Abstract
This paper examines effects of Generation and Transmission (G&T) ownership on price–cost margin and productivity of electric distribution cooperatives. In the USA, electric cooperatives are organized as either G&T or distribution only. G&T is owned by a group of distribution cooperatives and provides wholesale power to its member distribution cooperatives usually under long-term full-requirement contracts. In this paper, I construct a model of cost minimization that allows us to recover price–cost margin and productivity estimates at the firm level. The model is estimated using a panel data of electric distribution cooperatives from 2006 to 2011, where a significant fraction of the firms have G&T ownership, while the rest of the firms do not have the ownership. The results show that cooperatives that are members of G&T have higher productivity by 6%. I also find that G&T ownership is associated with higher price–cost margin which is obtained from lower marginal cost of operation, although the effects are statistically insignificant depending on the specifications.
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