When Does Regulation Distort Costs? Lessons from Fuel Procurement in U.S. Electricity Generation

Steve Cicala

NBER Working Paper No. 20109
Issued in May 2014
NBER Program(s):   EEE   IO   POL

This paper evaluates changes in fuel procurement practices by coal- and gas-fired power plants in the United States following state-level legislation that ended cost-of-service regulation of electricity generation. I find that deregulated plants substantially reduce the price paid for coal (but not gas), and tend to employ less capital-intensive sulfur abatement techniques relative to matched plants that were not subject to any regulatory change. Deregulation also led to a shift toward more productive coal mines. I show how these results lend support to theories of asymmetric information, capital bias, and regulatory capture as important sources of regulatory distortion.

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Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20109

Published: Steve Cicala, 2015. "When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation," American Economic Review, American Economic Association, vol. 105(1), pages 411-44, January. citation courtesy of

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