas and coal prices increase rates. The effects of a competitive retail electricity market are mixed across states, but generally appear to lower prices in states with high participation and raise prices in states that have little customer participation.
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 Federal Reserve Bank of Dallas in its series Working Papers with number 1105.
Date of creation: 2011
Date of revision:
Other versions of this item:
- Swadley, Adam & Yücel, Mine, 2011. "Did residential electricity rates fall after retail competition? A dynamic panel analysis," Energy Policy, Elsevier, vol. 39(12), pages 7702-7711.
- NEP-ALL-2011-09-16 (All new papers)
- NEP-COM-2011-09-16 (Industrial Competition)
- NEP-ENE-2011-09-16 (Energy Economics)
- NEP-HME-2011-09-16 (Heterodox Microeconomics)
- NEP-REG-2011-09-16 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul L. Joskow, 2005.
"Markets For Power In The United States - An Interim Assessment,"
0512, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Paul L. Joskow, 2006. "Markets for Power in the United States: An Interim Assessment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 1-36.
- Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988.
"Estimating Vector Autoregressions with Panel Data,"
Econometric Society, vol. 56(6), pages 1371-95, November.
- Tom Doan, . "RATS program to demonstrate IV estimation of VAR in panel data," Statistical Software Components RTZ00185, Boston College Department of Economics.
- David Roodman, 2009.
"A Note on the Theme of Too Many Instruments,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
- Woo, C.K. & Zarnikau, Jay, 2009. "Will Electricity Market Reform Likely Reduce Retail Rates?," The Electricity Journal, Elsevier, vol. 22(2), pages 40-45, March.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Kang, Linhong & Zarnikau, Jay, 2009. "Did the expiration of retail price caps affect prices in the restructured Texas electricity market?," Energy Policy, Elsevier, vol. 37(5), pages 1713-1717, May.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
- repec:reg:wpaper:270 is not listed on IDEAS
- Evens Salies and Catherine Waddams Price, 2004.
"Charges, Costs and Market Power: the Deregulated UK Electricity Retail Market,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Number 3), pages 19-36.
- Evens SALIES & Catherine WADDAMS PRICE, 2005. "Charges, Costs and Market Power: the Deregulated UK Electricity Retail Market," Industrial Organization 0508010, EconWPA.
- Evens Salies & Catherine Waddams Price, 2004. "Charges, Costs and Market Power: the Deregulated UK Electricity Retail Market," Sciences Po publications info:hdl:2441/7189, Sciences Po.
- Roe, Brian & Teisl, Mario F. & Levy, Alan & Russell, Matthew, 2001. "US consumers' willingness to pay for green electricity," Energy Policy, Elsevier, vol. 29(11), pages 917-925, September.
- Zarnikau, Jay & Whitworth, Doug, 2006. "Has electric utility restructuring led to lower electricity prices for residential consumers in Texas?," Energy Policy, Elsevier, vol. 34(15), pages 2191-2200, October.
- Arellano, Manuel, 1989.
"A note on the Anderson-Hsiao estimator for panel data,"
Elsevier, vol. 31(4), pages 337-341, December.
- Arellano, M., 1989. "A Note On The Anderson-Hsiao Estimator For Panel Data," Economics Series Working Papers 9975, University of Oxford, Department of Economics.
- David Roodman, 2009.
"How to do xtabond2: An introduction to difference and system GMM in Stata,"
StataCorp LP, vol. 9(1), pages 86-136, March.
- David Roodman, 2006. "How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata," Working Papers 103, Center for Global Development.
- Hattori, Toru & Tsutsui, Miki, 2004. "Economic impact of regulatory reforms in the electricity supply industry: a panel data analysis for OECD countries," Energy Policy, Elsevier, vol. 32(6), pages 823-832, April.
- Rose, Kenneth, 2004. "The State of Retail Electricity Markets in the U.S," The Electricity Journal, Elsevier, vol. 17(1), pages 26-36.
- Apt, Jay, 2005. "Competition Has Not Lowered U.S. Industrial Electricity Prices," The Electricity Journal, Elsevier, vol. 18(2), pages 52-61, March.
- James B. Bushnell & Erin T. Mansur, 2005. "CONSUMPTION UNDER NOISY PRICE SIGNALS: A STUDY OF ELECTRICITY RETAIL RATE DEREGULATION IN SAN DIEGO -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 493-513, December.
- Nagayama, Hiroaki, 2009. "Electric power sector reform liberalization models and electric power prices in developing countries: An empirical analysis using international panel data," Energy Economics, Elsevier, vol. 31(3), pages 463-472, May.
- Ruth A. Judson & Ann L. Owen, 1997. "Estimating dynamic panel data models: a practical guide for macroeconomists," Finance and Economics Discussion Series 1997-3, Board of Governors of the Federal Reserve System (U.S.).
- Kiviet, Jan F., 1995.
"On bias, inconsistency, and efficiency of various estimators in dynamic panel data models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 53-78, July.
- Tom Doan, . "LSDVC: RATS procedure to estimate a dynamic FE model with correction for bias," Statistical Software Components RTS00111, Boston College Department of Economics.
- Nagayama, Hiroaki, 2007. "Effects of regulatory reforms in the electricity supply industry on electricity prices in developing countries," Energy Policy, Elsevier, vol. 35(6), pages 3440-3462, June.
- Bushnell, James & Mansur, Erin T., 2005. "Consumption Under Noisy Price Signals: A Study of Electricity Retail Rate Deregulation in San Diego," Staff General Research Papers 13142, Iowa State University, Department of Economics.
- Evens SALIES & Catherine WADDAMS, 2004. "Charges, costs and market power in the deregulated UK electricity retail market," Industrial Organization 0406003, EconWPA.
- Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Chapman).
If references are entirely missing, you can add them using this form.