Consolidation and ownership trends of nonfederal hydropower generating assets, 1980-2003

Lea-Rachel Kosnik

Energy Economics, 2008, vol. 30, issue 3, 715-731

Abstract: This paper analyzes ownership trends of nonfederal hydropower generating assets from 1980-2003. Previous research has shown that the overall electricity industry is unique in that, because of the extreme inelasticity of demand for power, even small sectors of the industry have the potential to exhibit substantial price setting behavior. Hydropower assets especially, with their unique ability to "shift" electricity between time periods, have the potential to be used to exhibit horizontal market power. For this reason, an analysis of consolidation trends of hydropower assets is important. Our empirical results show that from 1980-2003, while transfer rates of nonfederal hydropower dams have been substantial (at 46%), there is little evidence of consolidation leading to the potential exercise of horizontal market power as a result of this. A detailed look at the data reveals that it is smaller dams, with less power production capacity, that have tended to be transferred more than other dams over this time period, and that it is private industrial owners and private utilities that are selling dams to private non-utility generation companies. This suggests that a realignment of hydropower assets, most likely in response to state-and federal-level regulatory initiatives, is taking place, but that increasing consolidation along with this is currently not a threat.

Date: 2008
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