Electricity market reforms have pursued two goals, both aimed at increasing economic efficiency. The first is to ensure that suppliers minimize costs. The second is to make prices more reflective of marginal costs. We use data from Texas to examine whether post-reform retail prices have better reflected wholesale prices, and whether reform has reduced retailer costs. We find clear evidence of both outcomes in competitive market areas but not in non-competitive areas supplied by municipally-owned utilities or co-operatives.
Read the full article in Energy Economics.