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This paper analyses the performance impact of the merger wave which took place in the US electricity industry during the period 1994-2003. It does so by analyzing the impact on operating and total cost in electricity distribution. While there are past studies of efficiency and productivity effects, as well as of prices, profits, and other outcomes, this study differs in several ways. First, the database consists of many merging and non-merging firms, rather than only a few on which to base inferences. Second, all of these mergers arise in a single industry, greatly facilitating controlled comparison. Third, we have data on the several years of pre-merger and post-merger efficiency of the specific merging units, unlike virtually all past studies. Finally, we employ a powerful nonparametric technique-data envelopment analysis-to measure the efficiency of each operating unit. The results indicate that electricity mergers are not consistent with improved cost performance.

This paper analyzes the gain in pricing power that a firm achieves by merging with a potential competitor in its market. Using pricing data for the merger of USAir and Piedmont, empirical analysis finds that prices rose by 5.0 to 6.0 per cent on routes that one carrier served and the other was a potential entrant. This was more than half the increase on routes where the two carriers had been direct competitors. Other important factors included carrier size, market concentration, incumbent's identity and the potential entrant's presence at one or both endpoints.

The restructuring of the U.S. electric power industry has been described as "one of the largest single industrial reorganizations in the history of the world." As with deregulation and reform of other industries, electricity restructuring was intended to produce cost efficiencies and price benefits to consumers. Whether it has achieved its stated objective is the focus of a number of recent studies that are examined in this review. The studies differ in numerous important ways -most importantly, in their methodologies and their conclusions. The focus of this review is on the strengths and limitations of their specific methodologies and, hence, on the confidence one might place in their conclusions. The article begins by setting out the basic methodological approaches employed in public policy evaluation. It then illustrates these points with examples from methodologies employed in several studies of electricity restructuring, concluding that several methodological deficiencies call into question the study results. In particular, despite much advocacy, there is little reliable and convincing evidence that consumers are better off as a result of the restructuring of the U.S. electric power industry.