A Comparison of Costs in Privately Owned and Publicly Owned Electric Utilities: The Role of Scale

Dong-Soo Koh, Sanford Berg and Lawrence Kenny

Land Economics, 1996, vol. 72, issue 1, 56-65

Abstract: The continued coexistence of small, publicly owned electricity utilities and larger privately owned utilities suggests that each ownership form has advantages inherent in scale and/or the acquisition of inputs. This pattern may be due to voters being better monitors in small jurisdictions, which yields more effective municipal cost control. This empirical study analyzes, using a translog cost function, the relative cost-efficiency of a relatively large sample of 121 privately owned and 61 publicly owned firms generating electricity via fossil fuels. Publicly owned firms are indeed more efficient at low output levels. Ownership choices are consistent with cost minimization.

Date: 1996
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