When Does Regulation Distort Costs? Lessons from Fuel Procurement in U.S. Electricity Generation

Steve Cicala

No 20109, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper evaluates changes in fuel procurement practices by coal- and gas-fired power plants in the United States following state-level legislation that ended cost-of-service regulation of electricity generation. I find that deregulated plants substantially reduce the price paid for coal (but not gas), and tend to employ less capital-intensive sulfur abatement techniques relative to matched plants that were not subject to any regulatory change. Deregulation also led to a shift toward more productive coal mines. I show how these results lend support to theories of asymmetric information, capital bias, and regulatory capture as important sources of regulatory distortion.

JEL-codes: D24 D72 D82 L11 L43 L51 L94 L98 Q4 Q48 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-cdm, nep-cta, nep-ene, nep-ind and nep-reg
Note: EEE IO POL
References: View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published as Steve Cicala, 2015. "When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation," American Economic Review, American Economic Association, vol. 105(1), pages 411-44, January.

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Journal Article: When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation (2015)
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