Rural electric cooperatives and the cost structure of the electric power industry: A multiproduct analysis
Since 1935, the federal government of the United States has administered a program designed to make electricity available to rural Americans. This dissertation traces the history of the rural electrification program, as well as its costs. While the Congress intended to simply provide help in building the capital structure of rural electric distribution systems, the program continues to flourish some 35 years after these systems first fully covered the countryside. Once the rural distribution systems were built, the government began to provide cooperatives with billions of dollars in subsidized loans for the generation of electric power. Although this program costs the taxpayers nearly $1 billion per year, no one has ever tested its efficacy. The coops' owner/members do not have the right to trade their individual ownership shares. The RECs do not fully exploit the scale and scope economies observed in the investor-owned sector of this industry. This dissertation compares the relative productive efficiencies of the RECs and the investor-owned electric utilities (IOUs) in the United States. Using multiproduct translog cost functions, the estimated costs of cooperatives are compared to those of IOUs in providing identical output bundles. Three separate products are considered as outputs: (1) wholesale power; (2) power sold to large industrial customers; and (3) power sold to residential and commercial customers. It is estimated that, were the RECs forced to pay market prices for their inputs, their costs would exceed those incurred by the IOUs by about 24 percent. Several policy recommendations are made: (1) the RECs should be converted to stockholder-owned, tax-paying corporations; (2) the government should discontinue its subsidized loan program; (3) the government should sell its hydroelectric power at market prices, nullifying the current preference given to cooperatives and municipal distributors in the purchase of this currently underpriced power.
- Research Organization:
- Auburn Univ., AL (United States)
- OSTI ID:
- 7107083
- Resource Relation:
- Other Information: Thesis (Ph.D.)
- Country of Publication:
- United States
- Language:
- English
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