Distributional effects of energy costs: Does firm ownership structure matter?

This paper examines the effect of ownership structure on the distribution of household electricity costs and its implications for income inequality. We leverage detailed data on household electricity expenditure, income, and utility tariff structures to provide new insights into the merits of alternative ownership regimes in the U.S. electricity sector. We use ownership discontinuities between adjacent statistical areas to establish causal effects. We find strong evidence that electricity costs are more regressive under cooperative and public ownership, yielding undesirable distributional outcomes. Moreover, households within cooperative and publicly-owned utility jurisdictions devote a larger portion of their income to electricity compared to consumers within private firm jurisdictions. Our findings highlight that the ownership structure in the utility sector not only affects income distribution through electricity costs within a geographic area but also has implications for spatial income inequality, offering new insights into the role of supply-side factors. This study also presents suggestive evidence that high fixed fees and the extent to which firms segment economically diverse consumer groups differently are potential mechanisms driving the observed regressivity of electricity costs. • Ownership structure in the utility sector shapes the distributional effects of electricity costs. • Electricity costs are more regressive under cooperative and public ownership. • High fixed fees and limited segmentation of consumer groups may drive cost regressivity.