The production inefficiency of US electricity industry in the face of restructuring and emission reduction

Tóm tắt

Purpose
The paper investigates the production inefficiency of the US electricity industry in the wake of restructuring and emission reduction regulations.

Design/methodology/approach
The study estimates a multiple-input, multiple-output directional distance function, using six inputs: fuel, labor, capital and annualized capital costs of sulfur dioxide (SO 2) , nitrogen oxides (NO X ) and particulate removal devices, two good outputs – residential and industrial-commercial electricity and three bad outputs – SO 2 , carbon dioxide (CO 2 ) and NO X emissions.

Findings
The authors find that restructuring in electricity markets improves deregulated utilities' technical efficiency (TE). Deregulated utilities with below-average NO X control equipment tend to invest less in these devices, but above-average utilities do the opposite. The reverse applies to particulate removal devices. The whole sample spends more on NO X , particulate and SO 2 control systems and reduces its electricity sales slightly. Increased investments in SO 2 and NO X control equipment do not reduce SO 2 and NO X emissions, but expansions of particulate control systems cut down SO 2 emissions greatly. Stricter environmental regulations have probably shifted the production frontier inwards and the utilities farther from the frontier over time.

Practical implications
Restructuring and environmental regulations do not make all utilities invest more in emission control systems. The US government should devise other schemes to achieve this goal.

Originality/value
The paper unveils heterogeneous reactions of US electric utilities in the wake of restructuring and emission regulations.