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Governance Alternatives and Pricing in the U.S. Electric Power Industry

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  • John E. Kwoka, Jr.

Abstract

Alternative governance mechanisms can be expected to result in differences in enterprise performance. This research analyzes the prices charged by U.S. electric utilities using a comprehensive pricing model and a large and detailed dataset that controls for enterprise costs and subsidies. It finds that public ownership is associated with significantly lower prices than with privately owned utilities, most likely because the latter are subject to regulation. Also associated with lower prices are elected commissioners (rather than those appointed by state governors), commissions with fewer members, and utilities whose governing bodies hold open meetings--all characteristics that imply more direct consumer influence on the price-determination process. Among customer groups, residential users are the biggest beneficiaries of public ownership, while industrial users appear to have more influence with elected state regulatory commissions. These findings are reconciled with theory and help explain the sometimes ambiguous results of previous studies. Copyright 2002, Oxford University Press.

Suggested Citation

  • John E. Kwoka, Jr., 2002. "Governance Alternatives and Pricing in the U.S. Electric Power Industry," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(1), pages 278-294, April.
    • Handle: RePEc:oup:jleorg:v:18:y:2002:i:1:p:278-294
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    Cited by:

    1. Bortolotti, Bernardo & Cambini, Carlo & Rondi, Laura, 2013. "Reluctant regulation," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 804-828.
    2. Estache, Antonio & Wren-Lewis, Liam, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," CEPR Discussion Papers 8082, C.E.P.R. Discussion Papers.
    3. Michael Klien, 2014. "Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political Interference in Water Prices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 393-422, June.
    4. Werner Troesken, 2006. "Regime Change and Corruption. A History of Public Utility Regulation," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 259-281, National Bureau of Economic Research, Inc.
    5. Matthew Ellman, 2006. "Does privatising public service provision reduce accountability?," Economics Working Papers 997, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Parinandi, Srinivas & Hitt, Matthew P., 2018. "How Politics Influences the Energy Pricing Decisions of Elected Public Utilities Commissioners," Energy Policy, Elsevier, vol. 118(C), pages 77-87.
    7. Won, Gu-Hwan, 2007. "Electric power industry restructuring and ROE: The case of Korea Electric Power Corporation," Energy Policy, Elsevier, vol. 35(10), pages 5080-5090, October.
    8. Fremeth, Adam R. & Holburn, Guy L.F., 2020. "The impact of political directors on corporate strategy for government-owned utilities: Evidence from Ontario's electricity distribution sector," Energy Policy, Elsevier, vol. 143(C).

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