IDEAS home Printed from https://ideas.repec.org/p/enp/wpaper/eprg0708.html
   My bibliography  Save this paper

Industry Restructuring, Mergers and Efficiency: Evidence from Electric Power

Author

Listed:
  • John Kwoka

    (Northeastern University)

  • Michael Pollitt

    (University of Cambridge)

Abstract

This paper analyses the performance impact of the merger wave which took place in the US electricity industry during the period 1994-2003. It does so by analyzing the impact on operating and total cost in electricity distribution. While there are past studies of efficiency and productivity effects, as well as of prices, profits, and other outcomes, this study differs in several ways. First, the database consists of many merging and non-merging firms, rather than only a few on which to base inferences. Second, all of these mergers arise in a single industry, greatly facilitating controlled comparison. Third, we have data on the several years of pre-merger and post-merger efficiency of the specific merging units, unlike virtually all past studies. And finally, we employ a powerful nonparametric technique - data envelopment analysis - to measure the efficiency of each operating unit. The results indicate that electricity mergers are not consistent with improved cost performance.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • John Kwoka & Michael Pollitt, 2007. "Industry Restructuring, Mergers and Efficiency: Evidence from Electric Power," Working Papers EPRG 0708, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg0708
    as

    Download full text from publisher

    File URL: https://www.jbs.cam.ac.uk/wp-content/uploads/2023/12/eprg-wp0708.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul L. Joskow, 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Working Papers 0308, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    2. Berry, S Keith, 2000. "Excess Returns in Electric Utility Mergers during Transition to Competition," Journal of Regulatory Economics, Springer, vol. 18(2), pages 175-188, September.
    3. Kira R. Fabrizio & Nancy L. Rose & Catherine D. Wolfram, 2007. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on US Electric Generation Efficiency," American Economic Review, American Economic Association, vol. 97(4), pages 1250-1277, September.
    4. Nancy L. Rose & Kira Markiewicz & Catherine Wolfram, 2004. "Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency," Working Papers 0418, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    5. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
    6. repec:reg:rpubli:207 is not listed on IDEAS
    7. Jamasb, Tooraj & Pollitt, Michael, 2003. "International benchmarking and regulation: an application to European electricity distribution utilities," Energy Policy, Elsevier, vol. 31(15), pages 1609-1622, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
    2. John Kwoka, 2008. "Restructuring the U.S. Electric Power Sector: A Review of Recent Studies," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(3), pages 165-196, May.
    3. Tovar, Beatriz & Javier Ramos-Real, Francisco & de Almeida, Edmar Fagundes, 2011. "Firm size and productivity. Evidence from the electricity distribution industry in Brazil," Energy Policy, Elsevier, vol. 39(2), pages 826-833, February.
    4. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    5. Slabá, Monika & Gapko, Petr & Klimešová, Andrea, 2013. "Main drivers of natural gas prices in the Czech Republic after the market liberalisation," Energy Policy, Elsevier, vol. 52(C), pages 199-212.
    6. Pollitt, Michael, 2008. "The arguments for and against ownership unbundling of energy transmission networks," Energy Policy, Elsevier, vol. 36(2), pages 704-713, February.
    7. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
    8. Gaunt, C.T., 2008. "Electricity distribution industry restructuring in South Africa: A case study," Energy Policy, Elsevier, vol. 36(9), pages 3448-3459, September.
    9. Growitsch, Christian & Müller, Gernot & Stronzik, Marcus, 2008. "Ownership Unbundling in der Gaswirtschaft: Theoretische Grundlagen und empirische Evidenz," WIK Discussion Papers 308, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kwoka, John & Pollitt, Michael, 2010. "Do mergers improve efficiency? Evidence from restructuring the US electric power sector," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 645-656, November.
