The Unsustainable Costs of Partial Deregulation

Abstract

Three decade ago, federal policymakers - Republicans and Democrats - embarked on a general strategy of deregulation in the electricity, gas delivery, and telecommunications industries. The strategy called for restructuring to separate production from the transmission and distribution, followed by elimination of price controls. The expected results were lower prices and increased quality, reliability, and scope of services.

This book shows that we now have only partial deregulation, a mixture of oligopoly structure with direct price control. It explores why this system leads to volatile and high prices, reduced investment, and low profitability, and what policy actions can be implemented to address these problems.

Keywords: Network Space, Lerner Index, Conjectural Variations, Bertrand Oligopoly, Basis Differential, Economic Value Added, EVA, Price Cap Regulation

JEL Classification: D43, K23, L13, L51, L94, L95, L96