2017-12 Effect of utility deregulation and mergers on consumer welfare
In the late 1990s, many U.S. states deregulated electric utilities, allowing for competition among power generators. Deregulated states then adopted a retail choice program, allowing customers to choose their power provider. In addition, a significant merger wave among large utility companies ensued after deregulation. What was the impact of these changes on consumer welfare? While this issue has been widely studied, the results remain ambiguous. This study examines the effects of these events, by analyzing electricity price and output changes among deregulated and regulated states from 2001 through 2014. The study finds that deregulation may have had a positive effect when states adopted certain measures, such as retail choice or fuel changes, that enhanced competition and lowered costs.