Journal of Regulatory Economics

, Volume 27, Issue 3, pp 281–308 | Cite as

Price-Cost Margins and Profit Rates in New Zealand Electricity Distribution Networks Since 1994: the Cost of Light Handed Regulation



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.


market power electricity industry deregulation utility regulation excess profits 


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Copyright information

© Springer Science+Business Media, Inc. 2005

Authors and Affiliations

  1. 1.School of Economics and FinanceVictoria University of WellingtonWellingtonNew Zealand

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