IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v45y2024i1p1-49.html
   My bibliography  Save this article

Retail Electricity Market Restructuring and Retail Rates

Author

Listed:
  • Kenneth Rose
  • Brittany Tarufelli
  • Gregory B. Upton Jr.

Abstract

Prior to the 1990s, all U.S. states used a “cost of service (COS)†regulation regime in which investor-owned utilities were allowed to recover prudently incurred costs plus a rate of return on capital expenditures, and retail customers were unable to choose their electricity supplier. From 1996–2000, multiple states passed retail electricity market “restructuring.†This empirical research examines the effect of retail restructuring on electricity prices to final consumers. We find that rates increased in restructured states relative to plausible counterfactuals in the years post-restructuring. But by twelve years after retail restructuring, we no longer observe any difference. We investigate plausible mechanisms, finding evidence that retail prices became more responsive to natural gas prices due to retail restructuring, the timing of which coincided with increases in natural gas prices nationally. We also test for whether restructuring had distributional effects across customer classes and find that in the short run residential customers benefited relative to industrial customers during transition periods, but that this difference does not persist into full implementation.

Suggested Citation

  • Kenneth Rose & Brittany Tarufelli & Gregory B. Upton Jr., 2024. "Retail Electricity Market Restructuring and Retail Rates," The Energy Journal, , vol. 45(1), pages 1-49, January.
    • Handle: RePEc:sae:enejou:v:45:y:2024:i:1:p:1-49
    DOI: 10.5547/01956574.45.1.kros
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.45.1.kros
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.45.1.kros?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Theodore Kury, 2013. "Price effects of independent transmission system operators in the United States electricity market," Journal of Regulatory Economics, Springer, vol. 43(2), pages 147-167, April.
    3. Mark Agerton and Gregory B. Upton Jr., 2019. "Decomposing Crude Price Differentials: Domestic Shipping Constraints or the Crude Oil Export Ban?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. Young, David & Bistline, John, 2018. "The costs and value of renewable portfolio standards in meeting decarbonization goals," Energy Economics, Elsevier, vol. 73(C), pages 337-351.
    5. Ashok Kaul & Stefan Klößner & Gregor Pfeifer & Manuel Schieler, 2022. "Standard Synthetic Control Methods: The Case of Using All Preintervention Outcomes Together With Covariates," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 40(3), pages 1362-1376, June.
    6. Agustin J. Ros, 2017. "An Econometric Assessment of Electricity Demand in the United States Using Utility-specific Panel Data and the Impact of Retail Competition on Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    7. Erin T. Mansur, 2007. "Do Oligopolists Pollute Less? Evidence From A Restructured Electricity Market," Journal of Industrial Economics, Wiley Blackwell, vol. 55(4), pages 661-689, December.
    8. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    9. Frank A. Wolak, 2011. "Measuring the Benefits of Greater Spatial Granularity in Short-Term Pricing in Wholesale Electricity Markets," American Economic Review, American Economic Association, vol. 101(3), pages 247-252, May.
    10. J. Dean Craig and Scott J. Savage, 2013. "Market Restructuring, Competition and the Efficiency of Electricity Generation: Plant-level Evidence from the United States 1996 to 2006," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    11. Noah Dormady, Matthew Hoyt, Alfredo Roa-Henriquez, and William Welch, 2019. "Who Pays for Retail Electric Deregulation? Evidence of Cross-Subsidization from Complete Bill Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    12. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mac Clay, Pablo & Börner, Jan & Sellare, Jorge, 2023. "Institutional and macroeconomic stability mediate the effect of auctions on renewable energy capacity," Energy Policy, Elsevier, vol. 180(C).
