Is welfare higher when utilities are owned by customers instead of investors? Evidence from electricity distribution in New Zealand

Richard Meade and Magnus Söderberg

Energy Economics, 2020, vol. 86, issue C

Abstract: We estimate cost, quality and price models for electricity distribution businesses (EDBs) in New Zealand, treating ownership as endogenous. We also account for simultaneity issues between costs and quality. We find that customer ownership is associated with lower prices and costs, and also with higher quality. We calculate welfare (total surplus) for both customer - and investor-owned EDBs, allowing for the possibility that investor-owned EDBs might produce higher welfare than customer-owned firms (e.g. due to having more valuable customers). However, we find that welfare is higher for customer-owned EDBs. Ownership is treated as endogenous in all models and we instrument it with the presence of regional air quality regulation.

Keywords: Utilities; Price; Efficiency; Quality; Welfare; Ownership (search for similar items in EconPapers)
JEL-codes: D24 L15 L51 L94 P13 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:86:y:2020:i:c:s0140988320300396

DOI: 10.1016/j.eneco.2020.104700

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