Skip to main content
×
×
Home

Do markets make good commissioners?: A quasi-experimental analysis of retail electric restructuring in Ohio

  • Noah Dormady (a1), Zhongnan Jiang (a1) and Matthew Hoyt (a2)
Abstract

Empirical support for the purported benefits of retail electric deregulation is mixed at best. Prior studies that identify states as simply “retail deregulated” overlook complex policy environments in which deregulation is implemented by regulators with a high degree of discretion. Prior studies also rely on Energy Information Administration data that do not account for core regulatory interventions that can take place during the process of implementing deregulation. Using robust time series household final bill survey data from the Public Utilities Commission of Ohio, this article provides a quasi-experimental analysis of the price impacts of retail electric restructuring in Ohio. The results suggest that residential electricity prices have increased following retail restructuring in all service territories in Ohio, with significant favourable welfare effects observed only in the Cincinnati area, where key policy implementation stages were not circumvented.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Do markets make good commissioners?: A quasi-experimental analysis of retail electric restructuring in Ohio
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Do markets make good commissioners?: A quasi-experimental analysis of retail electric restructuring in Ohio
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Do markets make good commissioners?: A quasi-experimental analysis of retail electric restructuring in Ohio
      Available formats
      ×
Copyright
Corresponding author
*Corresponding author. Email: dormady.1@osu.edu
References
Hide All
Abadie, A Gardeazabal, J (1999) The Economic Costs of Conflict: A Case Study of the Basque Country. The American Economic Review 93(1): 113132.
Appelbaum, E Katz, E (1987) Seeking Rents by Setting Rents: The Political Economy of Rent Seeking. The Economic Journal 97(387): 685699.
Apt, J (2005) Competition Has Not Lowered US Industrial Electricity Prices. The Electricity Journal 18(2): 5261.
Baillie, RT (1996) Long Memory Processes and Fractionally Integrated in Econometrics. Journal of Econometrics 73(1): 559.
Blumsack, S, Lave, L Apt, J (2008) Electricity Prices and Costs Under Regulation and Restructuring. Presented at 2008 Industry Studies Conference, Boston.
Borenstein, S Bushnell, JB (2015) The U.S. Electricity Industry after 20 Years of Restructuring. Annual Review of Economics 7(1): 437463.
Box, GEP Jenkins, GM (1970) Time Series Analysis, Forecasting and Control, 1st ed. San Francisco, CA: Holden-Day.
Box-Steffensmeier, JM Smith, RM (1998) Investigating Political Dynamics Using Fractional Integration Methods. American Journal of Political Science 42(2): 661689.
Box-Steffensmeier, JM, Freeman, JR, Hitt, MP Pevehouse, JCW (2014) Time Series Analysis for the Social Sciences. Cambridge: Cambridge University Press.
Brennan, TJ (2007) Consumer Preference Not to Choose: Methodological and Policy Implications. Energy Policy 35(3): 16161627.
Bushnell, JB Wolfram, C (2005) Ownership Change, Incentives and Plant Efficiency: The Divestiture of US Electric Generation Plants. Berkeley, CA: Center for the Study of Energy Markets.
Campbell, DT Stanley, J (1963) Experimental and Quasi-Experimental Designs for Research, 1st ed. Chicago, IL: Wadsworth Publishing.
Chandley, JD (2001) A Standard Market Design for Regional Transmission Organizations. The Electricity Journal 14(10): 2753.
