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Ownership and district heating prices: The case of an unregulated natural monopoly

Alejandro Egüez ()
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Alejandro Egüez: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden, https://www.umu.se/handelshogskolan

No 980, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The price of district heating in Sweden is unregulated and differs substantially among different networks. This paper investigates if the price variation can partly be explained by ownership status, i.e., whether the network companies are privately- or municipally-owned. The empirical analysis is based on data on district heating prices, ownership status, and network characteristics for the period 2012-2017. The results show that prices are higher in privately-owned district heating networks than in municipally-owned networks, especially in the fixed component of the price. It is argued that municipal and private companies’ divergent objectives may be part of the explanation for these differences. Finally, district heating prices are positively correlated with the market prices for heat pumps, regardless of ownership, which suggests a general price-setting strategy based on the price of substitutes.

Keywords: district heating prices; ownership; public versus private; natural monopoly; two-part tariff (search for similar items in EconPapers)
JEL-codes: D42 L11 L33 L43 L95 Q41 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020-10-23
New Economics Papers: this item is included in nep-ene and nep-reg
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