Vertical Integration and the Restructuring of the U.S. Electricity Industry
Cato Institute Policy Analysis Series
32 Pages Posted: 2 Apr 2007
Debates on restructuring the U.S. electricity industry are often about the degree to which market relationships should replace transactions that formerly took place within regulated, vertically integrated utilities. Markets for the purchase of energy by vertically unintegrated distribution utilities are clearly feasible, but - as suggested by a large body of academic literature - vertical integration provides operational and reliability benefits that are important in light of the unique characteristics of electricity. A proper comparison of these two market designs raises public welfare concerns about the current political push for independent generation and integrated transmission and distribution.
Keywords: Cato, Robert J. Michaels, PA 572, electricity, electricity industry, vertical integration, restructuring, United States electricity industry, market designs, political agenda, electricity transmission and distribution, regulated utilities, vertically integrated utilities markets, comparison
JEL Classification: Q48, Q49, Q43, Q40
Suggested Citation: Suggested Citation