Regulating Power: The Economics of Electricity in the Information Age. Carl Pechman.

Regulating Power: The Economics of Electricity in the Information Age. Carl Pechman. BOOK REVIEWS 375 between production and distribution. Thus, Dr. Kwoka’s finding that considerable vertical economies exist in the industry is significant. As noted, however, there appears to be a bias in his estimate. But beyond that, de-integration of the industry does not necessarily mean that vertical economies will be lost. The author notes ways to preserve these economies through the use of independent system operators or power pools. Dr. Kwoka’s other chief finding, that publicly-owned distribution systems tend to be especially efficient, prompts interesting policy questions. Logically, the con- clusion is that the optimal system performance may be best achieved through a public takeover of distribution. This may not be politically feasible in many sit- uations. However, the success of publicly-owned systems apparently lies in the ability of the regulators to monitor closely managerial operations, thus providing the regulator with good information on the system’s operating cost and investment requirements. If public takeovers are not desirable for political reasons, a second- best policy would be to reduce the size of distribution systems, making the flow of managerial information easier for regulators to handle and regulation more effec- tive. This has important implications for merger policy since the consolidation now http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Regulating Power: The Economics of Electricity in the Information Age. Carl Pechman.

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Publisher
Springer Journals
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007708411461
Publisher site
See Article on Publisher Site

Abstract

BOOK REVIEWS 375 between production and distribution. Thus, Dr. Kwoka’s finding that considerable vertical economies exist in the industry is significant. As noted, however, there appears to be a bias in his estimate. But beyond that, de-integration of the industry does not necessarily mean that vertical economies will be lost. The author notes ways to preserve these economies through the use of independent system operators or power pools. Dr. Kwoka’s other chief finding, that publicly-owned distribution systems tend to be especially efficient, prompts interesting policy questions. Logically, the con- clusion is that the optimal system performance may be best achieved through a public takeover of distribution. This may not be politically feasible in many sit- uations. However, the success of publicly-owned systems apparently lies in the ability of the regulators to monitor closely managerial operations, thus providing the regulator with good information on the system’s operating cost and investment requirements. If public takeovers are not desirable for political reasons, a second- best policy would be to reduce the size of distribution systems, making the flow of managerial information easier for regulators to handle and regulation more effec- tive. This has important implications for merger policy since the consolidation now

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 6, 2004

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