Examining the Effects of Deregulation on Retail Electricity Prices

A primary aim of deregulation is to reduce the customer cost of electricity. In this paper, we examine the degree of success in reaching that goal using a variety of methods. We examine rates for each of four customer classes; for regulated, deregulated and publicly owned utilities; and for three definitions of deregulation. We control for a variety of factors which may independently affect differences in electricity price: climate, fuel costs, and electricity generation by energy source. Taken as a whole, the results from our analysis do not support a conclusion that deregulation has led to lower electricity rates. * This paper was presented July 5, 2005 at the annual meeting of the Western Economic Association International at the session entitled “Power Market Restructuring: A Review” and September 20, 2005 at the annual North American Conference of the USAEE/IAEE at the session entitled “Electricity Market Structure, Conduct and Performance.”