IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

The Effect of Wholesale Market Deregulation on Shareholder Wealth in the Electric Power Industry

  • Besanko, David
  • D'Souza, Julia
  • Thiagarajan, S Ramu

This paper analyzes electric utility stock price reactions to events preceding the passage of the Energy Policy Act of 1992, a development that precipitated the onset of competition in the wholesale sector of the electric utility industry and accelerated the pace toward state-level deregulation of the retail sector. For the industry as a whole, we find that, at worst, investors had neutral reactions to events preceding wholesale deregulation. However, stock price reactions vary systematically with differences in incumbent utilities' marginal costs, though not with differences in fixed costs or purchased power costs. These results are consistent with the notion that new technologies have substantially reduced barriers to entry into the electric power generation industry, rendering capital cost advantages of incumbent utilities vulnerable to being neutralized by new entrants. However, marginal cost advantages are more likely to be sustainable because they are likely to be driven by inimitable locational advantages. Copyright 2001 by the University of Chicago.

If 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.

File URL: http://dx.doi.org/10.1086/320268
Download Restriction: Access to the online full text or PDF requires a subscription.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 44 (2001)
Issue (Month): 1 (April)
Pages: 65-88

as
in new window

Handle: RePEc:ucp:jlawec:v:44:y:2001:i:1:p:65-88
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

References listed on IDEAS
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.:

as in new window
  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  2. Dnes, Antony W. & Kodwani, Devendra G. & Seaton, Jonathan S. & Wood, Douglas, 1998. "The Regulation of the United Kingdom Electricity Industry: An Event Study of Price-Capping Measures," Journal of Regulatory Economics, Springer, vol. 13(3), pages 207-25, May.
  3. J. Gregory Sidak & William Baumol, 1995. "Transmission Pricing and Stranded Costs in the Electric Power Industry," Books, American Enterprise Institute, number 52281, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:44:y:2001:i:1:p:65-88. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.