Abstract
From 1994 to 2003, New Zealand’s corporatized electricity lines networks operated with no industry regulator, but under the spotlight of mandatory information disclosure. As a result there exists a large body of detailed, audited and publicly available accounting data on the financial performance of these businesses. Using that data, this paper finds that price-cost margins have widened substantially since deregulation. We estimate the extent to which ‘‘light-handed regulation’’ has allowed profits to exceed the levels which would have been acceptable under the old rate-of-return regulatory framework, and find that the answer is about $200 million per year, on an ongoing basis.
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We thank colleagues at Victoria University, and two anonymous referees for this journal, for constructive comments on this paper. Any remaining errors are entirely our responsibility.
JEL classification: D21; K23; L11; L43; L51
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Bertram, G., Twaddle, D. Price-Cost Margins and Profit Rates in New Zealand Electricity Distribution Networks Since 1994: the Cost of Light Handed Regulation. J Regul Econ 27, 281–308 (2005). https://doi.org/10.1007/s11149-005-6625-4
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DOI: https://doi.org/10.1007/s11149-005-6625-4