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From Investor-owned Utility to Independent Power Producer

Jun Ishii

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-5
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We examine the issue of why some parent companies of U.S. electric utilities have expanded into domestic independent power production (IPP) but not others. We evaluate the conjecture that the parent companies who have chosen to participate in recently restructured U.S. wholesale electricity markets are those with the most generation cost advantages. Specifically, we empirically investigate the link between apparent advantages in two types of generation costs operation & maintenance (O&M) and capital and the IPP participation decision. We use electric utility data from FERC Form 1 and combine it with IPP data collected from various industry sources. The data is analyzed using both a descriptive approach and a simple, empirical competitive entry model. We find that utilities with lower O&M costs are more likely to expand into IPP. Also, utility financial characteristics, reflecting possible capital cost advantages, seem to matter mainly for the largest utilities.

Who Pays for Retail Electric Deregulation? Evidence of Cross-Subsidization from Complete Bill Data

Noah Dormady, Matthew Hoyt, Alfredo Roa-Henriquez, and William Welch

Year: 2019
Volume: Volume 40
Number: Number 2
DOI: 10.5547/01956574.40.2.ndor
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Retail electric deregulation has been identified in the literature to have favorable price impacts to businesses and households because of the introduction of competition into rate-setting. Those studies often ignore the important role of regulatory intervention. They are also generally national or multi-state aggregated studies that ignore state- and utility-specific dynamics, and most rely on Energy Information Administration (EIA) price data that does not account for riders and surcharges on consumer bills, which can total more than 60 percent of bills. Using a unique panel of representative, complete electricity bill data from the Public Utilities Commission of Ohio (PUCO), this paper provides a multi-utility panel regression analysis of the effect of retail deregulation on total electric bills in Ohio. The results identify two main sources of cross-subsidization that have generally cancelled out the favorable effects of restructuring. Both types of cross-subsidies result in substantial burden shifts to residential consumers.

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