Evidence on U.S. Electricity Prices: Regulated Utility vs. Restructured States.

Eric L. Prentis

Abstract


Economic theory states that “free market” competition naturally achieves lower prices—thereby increasing efficiency and benefiting society. This is the first paper in the literature to use means testing to statistically analyze electricity prices, from 1970-2011, for states that restructure their electric utilities—pre-and-post restructuring—relative to U.S. electricity prices; thus determining whether restructured electricity utility states are more or less efficient, after restructuring, than before. This fundamental empirical evidence is sought to explain whether expected operating synergies are being realized and stockholders are gaining or losing relative value—once states restructure—and electric companies are merged or acquired. This paper’s empirical results are timely and important to future energy policy—in this crucial to the economy electric power industry—and establish whether “free market” economic theory is being appropriately applied in states that restructure their vertically-integrated government-regulated natural monopoly electric utilities. Future research is suggested.

Keywords: Electric utilities; Restructuring; Operating efficiency; Free market competition

JEL Classifications: G31; G38; H44; K23


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