WHO (ELSE) BENEFITS FROM ELECTRICITY DEREGULATION? COAL PRICES, NATURAL GAS, AND PRICE DISCRIMINATION. (15th April 2020)

• Record Type: Journal Article
• Authors: Hughes, Jonathan E.; Lange, Ian
• Is Part Of: Economic inquiry. Volume 58:Number 3(2020)
• Page Start: 1053
• Page End: 1075
• Publication Date: 2020-04-15
• Subjects: Economics -- Periodicals; 330.05
• DOI: 10.1111/ecin.12896
• Languages: English
• ISSNs: 0095-2583

Abstract

Abstract : Deregulation of major industries over the past 40 years has produced large efficiency gains. However, distributional effects have been more difficult to assess. In the electricity sector, deregulation has vastly increased information available to market participants through the formation of wholesale markets. We test whether upstream suppliers, specifically railroads that transport coal from mines to power plants, use this information to capture economic rents that would otherwise accrue to electricity generators. We find railroads charge higher markups when rents are larger. This effect is larger for deregulated plants, highlighting an important distributional impact of deregulation. ( JEL L11, L51, Q48)