Vertical integration in electricity markets reduces prices, benefiting consumers.
Vertical integration in the Pennsylvania, New Jersey, and Maryland electricity market helps keep prices competitive by aligning producers' interests with market efficiency. Production constraints and cost non-convexities play a role in market imperfections, leading to increased procurement costs. By accurately estimating competitive production decisions, it is found that costs were only slightly above competitive levels. Vertically integrated firms with fewer retail customers adjusted output more in line with competitive production estimates.