Public Utility Commissioner selection and electric utilities' cost of capital: Part 1, The overall cost of capital: Final report for 1986/87 SOMED Project

Technical Report · Tue Sep 01 04:00:00 EDT 1987

OSTI ID:5115705

Thistle, P D; Mishra, B; McLeod, R W

Utilities in states with elected Public Utility Commissioners (PUC)'s may face a higher cost of capital. The objective of this project is to determine if the direct election of PUC's has any effect on electric utilities cost of capital. The first part of the project is an analysis of the overall cost of capital of electric utilities. We use a book-value-weighted average of the costs of short and long term debt and common and preferred equity for 1982. A random coefficient regression model is used to analyze the effects of political and financial variables on the overall cost of capital. We find that direct election of the PUC has no effect on this measure of the overall cost of capital. This analysis is presented in Part 1 of the report. The second part of the project is an analysis of electric utility bond ratings for the period 1979-1983. Bond ratings are widely used to assess the quality of bonds, and are viewed as reflecting the degree of credit and default risk. An N-chotomous probit model is used to analyze the effects of political and financial variables on bond ratings. We find that direct election of the PUC has a significant negative effect on electric utilities bond ratings. This analysis is presented in Part 2 of the report.

• Research Organization: Alabama Univ., Birmingham (USA); McNeese State Univ., Lake Charles, LA (USA)
• OSTI ID: 5115705
• Report Number(s): NP-8010873; ON: TI88010873
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
296000* -- Energy Planning & Policy-- Electric Power
ADMINISTRATIVE PROCEDURES
CAPITALIZED COST
COST
DOCUMENT TYPES
ELECTRIC POWER
ELECTRIC UTILITIES
ORGANIZING
PERSONNEL
POWER
PRICES
PROGRESS REPORT
PUBLIC UTILITIES