EFFICIENCY AND PRICES OF REGULATION‐EXEMPT CONSUMER‐OWNED NATURAL MONOPOLIES: A FIRST LOOK AT ELECTRICITY DISTRIBUTORS IN NEW ZEALAND
Following the New Zealand Electricity Industry Reform Act in 1998 integrated electricity distribution and retail companies were forced to unbundle at ownership level, creating line companies and retailers. Electricity line companies that meet the ‘consumer‐owned’ criteria as set out in the Commerce Act are exempt from price‐quality regulation as of 2009. In this study, we examine the effects on variable costs and unit prices of the exemption by comparing exempt line companies and line companies that fall under the price‐quality regulation. The findings suggest that exempt line companies did not charge higher prices than non‐exempt line companies, and that they experienced a larger decline in their variable costs compared to non‐exempt line companies, following the exemption.
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Document Type: Research Article
Publication date: December 1, 2013