The Impact of Regulatory Changes and Mergers on Electricity Prices, Electricity Workers' Wages, and Research and Developmen

The dissertation is composed of three chapters that focus on electricity industry in the U.S. The first chapter examines the impact of Incentive Regulation (IR) or Performance-Based Regulation (PBR) of electric distribution utilities on price differentials between customer classes. Consumers in the electricity industry and many other public utility industries alike are often divided into different groups, to which different tariffs are applied. Regulatory constraint could affect utilities' pricing incentives. Therefore, this chapter aims to empirically examine whether and how price differentials between customer classes have changed as a result of the adoption of PBR. This empirical study explores a balanced panel dataset comprised of 87 distribution utilities during 1994-2010. Three dependent variables are examined: Industrial Prices, Residential/Industrial Price Ratios and Commercial/Industrial Price Ratios. I start with a simple pooled ordinary lest squares (OLS) estimator, to which year dummies are added to control for the effects due to macro economic environment. Then, techniques from panel data econometrics are employed in order to deal with the heterogeneity in the micro units. Finally, I turn to instrumental variables estimation method to address potential endogeneity of regulatory regimes. The estimation results show that adoption of PBR by distribution utilities has no significant effects in reducing industrial prices, but has significantly positive effects on Residential/Industrial and Commercial/Industrial Price Ratios. The results of this chapter provide additional empirical reference on the impact of PBR.;The second chapter studies the impact of deregulation on labor earnings in the electricity industry in the United States. General agreement exists that deregulation in product market affects not only the product market itself but also the labor market, as stepped-up competition in the product market can easily place greater pressures on labor expenses. While extensive studies have been conducted to examine the impacts of deregulation on rates, efficiency, investment, etc., the impacts on labor market are relatively less known. Therefore, my goal in this study is to provide some empirical reference on the impact of product market deregulation on hourly wages in the background of electricity industry in the United States. The empirical analysis is based on earnings data from the Current Population Survey (CPS) during the period of 1990--2016. The empirical framework is an augmented human capital model. Triple-difference approach is adopted as the estimation method with employees in manufacturing industries as the control group. Three variables are used to measure the intensity of deregulation---Nonutility Generation Share (NGS), Participation into RTOs/ISOs (RTO) and Retail Choice Share (RCS). The model is fitted with full sample and three subgroups of the sample by occupation: Electric Power Plant Operators, Electric Line-workers, and Electrical Engineers. The results show that the impact varies with the stage of the regulatory reform. And the wage regressions find that the impact of each reform stage varies across occupations.;The third chapter investigates how mergers and acquisitions (M&As) affect research and development (R&D) investment by electric distribution utilities in the United States. R&D investment is required to accelerate grid modernization in order to meet the challenges faced by the electrical power industry today, such as sustainability and environmental protection. Recent decades have witnessed chronic underinvestment in sustaining and upgrading the transmission and distribution systems in the U.S. The same has been true for R&D investment. M&As between electric utilities will change their scales, financial capabilities, knowledge bases, etc., which in turn may affect their incentives and capabilities to invest in R&D. The research is a retrospective analysis aiming to examine whether and how M&As have affected R&D investment by electric distribution utilities. The empirical analysis is conducted based on an unbalanced panel dataset comprised of 125 utilities during the period of 1994--2013. Heckman-style two-step approach is employed to deal with the significant proportion of zero R&D investment. The results indicate that M&As have no significant impact on the decision of whether to undertake R&D investment or on the amount of R&D investment. The questions about synergies and changes in the efficiency of research are not addressed in this study. Further research is required to answer the question whether M&As have promoted innovation in this industry.