Does Ownership Matter? Utility Structure and the Pass-Through of Energy Cost Shocks

• In Event: Electricity Markets, Pricing, and Utility Structure

Abstract

This paper introduces a novel city-level panel dataset of residential electricity prices in the United States, digitized from the Federal Power Commission and successor agencies' Typical Electric Bills (TEB) publication series covering 1959 to 1988. The dataset encompasses thousands of communities across all fifty states, Puerto Rico, and the District of Columbia, and links each community to a unique utility identifier, enabling the tracking of individual utilities and their customers across nearly three decades of American energy history. The panel captures bill amounts at multiple consumption tiers, allowing for the reconstruction of residential rate schedules over time, a level of granularity not available in existing historical datasets and a vast improvement on the currently-available State Energy Data System.

I exploit this panel to examine how utility ownership structure, defined as public versus investor-owned, shaped the pass-through of energy price shocks to residential customers. This question sits at the heart of longstanding debates in public utility economics. Proponents of public utility ownership argue that municipal and cooperative utilities insulate ratepayers from cost volatility by prioritizing affordability over returns to investors. Critics contend that investor-owned utilities, subject to more rigorous regulatory oversight by state public utility commissions, may in fact be more disciplined than public utilities in their rate-setting behavior. The historical record offers an opportunity to adjudicate between these views under conditions of unusually sharp and persistent cost pressure.

Using the 1973 oil embargo and the 1979 Iranian Revolution as quasi-experimental input cost shocks, I employ an event study design and geographic matching strategy that leverages plausibly exogenous variation in utilities' pre-existing dependence on oil-fired generation. Treatment intensity is constructed using plant-level generation data matched to utility service territories and geocoded to allow for geographic matching of cities served by public utilities with nearby cities served by private utilities. This design isolates the causal effect of cost exposure on residential prices while controlling for the many confounding factors that distinguish public and investor-owned utilities in cross-sectional comparisons.

Preliminary descriptive evidence suggests meaningful divergence in price trajectories between public and investor-owned utilities following both shocks, consistent with differences in regulatory incentives and cost recovery mechanisms. The findings have implications for ongoing policy debates about the role of ownership structure in utility regulation, infrastructure investment, and energy affordability. These debates have taken on renewed urgency as utilities across the country face mounting capital expenditure pressures from grid modernization, electrification, load growth, and the integration of renewable energy sources. Understanding how ownership structure shaped the distribution of cost burdens in a previous era of energy market disruption offers a useful historical lens for evaluating the likely consequences of these contemporary challenges.

Author

• Ryan Elliott Anthony, Georgia Institute of Technology
  Presenting Author