Pass-through in residential retail electricity competition: Evidence from Pennsylvania. (February 2023)

• Record Type: Journal Article
• Authors: Simeone, Christina E.; Lange, Ian; Gilbert, Ben
• Is Part Of: Utilities policy. Volume 80(2023)
• Publication Date: 2023-02
• Subjects: Retail electricity competition -- Cost pass-through -- Renewable energy credits; Public utilities -- United States -- Periodicals; Public utilities -- Government policy -- United States -- Periodicals; 363.6
• DOI: 10.1016/j.jup.2022.101479
• Languages: English
• ISSNs: 0957-1787

Abstract

Abstract: Public data for Pennsylvania show that competitive retail electricity generation suppliers (EGS) have offered higher-priced products to residential consumers compared to prices offered by regulated default electric distribution companies (EDCs). It is unclear if the EGSs higher prices are due solely to providing differentiated value-added products with higher input costs or if these suppliers are extracting higher markups. This study applies regression analysis to residential retail price data from Pennsylvania to explore this uncertainty. Results suggest EGSs pass-through markups on voluntary green-power product environmental attributes of at least 1.3x or greater, depending on the product type and penetration. These results do not support the hypothesis that higher EGS prices are solely the result of higher input costs and support the notion that higher prices are due in part to markups. Highlights: Residential retail electricity competition is being questioned by regulators. Competitive retail suppliers in Pennsylvania offered higher prices to residential sector. Cost pass-through regression analyzes publicly available data to investigate higher prices. Results suggest markups likely play a role in higher competitive supplier prices. Access to better data and testing other theories is required to confirm these findings.