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Is welfare higher when utilities are owned by customers instead of investors? Evidence from electricity distribution in New Zealand

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  • Meade, Richard
  • Söderberg, Magnus

Abstract

We estimate cost, quality and price models for electricity distribution businesses (EDBs) in New Zealand, treating ownership as endogenous. We also account for simultaneity issues between costs and quality. We find that customer ownership is associated with lower prices and costs, and also with higher quality. We calculate welfare (total surplus) for both customer - and investor-owned EDBs, allowing for the possibility that investor-owned EDBs might produce higher welfare than customer-owned firms (e.g. due to having more valuable customers). However, we find that welfare is higher for customer-owned EDBs. Ownership is treated as endogenous in all models and we instrument it with the presence of regional air quality regulation.

Suggested Citation

  • Meade, Richard & Söderberg, Magnus, 2020. "Is welfare higher when utilities are owned by customers instead of investors? Evidence from electricity distribution in New Zealand," Energy Economics, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:eneeco:v:86:y:2020:i:c:s0140988320300396
    DOI: 10.1016/j.eneco.2020.104700
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    Cited by:

    1. Söderberg, Magnus & Vesterberg, Mattias, 2023. "How demand uncertainty influences electricity network prices under revenue-cap regulation: The case of Sweden," Energy Economics, Elsevier, vol. 127(PB).
    2. Biggar , Darryl & Söderberg, Magnus, 2024. "Customers’ value-for-money for a regulated service across different owners," Ratio Working Papers 372, The Ratio Institute.
    3. Ovaere, Marten, 2023. "Cost-efficiency and quality regulation of energy network utilities," Energy Economics, Elsevier, vol. 120(C).
    4. Bonnie Wylie Pratt & Jon D. Erickson & Jane Kolodinsky & Erik Monsen & William J. Wales, 2022. "Shades of Green: Modelling Differences in Thought and Action among Electric Utility Regime Actors in the Energy System Transition," Sustainability, MDPI, vol. 14(20), pages 1-17, October.
    5. Zangin Zeebari & Kristofer Månsson & Pär Sjölander & Magnus Söderberg, 2023. "Regularized conditional estimators of unit inefficiency in stochastic frontier analysis, with application to electricity distribution market," Journal of Productivity Analysis, Springer, vol. 59(1), pages 79-97, February.
    6. Boscan, Luis & Söderberg, Magnus, 2021. "A theoretical and empirical analysis of district heating cost in Denmark," Energy Economics, Elsevier, vol. 99(C).
    7. Duras, Toni & Javed, Farrukh & Månsson, Kristofer & Sjölander, Pär & Söderberg, Magnus, 2023. "Using machine learning to select variables in data envelopment analysis: Simulations and application using electricity distribution data," Energy Economics, Elsevier, vol. 120(C).
    8. Zhang, Tao & Li, Hong-Zhou & Xie, Bai-Chen, 2022. "Have renewables and market-oriented reforms constrained the technical efficiency improvement of China's electric grid utilities?," Energy Economics, Elsevier, vol. 114(C).

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    More about this item

    Keywords

    Utilities; Price; Efficiency; Quality; Welfare; Ownership;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises

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