Chapman, D, Vossler, CA, Mount, TD, Barboni, V, Thomas, RJ Zimmerman, RD (2004) Market Efficiency, Competition, and Communication in Electric Power Markets: Experimental Results. Ecological Economics 48(3): 317327.
Carter, DP, Weible, CM, Siddiki, SN, Brett, J Chonaiew, SM (2015) Assessing Policy Divergence: How to Investigate the Differences Between a Law and a Corresponding Regulation. Public Administration 93(1): 159176.
Cicala, S (2014) When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation (No. w20109). Cambridge, MA: National Bureau of Economic Research.
Craig, JD Savage, SJ (2013) Market Restructuring, Competition and the Efficiency of Electricity Generation: Plant-level Evidence from the United States 1996 to 2006. The Energy Journal 34(1): 131.
Davis, LW Wolfram, C (2012) Deregulation, Consolidation, and Efficiency: Evidence from US Nuclear Power. American Economic Journal: Applied Economics 4(4): 194225.
Dias, JG Ramos, SB (2014) Heterogeneous Price Dynamics in US Regional Electricity Markets. Energy Economics 46, 453463.
Dickey, DA Fuller, WA (1974) Distribution of the Estimators for Autoregressive Time Series with A Unit Root. Journal of the American Statistical Association 74(366): 427431.
Det Norske Veritas - Germanischer Lloyd (DNV-GL) (2015) U.S. Competitive Retail Power & Gas Markets [Map], https://www.dnvgl.com/energy/brochures/download/retail-energy-choice-by-state.html (accessed 1 December 2016).
Energy Information Administration (EIA) (2001) State Electricity Profiles – Ohio. http://www.eia.gov/electricity/state/archive/062999.pdf (accessed 1 December 2016).
Electricity Information Administration (EIA) (2012). Electric Sales, Revenue and Average Price. Table 5A. Residential Average Monthly Bill by Census Division and State. https://www.eia.gov/electricity/sales_revenue_price/ (accessed 1 December 2016).
Enders, W (2014) Applied Econometric Time Series, 1st ed. New York, NY: John Wiley & Sons.
Esterling, KM (2009) The Political Economy of Expertise: Information and Efficiency in American National Politics. Ann Arbor, MI: University of Michigan Press.
Eto, JH, Hale, DR Lesieutre, BC (2006) Toward More Comprehensive Assessments of FERC Electricity Restructuring Policies: A Review of Recent Benefit-cost Studies of RTOs. The Electricity Journal 19(10): 5062.
Fagan, ML (2006) Measuring and Explaining Electricity Price Changes in Restructured States. The Electricity Journal 19(5): 3542.
Gamble, A, Juliusson, EA Gärling, T (2009) Consumer Attitudes Towards Switching Supplier in Three Deregulated Markets. The Journal of Socio-Economics 38(5): 814819.
Giulietti, M, Price, CW Waterson, M (2005) Consumer Choice and Competition Policy: A Study of UK Energy Markets. The Economic Journal 115(506): 949968.
Green, RJ Newbery, DM (1992) Competition in the British Electricity Spot Market. Journal of Political Economy 100(5): 929953.
Hamilton, JD (1994) Time Series Analysis, 1st ed. Princeton, NJ: Princeton University Press.
Hill, HC (2003) Understanding Implementation: Street-Level Bureaucrats’ Resources for Reform. Journal of Public Administration Research and Theory 13(3): 265282.
Hilke, JC (2008) Economics, Competition, and Costs in the Restructuring of US Electricity Markets. Review of Industrial Organization 32(3–4): 289296.
Hogan, WW (1998) Independent System Operator: Pricing and Flexibility in A Competitive Electricity Market. Center for Business and Government, JF Kennedy School of Government, Harvard University, https://www.hks.harvard.edu/FS/whogan/iso98.pdf (accessed 1 December 2016).
Hortaçsu, A Puller, SL (2008) Understanding Strategic Bidding in Multi‐unit Auctions: A Case Study of the Texas Electricity Spot Market. The RAND Journal of Economics 39(1): 86114.
