The Rationale for Reforming Utility Business Models

Daniel J. Kopin and Richard G. Vanden Bergh

The Energy Journal, 2023, vol. 44, issue 3, 65-88

Abstract: Economic models assume public utility commissions reform utility business models with revenue decoupling mechanisms primarily to remove the disincentive for demand-side management investment, which is expected to enhance social welfare. This paper tests that widespread assumption. We find some but limited support for commission responsiveness to avoided environmental costs. Instead, we find commission responsiveness to avoided political costs resulting from high prices of residential electricity compared to the regional average and high levels of partisan competition in the state legislature. Beyond questioning the primacy of the public interest rationale for regulation, our results give reason to reevaluate economic models of utility business model reform that do not explicitly consider commission interests in minimizing political risks.

Keywords: Revenue decoupling; Regulation; Electric utilities; Energy efficiency; Political economy (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.44.2.dkop (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:44:y:2023:i:3:p:65-88

DOI: 10.5547/01956574.44.2.dkop

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().