American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Reply
American Economic Review
vol. 111,
no. 4, April 2021
(pp. 1373–81)
See also: Original paper by Cicala (2015)
See also: Comment by Han, Houde, van Benthem, and Abito (2021)
See also: Comment by Han, Houde, van Benthem, and Abito (2021)
Abstract
The average effect of deregulatory policies on fuel prices at coal-fired power plants is strongly influenced by plants that were initially paying the highest prices for fuel. Primary sources document that these plants were locked into long-term, high-cost fuel contracts, and only secured market rates post-deregulation. While these plants' fuel costs were unusual, their response to deregulation was not: both coal- and gas-fired plants reduce fuel prices one-for-one with the amount they were initially paying above their neighbors' costs. Our understanding of deregulation is not improved by excluding those who stand to benefit most.Citation
Cicala, Steve. 2021. "When Does Regulation Distort Costs? Lessons from Fuel Procurement in US Electricity Generation: Reply." American Economic Review 111 (4): 1373–81. DOI: 10.1257/aer.20201872Additional Materials
JEL Classification
- L51 Economics of Regulation
- L71 Mining, Extraction, and Refining: Hydrocarbon Fuels
- L94 Electric Utilities
- L98 Industry Studies: Utilities and Transportation: Government Policy
- Q35 Hydrocarbon Resources
- Q41 Energy: Demand and Supply; Prices
- Q48 Energy: Government Policy