RECOMMENDED TEXTS:

 

Robert W. Crandall, Competition and Chaos: U.S. Telecommunications Since the 1996 Telecom Act, Washington, DC: Brookings, 2005.

 

Timothy J. Brennan, Karen L. Palmer, and Salvador A. Martinez, Alternating Currents: Electricity Markets and Public Policy, Washington, DC: Resources for the Future, 2002.

 

Paul W. MacAvoy, The Natural Gas Market: Sixty Years of Regulation and Deregulation, New Haven, CT: Yale University Press, 2000.

 

Papers referenced in the syllabus will be on e-reserve at Milner in the library.

 

COURSE OBJECTIVES:

 

This course is designed to be the “capstone” course for the M.A. program in Industries Studies sequence.  The student will use the theoretical and analytical tools from other courses to make sound economic judgements regarding public policy and managerial decision-making. 

 

There are two primary goals of this course.  First, the student is to have a comprehensive understanding of the electricity, natural gas, and telecommunications industries including their history, regulation, and current issues.  Second, the course is designed to simulate “real world” situations that the student may face in the workplace.  This will include: writing and presenting testimony as an expert witness; writing and presenting a paper to professional colleagues; writing and presenting a report to the vice president of a corporation; evaluating and reporting on others’ work.

 

Since most, if not all, of the students in this course will have done an internship in a particular industry, there will be some bias on the students' part towards one particular industry.  The course will try to show the similarities between the economic problems facing each of the industries while recognizing their differences.  The student should grow to appreciate the complexities of problems faced by all of the industries.

 

We will try to have a guest speaker representing each of the three industries to provide a current, state-of-the-art perspective on their respective industries.  You are expected to take notes and ask questions of the speakers.  Material covered by the speakers will be on the exams.

 

COURSE REQUIREMENTS

 

There will be two midterm exams and a final.  Homework assignments will be given throughout the semester.  Class attendance and participation is essential to learning in this course.  Details on the research project will be given separately. 

 

The final grade will be based on the following point scheme:

 

Midterm #1                 100 points

Midterm #2                 100 points

Homework                  200 points

Final                            100 points

 

 

This weighting scheme emphasizes the out-of-class assignments because of their practical nature and the amount of student effort that is involved.  The exams, which will roughly correspond to each industry, are given to demonstrate a level of competency in each of the different industries.

COURSE OUTLINE

HISTORICAL AND REGULATORY BACKGROUND OF TELECOMMUNICATIONS

I.          Industry Overview

Crandall, Chapter 1 & 2
Loomis, David G., “The Telecommunications Industry” in Hossein Bidgoli (ed.) The Handbook of Computer Networks, Volume 1, Hoboken, NJ: John Wiley & Sons, 2008.
Sappington & Weisman, Chapter 2, “Today’s Telecommunications Industry,” Designing Incentive Regulation for the Telecommunications Industry, Washington, DC: AEI Press, 1996.
Bluhm, Peter, “Fundamentals of Telecommunications Regulation: Markets, Jurisdiction and Challenges” NRRI Discussion Paper 08-05, May 7, 2008.

II.        Traditional Regulation

Vogelsang & Mitchell, Telecommunications Competition: The Last Ten Miles, Chapter 4 & 5

TELECOMMUNICATIONS ACT OF 1996

III.       Local Competition

Crandall, Chapter 3-5
Kwerel, Evan, et. Al., “Economic Analysis at the Federal Communications Commission,” Review of Industrial Organization, Vol. 25, No. 4, December 2004, pp. 395-430.
Mueller, Milton, Universal Service, Cambridge: MIT Press, 1997, Chapter 2 “Universal Service: A Concept in Search of a History” & Chapter 14 “Universal Service in the 1990s”
Mueller, Milton, & Jorge Reia Schement, "Six Myths of Telephone Penetration," Report for Bell Atlantic.

IV.       Wireless/Auction Theory

            Crandall, Chapter 7
Klemperer, Paul, “Why Every Economist Should Learn Some Auction Theory,” Chapter 2 in Auctions: Theory and Practice by Paul Klemperer, Princeton University Press, 2004.
Auction of 700 MHz Band Licenses Scheduled for January 16, 2008, FCC Report DA 07-3415, August 17, 2007.

V.        Broadband & International

            Crandall, Chapter 8-10
Rosenberg, Ed, “Assessing Wireless and Broadband Substitution in Local Telephone Markets,” NRRI Discussion Paper, 07-06, June, 2007.

EXAM #1

 

HISTORICAL AND REGULATORY BACKGROUND OF THE ELECTRIC INDUSTRY

I.          Industry Overview

Brennan, Chapter 1-5

II.        Prices and Costs

Crew, Michael A. and Paul R. Kleindorfer, “Electricity,” The Economics of Public Utility Regulation, Chapter 8.
Dalia Patiño-Echeverri *, Benoit Morel, Jay Apt, And Chao Chen, “Should a coal-fired power plant be replaced or retrofitted?” Carnegie Mellon Electricity Industry Center Working Paper CEIC-07-06.