    2. John Kwoka & Michael Pollitt & Sanem Sergici, 2010. "Divestiture policy and operating efficiency in U.S. electric power distribution," Journal of Regulatory Economics, Springer, vol. 38(1), pages 86-109, August.
    3. Machiel Mulder & Victoria Shestalova & Mark Lijesen, 2005. "Vertical separation of the energy-distribution industry; an assessment of several options for unbundling," CPB Document 84, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Mota, R.L., 2004. "‘Comparing Brazil and USA electricity performance; what was the impact of privatisation?’," Cambridge Working Papers in Economics 0423, Faculty of Economics, University of Cambridge.
    5. Machiel Mulder & Victoria Shestalova & Mark Lijesen, 2005. "Vertical separation of the energy-distribution industry; an assessment of several options for unbundling," CPB Document 84.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Stefan Seifert & Astrid Cullmann & Christian von Hirschhausen, 2014. "Technical Efficiency and CO2 Reduction Potentials: An Analysis of the German Electricity Generating Sector," Discussion Papers of DIW Berlin 1426, DIW Berlin, German Institute for Economic Research.
    7. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2007. "Benchmarking and Regulation in the Electricity Distribution Sector," CEPE Working paper series 07-54, CEPE Center for Energy Policy and Economics, ETH Zurich.
    8. Tooraj Jamasb & Michael Pollitt, 2005. "Deregulation and R&D in network industries: the case of the electricity industry," Working Papers EPRG 0502, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    9. Saplacan, Roxana, 2008. "Competition in electricity distribution," Utilities Policy, Elsevier, vol. 16(4), pages 231-237, December.
    10. D. Giannakis & T. Jamasb & M. Pollitt, 2003. "Benchmarking and Incentive Regulation of Quality of Service: an Application to the UK Electricity Distribution Utilities," Working Papers EP35, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    11. Supawat Rungsuriyawiboon & Spiro Stefanou, 2008. "The dynamics of efficiency and productivity growth in U.S. electric utilities," Journal of Productivity Analysis, Springer, vol. 30(3), pages 177-190, December.
    12. Liu, C.H. & Lin, Sue J. & Lewis, Charles, 2010. "Evaluation of thermal power plant operational performance in Taiwan by data envelopment analysis," Energy Policy, Elsevier, vol. 38(2), pages 1049-1058, February.
    13. Tovar, Beatriz & Javier Ramos-Real, Francisco & de Almeida, Edmar Fagundes, 2011. "Firm size and productivity. Evidence from the electricity distribution industry in Brazil," Energy Policy, Elsevier, vol. 39(2), pages 826-833, February.
    14. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    15. Astrid Cullmann & Christian Hirschhausen, 2008. "Efficiency analysis of East European electricity distribution in transition: legacy of the past?," Journal of Productivity Analysis, Springer, vol. 29(2), pages 155-167, April.
    16. Cullmann, Astrid & Nieswand, Maria, 2016. "Regulation and investment incentives in electricity distribution: An empirical assessment," Energy Economics, Elsevier, vol. 57(C), pages 192-203.
    17. Ajayi, Victor & Anaya, Karim & Pollitt, Michael, 2022. "Incentive regulation, productivity growth and environmental effects: the case of electricity networks in Great Britain," Energy Economics, Elsevier, vol. 115(C).
    18. Mehdi Farsi & Massimo Filippini, 2005. "A Benchmarking Analysis of Electricity Distribution Utilities in Switzerland," CEPE Working paper series 05-43, CEPE Center for Energy Policy and Economics, ETH Zurich.
    19. Angel Arcos-Vargas & Fernando Núñez & Juan Antonio Ballesteros, 2017. "Quality, remuneration and regulatory framework: some evidence on the European electricity distribution," Journal of Regulatory Economics, Springer, vol. 51(1), pages 98-118, February.
    20. Guerriero, Carmine, 2013. "The political economy of incentive regulation: Theory and evidence from US states," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 91-107.

    More about this item

    Keywords

    mergers; efficiency analysis; electricity distribution; data envelopment analysis;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:enp:wpaper:eprg0708. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ruth Newman (email available below). General contact details of provider: https://edirc.repec.org/data/jicamuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.