Year of Publication

2017

College

Martin School of Public Policy and Administration

Executive Summary

The deregulation of the electric utility industry is one of the largest deregulation efforts in U.S. history. Proponents argue that getting rid of the outdated utility model of regulated monopolies and introducing competitive markets will lower prices, increase efficiency, and result in a net benefit for the nation. Opponents, on the other hand, believe that both the tumultuous history of the electric utility industry and experiments with deregulation have shown that competitive markets for electricity are too open to manipulation and will result in increased prices for consumers and dangerous volatility in the provision of electricity. This paper will attempt to answer the question: does deregulation lower the price of electricity? The first section of this paper will detail technical and historical background information that is necessary to understand the debate surrounding the regulation of electric utilities. The second section will explore the relevant literature surrounding the empirical effects of deregulation. The third section will propose a method of testing the effect that deregulation has on the price of electricity by conducting a difference-in-difference analysis between Ohio (deregulated) and Indiana (regulated) pre and post deregulation. Results show that deregulation in Ohio has led to a modest decrease in retail prices for residential consumers relative to Indiana. This result was counter to the author’s expectations, but is not completely unexpected as it aligns with some of the current literature, which generally shows small or no changes to residential retail prices.

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