Who (Else) Benefits from Electricity Deregulation? Coal prices, natural gas and price discrimination

Jonathon E. Hughes () and Ian Lange
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Jonathon E. Hughes: Department of Economics, University of Colorado at Boulder

No 2018-06, Working Papers from Colorado School of Mines, Division of Economics and Business

Abstract: The movement to deregulate major industries over the past 40 years has produced large efficiency gains. However, distributional effects have been more difficult to assess. In the electricity sector, deregulation has vastly increased information available to market participants through the formation of wholesale markets. We test whether upstream suppliers, specifically railroads that transport coal from mines to power plants, use this information to capture economic rents that would otherwise accrue to electricity generators. Using natural gas prices as a proxy for generators' surplus, we find railroads charge higher markups when rents are larger. This effect is larger for deregulated plants, highlighting an important distributional impact of deregulation. This also means policies that change fuel prices can have substantially different effects on downstream consumers in regulated and deregulated markets.

Keywords: Deregulation; Price Discrimination; Electricity Markets; Procurement Contracts (search for similar items in EconPapers)
JEL-codes: L11 L51 Q48 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2018-11
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://econbus-papers.mines.edu/working-papers/wp201806.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: WHO (ELSE) BENEFITS FROM ELECTRICITY DEREGULATION? COAL PRICES, NATURAL GAS, AND PRICE DISCRIMINATION (2020)
Working Paper: Who (Else) Benefits from Electricity Deregulation? Coal Prices, Natural Gas and Price Discrimination (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mns:wpaper:wp201806

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