Research

Deregulation in the Electric Utility Industry: Excess Capacity and the Transition to a Long-Run Competitive Market?

Existing analyses of electricity deregulation have focused on situations where horizontal market power is present. This paper instead evaluates a market where a competitive outcome is more likely. Competitive market supply and demand curves for electricity have been simulated for a twenty-state region. These simulated supply and demand curves are used to predict short-run and long-run prices for electric power. Many consumers will see a drop in the portion of their electric bills accounted for by the current economic costs of supplying them with electricity. Adjustments to consumers' bills for stranded cost recovery will be determined by legislators and regulators on a state-by-state and utility-by-utility basis. Because of excess capacity that currently exists in the industry, the decline in prices will be greater in the short run than in the long run.

Publication Information
Article Title: Deregulation in the Electric Utility Industry: Excess Capacity and the Transition to a Long-Run Competitive Market?
Journal: Growth and Change (2004)
35
Author(s): Thompson, Eric
Researcher Information
    
Thompson, Eric
Thompson, Eric
Karl H. Nelson Associate Professor of Economics, Director of the Bureau of Business Research
Expertise:
  • Bureau of Business Research
  • Regional Economics
Economics
CoB 523 AA
P.O. Box 880489
University of Nebraska-Lincoln
Lincoln, NE 68588-0489, USA
Phone: (402) 472-3318
Fax: (402) 472-9700
ethompson2@unl.edu