Benefits Of Restructuring The Electric Industry In The Us

Michael Giberson

Has Restructuring Improved Operating Efficiency at US Electricity Generating Plants?, a working paper by Kira Markiewicz, Nancy Rose, and Catherine Wolfram posted by the University of California Energy Institute, answers the title’s question in the affirmative:

This research provides some of the first estimates of the impact of electricity generation sector restructuring in the United States on plant-level efficiency. The results suggest restructuring may yield substantive medium-run efficiency gains. The estimates suggests that IOU (investor-owned utility) plants in restructuring regimes reduced their labor and nonfuel operating expenses by about 5% in anticipation of increased competition in electricity generation, relative to IOU plants in states that did not restructure their markets. The estimated efficiency gains are even larger when compared to a benchmark based on municipal, federal, and cooperative plants, on the order of 5% reductions in labor use and 20% reductions in nonfuel operating expenses relative to non-IOU plants over the same time period.

The authors indicate that their results are only suggestive of the possible overall improvements in industry operating efficiency, capturing just the efficiency gains of a large number of existing generating plants, and not including longer-run efficiency gains possible from investment in new plants.