Date of Award

2017

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Graduate Group

Applied Economics

First Advisor

Jean-Francois Houde

Abstract

This dissertation consists of two essays on the U.S. electricity sector.

The first essay studies the impact of electricity market deregulation on a firm's fuel procurement costs. I find that deregulated coal-fired power plants achieve about 6% cost reduction, half of what literature has claimed. Furthermore, when the Acid Rain Program, environmental regulation on sulfur dioxide, induces deregulated plants to disproportionately switch to cleaner and cheaper sub-bituminous coal, it is challenging to identify what cost reductions would have been absent the environmental regulation. I estimate 3\% as the lower bound effect of deregulation. Despite the small effect on average, plants exhibit heterogenous reponses to deregulation. When plants procure coal via bilateral contracts, an amount of cost reductions a plant can attain depends on its incentive and ability to negotiate. I find that deregulated plants with unfavorable contracts and bigger production capacity achieve substantial cost reductions; 18% and 9%, respectively.

The second essay studies the impact of power company mergers on fuel sourcing decisions. Specifically, I study whether coal-fired power plants consolidate their supplier base upon a merger. I find that a pair of two merging plants becomes 23% more likely to source from common suppliers. Plant pairs also increase their dependence on the common suppliers. I find that a fraction of total coal delivery from the common suppliers increases by 47% upon a merger.

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