Powering Progress: Restructuring, Competition, and R&D in the U.S. Electric Utility Industry

Paroma Sanyal and Linda R. Cohen

The Energy Journal, 2009, vol. Volume 30, issue Number 2, 41-80

Abstract: This paper investigates the R&D behavior of regulated firms when they transition to a competitive environment. Using data from the US electricity market from 1990-2000, we analyze how competition, institutional changes, and political constraints have contributed to the precipitous decline in R&D expenditure by regulated utilities. We find that firms reduce their R&D significantly at the very early stages of restructuring or even when they expect restructuring to occur. Once the emerging institutional structure becomes clear, R&D spending recovers but is later offset by another decline when restructuring legislation is enacted. In addition, greater competition and the nearing of such competition adversely affects research spending. In aggregate, R&D declines by 78.6 percent after electricity markets are restructured. Firm and state characteristics matter, and a majority of the research is conducted by large generation companies located in pro-research states, especially if they are part of a larger holding company. Such characteristics have a different impact on research spending in the pre-and post-restructured periods.

JEL-codes: F0 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (38)

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