The Politics of Government Pricing: Political Influences on Rate Structures of Publicly‐owned Electric Utilities

. Although theoretical analysis of publicly‐owned enterprises is rapidly evolving into a well established body of literature, parallel empirical work is scarce. A major cause of this imbalance is the difficulty of quantifying theoretically important concepts such as political influence or political power. The purpose of this paper is to narrow the gap in the literature by statistically testing the role of political forces in determining the price structure in the case of publicly‐owned electric utilities (POEUs). The price differential between residential and commercial users is examined. Variables reflecting the relative political influence of the customer groups are discussed and their strength as determinants of the rate structure is tested. The findings are consistent with theoretical expectations; the higher the gain from favoring one group relative to the other, the greater the variance in price between groups.