Hortaçsu, A, Madanizadeh, SA Puller, SL (2017) Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market. American Economic Journal: Economic Policy 9(4): 192226.
Huber, JD Shipan, CR (2002) Deliberate Discretion? The Institutional Foundations of Bureaucratic Autonomy. New York: Cambridge University Press.
Hunt, S (2002) Making Competition Work in Electricity. Volume 146. Hoboken, NJ: John Wiley & Sons.
Joskow, PL (2008) Lessons Learned from Electricity Market Liberalization. The Energy Journal 29(2): 942.
Joskow, PL (2006) Markets for Power in the United States: An Interim Assessment. The Energy Journal 27(1): 136.
Joskow, PL (2005a) The Difficult Transition to Competitive Electricity Markets in the United States. In Griffin M. and Puller S. L. (eds.), Electricity Deregulation: Choices and Challenges, 1st ed. Chicago, IL: University of Chicago Press, 3197.
Joskow, PL (2005b) Transmission Policy in the United States. Utilities Policy 13(2): 95115.
Joskow, PL Schmalensee, R (1983) Markets for Power: An Analysis of Electric Utility Deregulation. Cambridge, MA: MIT Press.
Krueger, AO (1974) The Political Economy of the Rent-Seeking Society. The American Economic Review 64(3): 291303.
Kwoka, J (2008) Restructuring the US Electric Power Sector: A Review of Recent Studies. Review of Industrial Organization 32(3–4): 165196.
Littlechild, S (2008) Municipal Aggregation and Retail Competition in the Ohio Energy Sector. Journal of Regulatory Economics 34(2): 164194.
Lo, AW MacKinlay, AC (1988) Stock Market Prices Do Not Follow Random Walks: Evidence from A Simple Specification Test. Review of Financial Studies 1(1): 4166.
Mansur, ET (2008) Measuring Welfare in Restructured Electricity Markets. The Review of Economics and Statistics 90(2): 369386.
Mahoney, J Thelen, K (2010) A Theory of Gradual Institutional Change. In Mahoney J and Thelen K (eds.), Explaining Institutional Change: Ambiguity, Agency, and Power. Cambridge: Cambridge University Press, 1–37.
Markiewicz, K, Rose, NL Wolfram, C (2004) Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency (No. w11001). Cambridge, MA: National Bureau of Economic Research.
Mazmanian, DA Sabatier, PA (1981) Effective Policy Implementation, 1st ed. Florence, MA: Free Press.
National Association of Regulatory Utility Commissioners (NARUC) (2013) History of Electric Regulation in Ohio [PowerPoint Slides], http://pubs.naruc.org/pub/53924A2F-2354-D714-5152-6C4088474A4A (accessed 1 December 2016).
Newbery, DM (1999) Privatization, Restructuring, and Regulation of Network Utilities. The Walras-Pareto Lectures Cambridge: MIT Press.
Ohio Legislative Service Commission (OLSC) (1999) Final Analysis, Am. Sub. S.B. 3. Columbus, OH, http://www.lsc.ohio.gov/analyses/99-sb3.pdf (accessed 1 December 2016).
Ohio Legislative Service Commission (OLSC) (2008) Final Analysis, Am. Sub. S.B. 221. Columbus, OH, http://www.lsc.ohio.gov/analyses127/08-sb221-127.pdf (accessed 1 December 2016).
Peltzman, S (1989) The Economic Theory of Regulation after A Decade of Deregulation. Brookings Papers on Economic Activity: Microeconomics, 141.
Phillips, CF (1993) The Regulation of Public Utilities: Theory and Practice. Public Utilities Reports. Arlington, VI.
Pollitt, MG (2012) Lessons from the History of Independent System Operators in the Energy Sector. Energy Policy 47, 3248.
Price, CW (2005) The Effect of Liberalizing UK Retail Energy Markets on Consumers. Oxford Review of Economic Policy 21(1): 128144.
Public Utilities Commission of Ohio (PUCO) (2016a) Electric Customer Choice Switch Rates and Aggregation Activity, http://www.puco.ohio.gov/puco/index.cfm/industry-information/statistical-reports/electric-customer-choice-switch-rates-and-aggregation-activity/#sthash.hPzkQzUI.dpbs (accessed 1 December 2016).
