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Ownership, pricing, and productivity: the case of electric distribution cooperatives

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  • Heesun Jang

    (Korea Energy Economics Institute)

Abstract

This paper examines effects of Generation and Transmission (G&T) ownership on price–cost margin and productivity of electric distribution cooperatives. In the USA, electric cooperatives are organized as either G&T or distribution only. G&T is owned by a group of distribution cooperatives and provides wholesale power to its member distribution cooperatives usually under long-term full-requirement contracts. In this paper, I construct a model of cost minimization that allows us to recover price–cost margin and productivity estimates at the firm level. The model is estimated using a panel data of electric distribution cooperatives from 2006 to 2011, where a significant fraction of the firms have G&T ownership, while the rest of the firms do not have the ownership. The results show that cooperatives that are members of G&T have higher productivity by 6%. I also find that G&T ownership is associated with higher price–cost margin which is obtained from lower marginal cost of operation, although the effects are statistically insignificant depending on the specifications.

Suggested Citation

  • Heesun Jang, 2020. "Ownership, pricing, and productivity: the case of electric distribution cooperatives," Empirical Economics, Springer, vol. 59(2), pages 977-1001, August.
    • Handle: RePEc:spr:empeco:v:59:y:2020:i:2:d:10.1007_s00181-019-01658-9
    DOI: 10.1007/s00181-019-01658-9
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    Cited by:

    1. Jang, Heesun & Moon, Seongman & Kim, Jihyo, 2024. "Effects of time-of-use pricing for residential customers and wholesale market consequences in South Korea," Energy Economics, Elsevier, vol. 134(C).
    2. Gilcrease, Winston & DiCosmo, Valeria & Padovan, Dario, 2022. "Trends of rural electric cooperatives in the United States from 1990 to 2019: An empirical analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 166(C).

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