III.       Implementing Competition

Brennan, Chapter 6-11
Borenstein, Severin, “The Trouble With Electricity Markets: Understanding California’s Restructuring Disaster,” Journal of Economic Perspectives, Vol 16 No. 1, Winter 2002, pp. 191-211.
Lester Lave, Jay Apt, and Seth Blumsack, “Deregulation/Restructuring, Where Should We Go from Here?” Carnegie Mellon Electricity Industry Center Working Paper CEIC-07-07.

IV.       Implications of Competition

Brennan, Chapter 12-17
Brennan, Timothy, “Market Failures in Real-Time Metering,” Journal of Regulatory Economics, Vol. 26 No. 2, September 2004, pp. 119-139.
Loxley, Colin, and David Salant, “Default Service Auctions, Journal of Regulatory Economics, Vol. 26 No. 2, September 2004, pp. 201-229.
Joskow, Paul, “Markets For Power In The United States: An Interim Assessment” Center for Energy and Environmental Policy Research, 05-012, August 2005.
Potter, Scott, “After the Freeze: Issues Facing Some State Regulators As Electric Restructuring Transition Periods End,” NRRI Discussion Paper 03-18, 2003.

ILLINOIS ELECTRICITY DEREGULATION/RESTRUCTURING LAWS

V.        Analysis of Illinois Restructuring

HB 362 (Online)
ICC Report on Deregulation Bill (SB 55) (Online)
Illinois Power Agency Act (SB1592) (Online)
Silverstein, Ken, “Rate Cases Cause Ruckus,” EnergyBiz Insider, August 3, 2007.
Carlson, J. Lon and David G. Loomis, “An Assessment of the Impact of Deregulation on the Relative Price of Electricity in Illinois,” Electricity Journal, forthcoming.

 

VI.       Transmission/Locational Marginal Pricing (LMP)

McGarvey, Joe, “Transmission Investment” Commissioner Primer – NRRI Paper 06-104, July 2006.
ERCOT, Calculation of Market Clearing Price for Energy, White Paper, undated, online.

VII. Electricity Demand

Horowitz, Marvin J., “Changes in Electricity Demand in the United States from the 1970s to 2003,” The Energy Journal, Vol. 28, No. 3., 2007.

Exam #2

HISTORICAL AND REGULATORY BACKGROUND OF THE NATURAL GAS INDUSTRY

I.          Industry Overview

Costello, Ken, “The Natural Gas Industry at a Glance,” NNRI Discussion Paper, January, 2008.
MacAvoy, Chapter 1-3
Alger, Dan and Michael Toman, "Market-Based Regulation of Natural Gas Pipelines," Journal of Regulatory Economics, September 1990, 2 (3), pp. 263-280.
Doane, Michael J. and Daniel Spulber, "Open Access and the Evolution of the U.S. Spot Market for Natural Gas," The Journal of Law and Economics, October 1994, v. 37 n. 2, p. 477ff.
Crew, Michael A. and Paul R. Kleindorfer, “Gas,” The Economics of Public Utility Regulation, Chapter 10.

 

II.        Prices and Costs

Klein, Christopher C., "A Comparison of Cost-based Pricing Rules for Natural Gas Distribution Utilities," Energy Economics, July 1993, v. 15 n. 3, pp. 176ff.

III.       Effects of Deregulation

MacAvoy, Chapter 4-6
Dreyfus, Daniel A., "Deregulation of Utilities: The Natural Gas Experience," Business Economics, April 1989, v. 24 n. 2, pp. 41ff.
Yucel, M.K., "A Dynamic Model of Natural Gas Deregulation," Energy Economics, January 1990, v. 12 n. 1, pp. 35ff.
Lyon, Thomas P. and Steven C. Hackett, "Bottlenecks and Governance Structures: Open Access and Long-Term Contracting in Natural Gas," Journal of Law, Economics, and Organization, October 1993, v. 9 n. 2, pp. 380ff.
Leppel, Karen and Thomas O. Armstrong, "Are Regulated and Potentially Unregulated Combination Gas and Electric Utilities Natural Monopolies?" Journal of Economics and Business, August 1994, v. 46 n. 3, pp. 195ff.

IV.       Implementing Retail Choice

“ICC Staff report on natural gas workshops” on e-reserves
Barcella, Mary L., "Natural Gas in the Twenty-First Century," Business Economics, October 1996, v. 31 n. 4, p. 19ff.
Gorak, Thomas C. and Dennis Ray, "Efficiency and Equity in the Transition to a New Natural Gas Market," Land Economics, August 1995, v. 71 n. 3, p. 368ff.
Costello, Ken, “Revenue Decoupling for Natural Gas Utilities,” NRRI Discussion Paper 06-06, April, 2006.

FINAL – Wednesday, December 10 at 3:10 pm