{"title":"Tests of allocative efficiency in regulated multi-product firms","authors":"Scott E. Atkinson, Robert Halvorsen","doi":"10.1016/0165-0572(90)90041-G","DOIUrl":"10.1016/0165-0572(90)90041-G","url":null,"abstract":"<div><p>In this paper a shadow normalized restricted profit function is used to test for allocative efficiency with respect to both inputs and outputs in regulated firms producing multiple outputs. The efficiency of input choices is tested by examining the relationship between marginal rates of technical substitution and input price ratios, while the efficiency of output pricing is tested by examining the relationship between the price and marginal cost of each output. Observation specific estimates of deviations from efficient behavior are obtained by specifying the shadow prices of outputs and variable inputs as functions of variables that are causally related to the sources of inefficiency.</p><p>The model is estimated with data for privately-owned electric utilities in the United States. The results indicate that the price of residential output is less than its marginal cost and the price of commercial-industrial output is greater than its marginal cost. Utilities subject to fuel adjustment clauses are found to use more than the cost-minimizing amount of fuel relative to labor.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 65-77"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90041-G","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85547975","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Regulating independent power producers","authors":"Peter S. Fox-Penner","doi":"10.1016/0165-0572(90)90045-K","DOIUrl":"10.1016/0165-0572(90)90045-K","url":null,"abstract":"<div><p>The Public Utility Regulatory Policies Act of 1978 (PURPA) enabled private, unregulated power generators to sell electricity to electric utilities. PURPA required states to adopt somewhat flexible implementation policies with the uniform objective of facilitating sales between private producers and utilities. In contrast to many published anecdotal accounts of PURPA's impact, this research constructs a model of cogeneration investment as a function of state prices and state PURPA regulations. Tests of the model using data from around 1985 indicate that interstate regulatory differences have significant and sometimes counterintuitive impacts on private generation. Electricity and fuel prices significantly affect the amount of private capacity installed, but regulatory effects dominate the decision to invest or not to invest.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 117-141"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90045-K","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86747605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Tests of perverse input demand behavior by the rate-of-return-regulated firm","authors":"Charles Ofori-Mensa","doi":"10.1016/0165-0572(90)90043-I","DOIUrl":"10.1016/0165-0572(90)90043-I","url":null,"abstract":"<div><p>This paper tests the possibility, raised in several recent theoretical works, that the demand for a non-rate-base input by a cost-minimizing, rate-of-return-regulated firm may increase (decrease) as the price of that input increases (decreases). Confirmation that regulated firms may increase their employment of labor when they are faced with higher wages may help to explain the relatively high level of cooperation between labor and management in compensation bargaining among regulated firms. The paper briefly reviews the theory of cost and input demand for regulated firms. Then it describes the empirical model used in the test. Using data from the electric utility industry, the paper estimates cost and input demand functions in a three-input long-run model. Parameter estimates from the empirical cost and input demand functions are used to calculate own-price elasticities of demand for labor and fuel. The tests for perverse input demand behavior are based on the signs of the estimated own-price elasticities. The results of this study are mixed. The demand for fuel is unambiguously negatively sloped. But the demand for labor, especially in medium-sized firms producing between 0.5 and 1.7 billion kilowatt hours of electricity a year, may be upward sloping.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 97-106"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90043-I","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86818087","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The electric utility industry","authors":"R.Richard Geddes, Peter H. Griffes","doi":"10.1016/0165-0572(90)90037-J","DOIUrl":"10.1016/0165-0572(90)90037-J","url":null,"abstract":"<div><p>Changes in the electric utility industry over the last two decades have led to many topics for analysis, including fuel adjustment mechanisms, determination of avoided costs, bypass, and optimal contracts for utilities. Meanwhile, longer standing topics continue to be of interest including regulatory effects on efficiency, effective means of regulation, efficient pricing and scale economies, among others. In this introduction to the present special issue of <em>Resources and</em> <em>Energy</em>, major new and old strands of literature on the electric utility industry are assessed, and each of the articles appearing in this issue is discussed in light of the literature. This special issue contains examples of research on both the relatively recent problems and the pervasive, longdebated ones. Articles fall into three groups: prescriptive policy studies, input demand under rate-of-return regulation, and empirical regulatory studies.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 1-15"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90037-J","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81573112","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Profit-maximizing input demand under rate-of-return regulation","authors":"Joseph P. Hughes","doi":"10.1016/0165-0572(90)90042-H","DOIUrl":"10.1016/0165-0572(90)90042-H","url":null,"abstract":"<div><p>Cost-minimizing and profit-maximizing input demand for the firm subject to rate-of-return regulation are examined. Unregulated cost and profit functions which are conditional on the rate of employment of the rate-base input are shown to be identically equal to the regulated cost and profit functions, evaluated at the regulated optimum. Shephard's lemma and Hotelling's lemma applied to the conditional cost and profit functions, evaluated at the regulated optimum, yield the regulated input demands. For both the profit-maximizing and cost-minimizing demands, own-price effects are not necessarily negative nor are the cross-price effects in general equal. Moreover, the profit-maximizing output effect is not necessarily negative. Various decompositions of input demand are explored to explain these conclusions.