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Public interest versus regulatory capture in the Swedish electricity market

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  • Russell Smyth
  • Magnus Söderberg

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Abstract

This article tests the public interest and regulatory capture hypotheses, in the context of the Swedish electricity market, by studying the factors influencing the Swedish Energy Agency's decision to replace decision-makers it employs to hear customer complaints against utilities. The study covers the period from the beginning of 1996, when a series of regulatory reforms were introduced to improve consumer protection, until the end of 2008. The study concludes that decision-makers who find in favor of customers have had a statistically lower probability of being removed, consistent with public interest theory. A transitory effect of favoring utilities can be observed for the period from 2 to 6 years following the reforms. In this period, government and public scrutiny of the regulator, which had been high in the immediate aftermath of the reforms, had waned and there were few precedents decided by the courts that the regulator was required to follow. This vacuum created an opportunity for the utilities to increase their influence over the regulator. Once the courts started establishing precedents in relatively large numbers, the supervisory role of the courts ensured that the actions of the regulator were scrutinized. This development has served a similar function to government and public scrutiny in the years immediately following the reforms in promoting the public interest.
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Suggested Citation

  • Russell Smyth & Magnus Söderberg, 2010. "Public interest versus regulatory capture in the Swedish electricity market," Journal of Regulatory Economics, Springer, vol. 38(3), pages 292-312, December.
  • Handle: RePEc:kap:regeco:v:38:y:2010:i:3:p:292-312
    DOI: 10.1007/s11149-010-9129-9
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    References listed on IDEAS

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    1. repec:kap:iaecre:v:23:y:2017:i:2:d:10.1007_s11294-017-9637-9 is not listed on IDEAS
    2. Flavio Menezes & Magnus Söderberg & Miguel Santolino, 2012. "Regulatory behaviour under threat of court reversal," Discussion Papers Series 472, School of Economics, University of Queensland, Australia.
    3. Fumitoshi Mizutani & Eri Nakamura, 2016. "Factors Affecting Inefficiency Level: Stochastic Frontier Analysis of Public Utility Firms in Japan," Discussion Papers 2016-02, Kobe University, Graduate School of Business Administration.
    4. Miguel Santolino & Magnus Söderberg, 2011. "The influence of decision-maker effort and case complexity on appealed rulings subject to multi-categorical selection," IREA Working Papers 201115, University of Barcelona, Research Institute of Applied Economics, revised Sep 2011.
    5. Fumitoshi Mizutani & Eri Nakamura, 2013. "Regulation, Competition, Diversification, Governance and Costs: An Empirical Analysis of Public Utility and Manufacturing Firms in Japan," Discussion Papers 2013-25, Kobe University, Graduate School of Business Administration.
    6. Per J. Agrell & Axel Gautier, 2012. "Rethinking Regulatory Capture," Chapters,in: Recent Advances in the Analysis of Competition Policy and Regulation, chapter 14 Edward Elgar Publishing.

    More about this item

    Keywords

    Electricity; Public interest; Regulatory capture; D73; K23; L97;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

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