Decomposing unregulated multiproduct technologies from regulated multiproduct technologies: The case of investor-owned electric utilities

Thesis/Dissertation · Sun Jan 01 04:00:00 EST 1989

OSTI ID:7155143

Armstrong, T O

This study estimates a regulated translogarithmic cost function using 1972, 1977, and 1984 data on investor-owned electric utilities, IOU's. It investigates the existence of cost subadditivity, overall and product-specific economies of scale and scope, and substitutability between inputs for regulated IOU's and potentially rate-of-return deregulated IOU's. No evidence of cost subadditivity for the regulated industry and the potentially rate-of-return deregulated industry is found. This result suggests regulated and potentially deregulated IOU firms are not natural monopolies. Overall constant returns to scale are reported for regulated and unregulated cost functions. As outputs rise in a fixed proportion along a ray, ray average costs are constant. The lack of transray convexity in conjunction with overall diseconomies of scope suggest regulated or potentially deregulated IOU's may reduce indirect costs by producing outputs, residential, small commercial, or large industrial users, separately. The study reports weak cost complementarity between residential and industrial outputs. It lends support to deregulation of the generation component of an IOU. Eliminating rate-of-return regulation on generation would induce cost savings.

• Research Organization: Temple Univ., Philadelphia, PA (USA)
• OSTI ID: 7155143
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
296000* -- Energy Planning & Policy-- Electric Power
COST ESTIMATION
DEREGULATION
ECONOMIC IMPACT
ELECTRIC UTILITIES
OWNERSHIP
PROFITS
PUBLIC UTILITIES
REGULATIONS
TECHNOLOGY IMPACTS