Capacity and economies of scale in electric power transmission

Historically, most analyses of electric utility cost structures have focused almost exclusively on the generation sector of the industry. Electric restructuring raises a number of new questions which require analysis of electric utility operations in other sectors of the industry. Most restructuring...

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Bibliographic Details
Published in:Utilities policy 1998-11, Vol.7 (3), p.155-162
Main Authors: Dismukes, David E., Cope, Robert F., Mesyanzhinov, Dmitry
Format: Article
Language:English
Subjects:
Economies of scale
Electric utilities
Energy industry
Energy market
Regulation
Restructuring
Utilities
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Summary:Historically, most analyses of electric utility cost structures have focused almost exclusively on the generation sector of the industry. Electric restructuring raises a number of new questions which require analysis of electric utility operations in other sectors of the industry. Most restructuring proposals call for continued regulation of the transmission sector of the industry based upon the presumption that it is a natural monopoly. The presumption, however, is based upon little empirical evidence. We present a modified translog cost model which examines whether economies of scale genuinely exist in the provision of electric transmission service. We find strong economies over all relevant ranges of capacity and across all regions of the USA. The result is timely since it supports existing restructuring policies calling for continued regulation of the transmission portion of the industry.
ISSN:0957-1787
1878-4356
DOI:10.1016/S0957-1787(98)00010-1