Ownership, pricing, and productivity: the case of electric distribution cooperatives

Heesun Jang ()
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Heesun Jang: Korea Energy Economics Institute

Empirical Economics, 2020, vol. 59, issue 2, No 17, 977-1001

Abstract: Abstract This paper examines effects of Generation and Transmission (G&T) ownership on price–cost margin and productivity of electric distribution cooperatives. In the USA, electric cooperatives are organized as either G&T or distribution only. G&T is owned by a group of distribution cooperatives and provides wholesale power to its member distribution cooperatives usually under long-term full-requirement contracts. In this paper, I construct a model of cost minimization that allows us to recover price–cost margin and productivity estimates at the firm level. The model is estimated using a panel data of electric distribution cooperatives from 2006 to 2011, where a significant fraction of the firms have G&T ownership, while the rest of the firms do not have the ownership. The results show that cooperatives that are members of G&T have higher productivity by 6%. I also find that G&T ownership is associated with higher price–cost margin which is obtained from lower marginal cost of operation, although the effects are statistically insignificant depending on the specifications.

Keywords: Electric cooperatives; Productivity; Vertical integration (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00181-019-01658-9

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