Public Utilities Commission of Ohio (PUCO) (2016b) FirstEnergy’s Electric Security Plan, http://www.puco.ohio.gov/puco/index.cfm/be-informed/consumer-topics/firstenergy-s-electric-security-plan/#sthash.vIpUoBG7.dpbs (accessed 1 December 2016).
Public Utilities Commission of Ohio (PUCO) (2012) Case Number 12-3151-EL-COI, Entry Order from PUCO, Entry 127, http://dis.puc.state.oh.us/TiffToPDf/A1001001A14A16A95144H29544.pdf (accessed 1 December 2016).
Public Utilities Commission of Ohio (PUCO) (2007) Electric Rate Stabilization Plans: Ensuring Rate Certainty in Ohio, http://www.getpurenergy.com/states/forms/Electric%20Rate%20Stabilization.pdf (accessed 1 December 2016).
Puller, SL (2007) Pricing and Firm Conduct in California’s Deregulated Electricity Market. The Review of Economics and Statistics 89(1): 7587.
Radaelli, C (1995) The Role of Knowledge in the Policy Process. Journal of European Public Policy 2(2): 159183.
Radaelli, C (2004) The Puzzle of Regulatory Competition. Journal of Public Policy 24(1): 123.
Ros, AJ (2017) An Econometric Assessment of Electricity Demand in the United States Using Utility-specific Panel Data and the Impact of Retail Competition on Prices. The Energy Journal 38(4): 7399.
Sabatier, P Mazmanian, D (1980) The Implementation of Public Policy: A Framework of Analysis. Policy Studies Journal 8(4): 538560.
Shadish, WR, Cook, TD Campbell, DT (2002) Experimental and Quasi-Experimental Designs for Generalized Causal Inference. Wadsworth: Cengage Learning.
Shapiro, SA Tomain, JP (2003) Regulatory Law and Policy: Cases and Materials, 3rd ed. New York, NY: Lexis Nexis.
Sowell, F (1992) Modeling Long-run Behavior with the Fractional ARIMA Model. Journal of Monetary Economics 29(2): 277302.
Stigler, GJ Friedland, C (1962) What Can Regulators Regulate-the Case of Electricity. Journal of Law & Economics 5, 116.
Su, X (2015) Have Customers Benefited from Electricity Retail Competition? Journal of Regulatory Economics 47, 146182.
Swadley, A Yücel, M (2011) Did Residential Electricity Rates Fall After Retail Competition? A Dynamic Panel Analysis. Energy Policy 39(12): 77027711.
Taber, J, Chapman, D Mount, T (2006) Examining the Effects of Deregulation on Retail Electricity Prices. Department of Applied Economics and Management, Working Paper 2005–14, Cornell University. http://publications.dyson.cornell.edu/research/researchpdf/wp/2005/Cornell_Dyson_wp0514.pdf (accessed 1 December 2016).
Tullock, G (2001) Efficient Rent Seeking. In Lockard A. A. and Tullock G. (eds.), Efficient Rent-Seeking. Boston, MA: Springer, 3–16.
Winston, C (1993) Economic Deregulation: Days of Reckoning for Microeconomists. Journal of Economic Literature 31(3): 12631289.
Wright, CL (1977) A Note on the Decision Rules of Public Regulatory Agencies. Public Choice 31(1): 151155.
Yang, Y (2014) Understanding Household Switching Behavior in the Retail Electricity Market. Energy Policy 69, 406414.
Zahariadis, N Exadaktylos, T (2016) Policies That Succeed and Programs That Fail: Ambiguity, Conflict, and Crisis in Greek Higher Education. Policy Studies Journal 44(1): 5982.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Journal of Public Policy
  • ISSN: 0143-814X
  • EISSN: 1469-7815
  • URL: /core/journals/journal-of-public-policy
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

Metrics

Full text views

Total number of HTML views: 7
Total number of PDF views: 38 *
Loading metrics...

Abstract views

Total abstract views: 119 *
Loading metrics...

* Views captured on Cambridge Core between 3rd July 2018 - 22nd August 2018. This data will be updated every 24 hours.