Three essays on utility regulation

To induce utilities in the gas distribution market to operate efficiently, US states have deployed consumer choice programs, price caps, and variations of sliding scale plans. My first essay studies the impact of these restructuring and deregulation efforts on consumer rates, using panel data from a custom survey of state commissions and the Department of Energy. I estimate the residential, small commercial and industrial price equations jointly, and use instrumental variables to control for the potentially endogenous demand and status of deregulation.; Consumer choice programs lower the prices by 2.2-20.1% compared to the rate of return regulation, benefiting industrial consumers the most and households the least. These effects appear even one to two years prior to the programs' implementation, and become stronger over time. Price caps lower all prices by 0.0-20.0%, with the same ranking. The impacts of sliding scale plans are close to zero, between -2.6% and +4.0%; The second paper evaluates health damages caused by air concentrations of SO2 under three alternative environmental policies leading to identical aggregate emissions: emission caps, a nationwide emission tax, and a system of tradable emission allowances such as the one currently used in the US. The numerical model of the industry finds generators' output, participation in energy trade and SO2 abatement effort under each policy. The resulting SO2 concentrations are used to derive the aggregate health damages using estimates in the medical literature.; SO2 concentrations vary across policies even when the aggregate emissions are the same. These variations translate into substantially different losses for any individual state, and, nationwide, to hundreds of millions of dollars of difference in aggregate damages. Emission caps are found to lead to the lowest damages, outperforming the currently used system of allowances by {dollar}452 million. A uniform emission tax leads to very similar damages as the system of tradable allowances, in agreement with the theory. These results are consistent with prior academic studies, that emission allowances and uniform taxes may lead to higher damages than regulatory instruments that control regional emissions more closely. In terms of SO2 concentrations and health impacts, emission caps are shown to favor the southern and southeastern states, where they deliver {dollar}840 million lower damages than the system of allowances or an emission tax, while they deliver {dollar}390 million higher damages in the northern and northeastern states.; In the third essay I compute health damages from SO2 under different assumptions on the relationship between the concentration levels and their marginal health impacts. I evaluate SO2 concentration profiles resulting under the three policies in the previous chapter. Using the ranges of marginal damage estimates in medical literature, emission caps are shown to lead to the lowest damages under all considered slopes, although their benefit over the system of tradable allowances falls as the slope of the marginal damage function increases. With the maximum slope consistent with current medical data, the savings in damages under the emission caps in the southern states fall to {dollar}670 million compared the system of allowances, while the excess in damages they cause in the north and the northeast rises to {dollar}600 million.