The effects of rate of return and environmental regulations on the productivity performance in the US electric utility industry
Thesis/Dissertation
·
OSTI ID:7178990
Productivity growth in the US electric power industry has been declining since the late 1960's. Rate of return regulation and environmental regulations are hypothesized to adversely affect the productivity performance. Employing a Divisa index of the total factor productivity (TEP) an electric utility's performance is measured based on a profit maximization framework subject to both regulatory constraints. The empirical analysis attempts to analyze the effects of these regulations on the productivity growth employing data from privately-owned, fossil-fueled electric utilities. Results show a consistent decline in productivity growth over time averaging at 2% annually during 1977 and 1982, as well as the existence of regional differences in TFP growth among utilities. It shows positive and significant relationships between TFP growth and the rate of return, regulatory lag, the use of future test year, and deferred tax credit in the rate-making process. In the environmental case, results show that a stringent emission standard, using scrubbers for sulfur reduction and the utilization of aging power plants all contribute to the decline in productivity growth.
- Research Organization:
- Pennsylvania Univ., Philadelphia, PA (United States)
- OSTI ID:
- 7178990
- Country of Publication:
- United States
- Language:
- English
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