Research

This paper examines how incumbent firms' adoption of new energy technologies is shaped by the regulatory environment, focusing on the transition from manufactured to natural gas in the United States during the first half of the twentieth century. Using detailed, newly digitized panel data on municipality-level gas utility services, I exploit variation in pipeline proximity for municipalities along the pipeline's path and regulatory changes introduced by the Natural Gas Act of 1938 to investigate incumbent utility firms' decisions to switch from manufactured to natural gas. I find that incumbent firms delayed adopting natural gas during the initial unregulated period but accelerated adoption after the implementation of federal regulation. When considering the factors that predict early adoption by incumbents, ownership by a holding company is associated with switching before federal regulation, while higher switching costs are associated with switching after regulation. These results are consistent with federal regulation helping reduce the gap between regulated retail prices charged by gas utilities and previously unregulated wholesale pipeline prices, allowing incumbents to recoup switching costs, illustrating that coordination through regulation or holding company ownership can reduce uncertainty and expedite technological transitions.

In this paper, I re-evaluate the effects of the initial adoption of state regulation of public utilities, focusing on the gas utility market. While prior research has focused on prices, I consider the effects on both prices and product quality. I also implement a new empirical approach to better account for potential biases arising from differences in local economic conditions. Using novel digitized data, I find evidence that early state regulation may have allowed gas utilities to increase their monopoly power not by raising prices relative to those under municipal regulation but by allowing lower-quality gas. However, I also find that state regulators permitted smaller price increases in response to the input price shock caused by World War I, suggesting that regulatory constraints on firms changed over time. Additionally, I find evidence of increased regulatory frictions resulting from the move to non-local oversight. State regulation also introduced greater pricing flexibility through the adoption of block pricing schemes.