Economies of scale and vertical integration in the investor-owed electric utility industry

Thompson, H G; Islam, M; Rose, K

Title: Economies of scale and vertical integration in the investor-owed electric utility industry

Full Record
Other Related Research

Abstract

This report analyzes the nature of costs in a vertically integrated electric utility. Findings provide new insights into the operations of the vertically integrated electric utility and supports earlier research on economics of scale and density; results also provide insights for policy makers dealing with electric industry restructuring issues such as competitive structure and mergers. Overall, results indicate that for most firms in the industry, average costs would not be reduced through expansion of generation, numbers of customers, or the delivery system. Evidently, the combination of benefits from large-scale technologies, managerial experience, coordination, or load diversity have been exhausted by the larger firms in the industry; however many firms would benefit from reducing their generation-to-sales ratio and by increasing sales to their existing customer base. Three cost models were used in the analysis.

Authors:

Thompson, H G ^[1]; Islam, M; Rose, K

Christensen Associates, Madison, WI (United States)

Publication Date:: Mon Jan 01 00:00:00 EST 1996

Research Org.:: National Regulatory Research Inst., Columbus, OH (United States)

Sponsoring Org.:: National Association of Regulatory Utility Commissioners, Washington, DC (United States)

OSTI Identifier:: 231328

Report Number(s):: NRRI-96-05
ON: DE96011045

Resource Type:: Technical Report

Resource Relation:: Other Information: PBD: Jan 1996

Country of Publication:: United States

Language:: English

Subject:: 29 ENERGY PLANNING AND POLICY; ELECTRIC UTILITIES; VERTICAL INTEGRATION; ECONOMIC ANALYSIS; POWER GENERATION; COST; ECONOMETRICS

Citation Formats


                    Thompson, H G, Islam, M, and Rose, K. Economies of scale and vertical integration in the investor-owed electric utility industry.  United States: N. p., 1996. 
        Web.

Copy to clipboard


                    Thompson, H G, Islam, M, & Rose, K. Economies of scale and vertical integration in the investor-owed electric utility industry.  United States.

Copy to clipboard


                    Thompson, H G, Islam, M, and Rose, K. 1996.  
        "Economies of scale and vertical integration in the investor-owed electric utility industry".  United States.

Copy to clipboard


                    
@article{osti_231328,

  title        = {Economies of scale and vertical integration in the investor-owed electric utility industry},

  author       = {Thompson, H G and Islam, M and Rose, K},

  abstractNote = {This report analyzes the nature of costs in a vertically integrated electric utility. Findings provide new insights into the operations of the vertically integrated electric utility and supports earlier research on economics of scale and density; results also provide insights for policy makers dealing with electric industry restructuring issues such as competitive structure and mergers. Overall, results indicate that for most firms in the industry, average costs would not be reduced through expansion of generation, numbers of customers, or the delivery system. Evidently, the combination of benefits from large-scale technologies, managerial experience, coordination, or load diversity have been exhausted by the larger firms in the industry; however many firms would benefit from reducing their generation-to-sales ratio and by increasing sales to their existing customer base. Three cost models were used in the analysis.},

  doi          = {},

  url          = {https://www.osti.gov/biblio/231328},
  journal      = {},
number       = ,

  volume       = ,

  place        = {United States},

  year         = {Mon Jan 01 00:00:00 EST 1996},

  month        = {Mon Jan 01 00:00:00 EST 1996}

}

Copy to clipboard

Technical Report:

Other availability

Please see Document Availability for additional information on obtaining the full-text document. Library patrons may search WorldCat to identify libraries that may hold this item. Keep in mind that many technical reports are not cataloged in WorldCat.

Save / Share:

Export Metadata

Save to My Library

Similar records in OSTI.GOV collections:

Estimating potential stranded commitments for U.S. investor-owned electric utilities

Technical Report Baxter, L; Hirst, E

New technologies, low natural gas prices, and federal and state utility regions are restructuring the electricity industry. Yesterday`s vertically integrated utility with a retail monopoly franchise may be a very different organization in a few years. Conferences, regulatory-commission hearings, and other industry fora are dominated by debates over the extent and form of utility deintegration, wholesale competition, and retail wheeling. A key obstacle to restructuring the electricity industry is stranded commitments. Past investments, power-purchase contracts, and public-policy-driven programs that made sense in an era of cost-of-service regulation may not be cost-effective in a competitive power market. Regulators, utilities, and othermore »« less
https://doi.org/10.2172/10122421

Full Text Available
Empirical tests of cost subadditivity in the investor-owned electric-utility industry

Thesis/Dissertation Finder, A

This dissertation examines the hypothesis that the social cost of electricity is reduced by concentrating the sale of electricity in one firm instead of several. The criterion for exploring the validity of the hypothesis was cost subadditivity. When costs are subadditive, the industry is said to be a multiple product natural monopoly. The presence of cost subadditivity was tested by performing for a sample of sixty firms during the years 1975 through 1980. The research improves upon the existing empirical literature by: (i) demonstrating that the functional form used for estimating is the only one capable of yielding global results;more »« less
Merge, consolidate, grow, or spin off?

Journal Article Thompson, Jr, H; Hovde, D; Rose, K - Fortnightly

The costs and synergies of vertical integration are discussed. Is bigger always better in electric generation? That notion prevailed, beginning around the turn of the century, when costs generally fell as the scale of production grew. The electric industry consolidated as costs and prices declined. Bigger was nearly always better. Today, at the other end of the century, does this view still hold true? Early work on estimating economies of scale suggests that a turnaround occurred at least 20 years ago, predating even the Public Utility Regulatory Policies Act of 1978. In fact, the current clamor for industry restructuring andmore »« less
Changing the face of the sales force in the deregulated electric industry

Journal Article Tetzel, T - Electricity Journal

As the electric utility industry marches toward restructuring and consumer choice, sales methods also must be restructured in ways that will shake the foundations of tradition. The new retail structure will likely replace the single electricity supplier with a traditional, competitive marketplace where multiple choices drive supply and demand for consumers. As existing utilities reshape their corporate structure and business practices in an attempt to retain and broaden their customer base, marketing departments will strive to build a saleable brand. The ultimate battles, however, will be fought in the trenches by the sales department. Very simply, success will depend onmore »« less
https://doi.org/10.1016/S1040-6190(99)00061-5
Record of Decision for the Bonneville Power Administration's Service to Direct Service Industrial Customers for Fiscal Years 2007-2011

Technical Report

Beginning in July 2004, the Bonneville Power Administration (BPA) initiated the Regional Dialogue process as part of its effort, in cooperation with its customers and constituents, to identify and decide issues regarding BPA's power supply role for FY 2007-2011. BPA service to Direct Service Industries (DSIs) has been steadily declining since the pre-1995 period when contracts totaled over 3,000 aMW, to 1995 when contracts were reduced to 2,000 average megawatts (aMW), to 2002 when contracts were reduced to 1,500 aMW (with much less actually delivered in the 2002-2006 period). Over the same period, BPA service to public utilities has grownmore »« less
https://doi.org/10.2172/842209

Full Text Available

Similar Records