Technological Change Bias In The U.S. Investor-Owned Electric Utility Industry Following Potential Deregulation

Abstract

This paper estimates regulated and poientially deregulated costs of production for a multiproduct electric utility industry. The empirical evidence suggests technological regression with respect to costs in both regulated and deregulated environments. Analysis of factor cost shares indicates that technological change in a deregulated environment is expected to be less apital saving than technological change in the regulated environment. In addition, this study finds that overall diseconomies of scale may be nduced over time and to a greater extentunder deregulation than under regulation. Also, cost complementarities may be enhancedover time, but to a lesser extent under deregulation. Hence. tendencies toward natural monop oly may be increased or decreased by deregulation, and advancing deregulation may or may not be an appropriate policy.

Keywords:

• Technological Change
• Deregulation
• Electric Utilities

^∗Thomas Armstrong is the Policy Dirctor. He can be reached at (717) 783–3682.

^†Michael Goetz is an Associate Professor. He can be reached at (215) 204–1762.

^∗Thomas Armstrong is the Policy Dirctor. He can be reached at (717) 783–3682.

^†Michael Goetz is an Associate Professor. He can be reached at (215) 204–1762.

Notes

^∗Thomas Armstrong is the Policy Dirctor. He can be reached at (717) 783–3682.

^†Michael Goetz is an Associate Professor. He can be reached at (215) 204–1762.