When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Reply

Steve Cicala

American Economic Review, 2021, vol. 111, issue 4, 1373-81

Abstract: The average effect of deregulatory policies on fuel prices at coal-fired power plants is strongly influenced by plants that were initially paying the highest prices for fuel. Primary sources document that these plants were locked into long-term, high-cost fuel contracts, and only secured market rates post-deregulation. While these plants' fuel costs were unusual, their response to deregulation was not: both coal- and gas-fired plants reduce fuel prices one-for-one with the amount they were initially paying above their neighbors' costs. Our understanding of deregulation is not improved by excluding those who stand to benefit most.

JEL-codes: L51 L71 L94 L98 Q35 Q41 Q48 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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DOI: 10.1257/aer.20201872

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