The Impact of Competition and Corporate Structure on Productive Efficiency: The Case of the U.S. Electric Utility Industry, 1990-2004

Mika Goto and Anil K. Makhija
Additional contact information
Mika Goto: Central Research Institute of Electric Power Industry
Anil K. Makhija: Ohio State U

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: In this study, we present empirical evidence on the productive efficiency of electric utilities in the United States over the period, 1990-2004. This is a period marked by major attempts to introduce competition in the industry with the expectation that it will lead firms to improve their productive efficiency and ultimately to lower consumer prices. The actual experience has been surprising, since electricity prices have either fallen little or even risen sharply in some states. Relying on recent advances in the estimation of productive efficiency, we find that firms in jurisdictions that adopted competitive mechanisms have lower productive efficiency compared to firms in jurisdictions where rate-of-return regulation was retained. Furthermore, we provide evidence that firms in states that adopted competition have experienced decreases in productive efficiency, while firms in states with traditional regulation saw increases in efficiency over time. Since the introduction of deregulation has brought greater discretion to managers, we also examine the impact of various organizational choices on productive efficiency. Interestingly, the separation of the generation function from other functions, a hallmark of the effort to deregulate the industry, is associated with an adverse impact on productive efficiency. These findings question the claim that competition necessarily fosters higher productive efficiency. Alternatively, true competition may have been circumvented.

JEL-codes: L94 (search for similar items in EconPapers)
Date: 2007-05
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-10.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-10.pdf [301 Moved Permanently]--> https://www.cob.ohio-state.edu/fin/dice/papers/2007/2007-10.pdf [301 Moved Permanently]--> https://fisher.osu.edu/fin/dice/papers/2007/2007-10.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2007-10

Access Statistics for this paper

More papers in Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().