Research

Technological innovations that enable cleaner and more efficient energy sources can generate substantial economic gains, but market structures and regulatory systems often create incentives for incumbents to delay adoption. 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 its path and regulatory changes introduced by the 1938 Natural Gas Act to investigate incumbent utility firms' decision 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 federal regulation. While distance to the natural gas pipeline was an important factor in determining which municipalities received natural gas service first, close proximity to the pipeline was not enough to overcome incumbent resistance. 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 creating price consistency that eased transitions by narrowing the gap between regulated retail prices and previously unregulated pipeline wholesale prices, 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 municipal regulators 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 and greater pricing flexibility under state regulation through the adoption of block pricing schemes.