Decentralized method for utility regulation

Journal Article · Mon Oct 01 04:00:00 EDT 1979 · J. Law Econ.; (United States)

DOI:https://doi.org/10.1086/466949· OSTI ID:5531714

Loeb, M ^[1]; Magat, W A

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1. North Carolina State Univ., Raleigh

A new institutional arrangement for regulating utilities is suggested that minimizes the costs of natural monopolies. A mixture of regulation and franchising, the plan draws on the advantages of each and eliminates many of the problems. The proposal allows utilities to set their own price on the basis of demand and marginal-cost projections. Subsidies are provided by the regulatory agency if there is a consumer surplus. The system encourages the utility to select a competitive price and to produce only the amount of service needed. Operating efficiency is encouraged by rewarding cost reductions and discouraging cost overstatement at the rate review. The regulatory agency would not need to take action to bring price and marginal costs into equality. The franchise sale can be made by competitive bidding, in which the bidders would capitalize part or all of the subsidy or the regulatory agency could recover the subsidy in a lump-sum tax on the utility.

• OSTI ID: 5531714
• Journal Information: J. Law Econ.; (United States), Journal Name: J. Law Econ.; (United States) Vol. 22:2; ISSN JLLEA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
293000* -- Energy Planning & Policy-- Policy
Legislation
& Regulation
FINANCIAL INCENTIVES
INSTITUTIONAL FACTORS
MONOPOLIES
PRICES
PUBLIC UTILITIES
RATE STRUCTURE
REGULATIONS
SUBSIDIES