    2. Tin Cheuk Leung & Kwok Ping Ping & Kevin K. Tsui, 2019. "What can deregulators deregulate? The case of electricity," Journal of Regulatory Economics, Springer, vol. 56(1), pages 1-32, August.
    3. Jose Miguel Abito & Jin Soo Han & Jean‐François Houde & Arthur A. van Benthem, 2024. "Agency Frictions and Procurement: New Evidence from U.S. Electricity Restructuring," Journal of Industrial Economics, Wiley Blackwell, vol. 72(1), pages 20-48, March.
    4. Kaller, Alexander & Bielen, Samantha & Marneffe, Wim, 2018. "The impact of regulatory quality and corruption on residential electricity prices in the context of electricity market reforms," Energy Policy, Elsevier, vol. 123(C), pages 514-524.
    5. Taminiau, Job, 2025. "Community choice energy: Bridging the gap between sustainability and affordability in electricity supply," Energy Policy, Elsevier, vol. 198(C).
    6. Wang, Chang & Guo, Yue & Yang, Yu & Chen, Shiyi, 2022. "The environmental benefits of electricity industry restructuring in China: Ownership mixing vs. vertical unbundling," Energy Economics, Elsevier, vol. 115(C).
    7. Justin C. Wiltshire, 2023. "Walmart Supercenters and Monopsony Power: How A Large, Low-Wage Employer Impacts Local Labor Markets," Department Discussion Papers 2304, Department of Economics, University of Victoria.
    8. Asane-Otoo, Emmanuel, 2016. "Competition policies and environmental quality: Empirical analysis of the electricity sector in OECD countries," Energy Policy, Elsevier, vol. 95(C), pages 212-223.
    9. Zarnikau, J. & Cao, K.H. & Qi, H.S. & Woo, C.K., 2023. "Has retail competition reduced residential electricity prices in Texas?," Utilities Policy, Elsevier, vol. 84(C).
    10. Chu, Yin & Chang, Chun-Ping, 2020. "Vertical separation of transmission control and market efficiency in the wholesale electricity market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    11. Amenta, Carlo & Aronica, Martina & Stagnaro, Carlo, 2022. "Is more competition better? Retail electricity prices and switching rates in the European Union," Utilities Policy, Elsevier, vol. 78(C).
    12. Johnsen, Reid & LaRiviere, Jacob & Wolff, Hendrik, 2016. "Estimating Indirect Benefits: Fracking, Coal and Air Pollution," IZA Discussion Papers 10170, Institute of Labor Economics (IZA).
    13. Dormady, Noah & Roa-Henriquez, Alfredo & Hoyt, Matthew & Pesavento, Matthew & Koenig, Grace & Welch, William & Li, Zejun, 2025. "How are retail prices formed in restructured electricity markets?," Energy Economics, Elsevier, vol. 143(C).
    14. Noah Dormady & Matthew Hoyt & Alfredo Roa-Henriquez & William Welch, 2019. "Who Pays for Retail Electric Deregulation? Evidence of Cross-Subsidization from Complete Bill Data," The Energy Journal, , vol. 40(2), pages 161-194, March.
    15. Knittel, Christopher R. & Metaxoglou, Konstantinos & Trindade, André, 2019. "Environmental implications of market structure: Shale gas and electricity markets," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 511-550.
    16. Bas Scheer & Wiljan van den Berge & Maarten Goos & Alan Manning & Anna Salomons, 2022. "Alternative Work Arrangements and Worker Outcomes: Evidence from Payrolling," CPB Discussion Paper 435, CPB Netherlands Bureau for Economic Policy Analysis.
    17. Katrin Huber & Geske Rolvering, 2023. "Public child care and mothers’ career trajectories," Working Papers 228, Bavarian Graduate Program in Economics (BGPE).
    18. Telegdy, Álmos, 2024. "Subsidized working capital loans and firm growth in times of crisis," Economics Letters, Elsevier, vol. 245(C).
    19. Alex Hollingsworth & Krzysztof Karbownik & Melissa A. Thomasson & Anthony Wray, 2024. "The Gift of a Lifetime: The Hospital, Modern Medicine, and Mortality," American Economic Review, American Economic Association, vol. 114(7), pages 2201-2238, July.
    20. Coury, Michael & Falconer, Liam & La Nauze, Andrea, 2024. "Wildfire smoke and private provision of public air-quality monitoring," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:45:y:2024:i:1:p:1-49. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.