Does regulation tilt toward utilities?
Conventional wisdom says that electric utility regulation favors neither utilities nor consumers, but, instead, advances the interests of society. This optimistic view of the process is challenged by more jaded observers who contend that regulation tilts toward certain powerful market players, specifically the firms being regulated. While the debate has ebbed and flowed over the years, recent industry event offer a fresh perspective on this issue. Those events concern the emergence of stranded costs as a significant problem for the electricity market. These stranded costs are evidence that the regulatory process does, indeed, tilt toward the regulated firm. The existence of these costs demonstrates that regulators have allowed utilities to recover more than their fair share of costs from ratepayers. Furthermore, the recovery of stranded costs from ratepayers shows that the regulatory process protects utility interests. This concept of a tilt toward the regulated firm is not new, having been presented by a number of economists over the years. Perhaps the most noted proponent of this view is George Stigler, who states, Regulation may be actively sought or it may be thrust upon the regulated industry. A central thesis of this paper is that, as a rule, regulation is acquired by industry and is designed and operated primarily for its benefit. These perspective provides the starting point for the analysis to follow, which will examine the relevance of Stigler's argument to an electricity industry that is grappling with the problem of stranded costs.
- Research Organization:
- Illinois Commerce Commission, IL (US)
- OSTI ID:
- 20013716
- Journal Information:
- Electricity Journal, Vol. 12, Issue 9; Other Information: PBD: Nov 1999; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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