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 79-95"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90042-H","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81584672","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Competitive pricing in the electric industry","authors":"Kenneth W. Costello, Ross C. Hemphill","doi":"10.1016/0165-0572(90)90040-P","DOIUrl":"10.1016/0165-0572(90)90040-P","url":null,"abstract":"<div><p>This paper deals with pricing in an increasingly competitive electric industry. Many electric utilities face the prospect over the next several years of losing a portion of their industrial load to alternative suppliers and technologies. ‘Bypass’ has become a major concern for electric utilities. This paper first outlines the basic economic issues associated with bypass and the choices confronting regulators when bypass has begun, or is imminent or a real possibility. It then examines different pricing options for accommodating bypass, focusing on the major features of a flexible pricing rule based on the theory of contestable markets. This rule is designed to effect optimal bypass and thereby maximize the total economic benefits of competitive forces emerging in the electric industry</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 49-63"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90040-P","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79506937","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Timidity in electric utility deregulation","authors":"Richard L. Gordon","doi":"10.1016/0165-0572(90)90038-K","DOIUrl":"10.1016/0165-0572(90)90038-K","url":null,"abstract":"<div><p>Reform proposals for electric power have centered around facilitating private provision of electricity. While such private provision may be desirable, its facilitation is inadequate to deal with the defects of electric power regulation. A number of economists have complained about the inherent defects of regulation. A range of suggestions has appeared. The alternatives include total deregulation, separating generation from transmission and distribution and deregulating generation, allowing competition in distribution, and reforming the existing regulatory process. Merely aiding power purchase is inadequate reform from any of the broader perspectives. Regulation has involved increased controls that have aggravated problems of maintaining profitability in a more uncertain market environment. Utility response has been to lessen greatly its commitments to continued expansion.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 17-32"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90038-K","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77364723","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"An empirical test of feedbacks in public utility regulation","authors":"Richard A. Wall, Michael Gort","doi":"10.1016/0165-0572(90)90044-J","DOIUrl":"10.1016/0165-0572(90)90044-J","url":null,"abstract":"<div><p>Current methods for estimation of the cost of capital in public utility rate making results in a feedback mechanism where pressures from capital markets attenuate potential deviations from a cost of capital rate of return. An empirical model of the electric utility industry reveals an inverse relationship between security prices and the allowed rate of return, thus supporting the feedback hyopothesis. Further, the attenuation effect is augmented by net present value effects of growth in demand.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 107-116"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90044-J","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83772732","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Purchasing power for the grid","authors":"Michael A. Einhorn","doi":"10.1016/0165-0572(90)90039-L","DOIUrl":"10.1016/0165-0572(90)90039-L","url":null,"abstract":"<div><p>This paper considers a regulatory mechanism that electric utility regulators may use to govern the purchase of electric power that is generated by independent sellers. In the suggested mechanism, the commission will get to specify the terms of one ‘fair’ tariff, which any prospective generator may unconditionally use to sell power back to the utility grid; once this tariff is offered, the utility may freely design or negotiate as many alternatives as it likes. The suggested approach displays many economically desirable outcomes that can compare favorably with alternative procedures — i.e., avoided cost pricing and competitive bidding — that are now in use.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"12 1","pages":"Pages 33-48"},"PeriodicalIF":0.0,"publicationDate":"1990-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90039-L","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74390235","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Welfare analysis with rising block pricing","authors":"Rodney Maddock","doi":"10.1016/0165-0572(90)90002-Z","DOIUrl":"10.1016/0165-0572(90)90002-Z","url":null,"abstract":"<div><p>This paper shows how compensating and equivalent variations can be calculated for demand relationships derived from convex budget sets made up of linear segments. The method is demonstrated in the case of electricity pricing in Medellin, Colombia, and is generally applicable in situations of rising block pricing.</p></div>","PeriodicalId":101080,"journal":{"name":"Resources and Energy","volume":"11 4","pages":"Pages 329-336"},"PeriodicalIF":0.0,"publicationDate":"1990-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1016/0165-0572(90)90002-Z","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83442649","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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