Ownership Form and Rate Structure: An Examination of Cooperative and Municipal Electric Distribution Utilities

An examination is made of the rate-setting behavior of a set of publicly owned (presumably not-for-profit) municipal utilities and a set of privately owned (presumably not-for-profit) cooperative utilities. To investigate for ownership effects, a system of demand, price, and cost equations is estima...

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Bibliographic Details
Published in:Southern economic journal 1994-10, Vol.61 (2), p.519-529
Main Authors: Hollas, Daniel R., Stansell, Stanley R., Claggett, E. Tylor
Format: Article
Language:English
Subjects:
Average cost
Coefficients
Comparative studies
Cooperatives
Customers
Distribution
Economic aspects
Economic theory
Economics
Electric power
Electric rates
Electric utilities
Electrical industries
Electricity
Energy
Management
Municipal government
Owners
Ownership
Prices
Prices and rates
Pricing policies
Profits
Property rights
Rural electric cooperatives
Statistical significance
Utility rates
Wholesale trade
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Summary:An examination is made of the rate-setting behavior of a set of publicly owned (presumably not-for-profit) municipal utilities and a set of privately owned (presumably not-for-profit) cooperative utilities. To investigate for ownership effects, a system of demand, price, and cost equations is estimated for a sample of Tennessee Valley Authority (TVA) electric distributors. Empirical tests support the argument that municipal ownership reduces residential and commercial rates. Furthermore, in a comparison of municipals to cooperatives, it is found that municipals practice non-economic based price discrimination by favoring residential and commercial customers relative to industrial customers. Private ownership, typified by cooperatives, introduces incentives to charge somewhat higher prices to residential and commercial customers, and lower prices to industrial customers. Although the magnitude of the price differences between municipal and cooperative TVA distributors is not particularly large, the overall results suggest that there is an ownership form effect.
ISSN:0038-4038
2325-8012
DOI:10.2307/1059997