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Effect of Utility Deregulation and Mergers on Consumer Welfare

Listed author(s):
  • Ralph Sonenshine
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    In the late 1990s many US states deregulated their electric utilities, separating generation from transmission, allowing for competition among power generators. As a result there was a significant merger wave among large utility companies. To date the effect of utility deregulation and mergers on electricity prices, while widely studied, remains ambiguous. This study examines the effects of these events by analyzing statewide electricity price and output changes among deregulated and regulated states from the period 2001 through 2014. The study finds that deregulation appears to have a positive impact on social welfare by lowering prices and output by improving efficiencies in part through retail choice programs. However, mergers appear to have a slightly negative effect on social welfare by raising prices and possibly output in deregulated states.

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    File URL: http://www.american.edu/cas/economics/research/upload/2016-08.pdf
    File Function: First version, 2016
    Download Restriction: no

    Paper provided by American University, Department of Economics in its series Working Papers with number 2016-08.

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    Date of creation: 2016
    Handle: RePEc:amu:wpaper:2016-08
    Contact details of provider: Web page: http://www.american.edu/cas/economics/

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    12. Kole, Stacey R & Lehn, Kenneth, 1997. "Deregulation, the Evolution of Corporate Governance Structure, and Survival," American Economic Review, American Economic Association, vol. 87(2), pages 421-425, May.
    13. Kaserman, David L & Mayo, John W, 1991. "The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 39(5), pages 483-502, September.
    14. Scott Hempling, 1995. "Electric Utility Holding Companies: The New Regulatory Challenges," Land Economics, University of Wisconsin Press, vol. 71(3), pages 343-353.
    15. Li, Quan & Reuveny, Rafael, 2003. "Economic Globalization and Democracy: An Empirical Analysis," British Journal of Political Science, Cambridge University Press, vol. 33(01), pages 29-54, January.
    16. Ray, Dennis J & Thompson, Howard E, 1990. ""Fifty in Five": The Prospects for Merger in the Electric Utility Industry," Journal of Regulatory Economics, Springer, vol. 2(2), pages 111-128, June.
    17. Toru Hattori & Tooraj Jamasb & Michael Pollitt, 2005. "Electricity Distribution in the UK and Japan: A Comparative Efficiency Analysis 1985-1998," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 23-48.
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