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The Journal of Law, Economics, and Organization V18 I1
© 2002 Oxford University Press

Original Article

Governance Alternatives and Pricing in the U.S. Electric Power Industry

John E. Kwoka, Jr.

Northeastern University

Abstract

Alternative governance mechanisms can be expected to result in differences in enterprise performance. This research analyzes the prices charged by U.S. electric utilities using a comprehensive pricing model and a large and detailed dataset that controls for enterprise costs and subsidies. It finds that public ownership is associated with significantly lower prices than with privately owned utilities, most likely because the latter are subject to regulation. Also associated with lower prices are elected commissioners (rather than those appointed by state governors), commissions with fewer members, and utilities whose governing bodies hold open meetings–all characteristics that imply more direct consumer influence on the price-determination process. Among customer groups, residential users are the biggest beneficiaries of public ownership, while industrial users appear to have more influence with elected state regulatory commissions. These findings are reconciled with theory and help explain the sometimes ambiguous results of previous studies.


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