Political economy of the utility rate-making process

Book · Fri Jan 01 04:00:00 EST 1988

OSTI ID:6158554

Manning, S H

Research is reported that characterizes the political economy of the rate-making process in terms of distinct interest groups, empirically tests the incentives motivating these groups, and quantifies the groups' influence on public-utility commissioners' decisions to grant or deny requested increases in electric-utility revenues. The theory developed is an extension of earlier work performed by Mark Crain and Robert McCormick. Its theoretical basis resides in public choice and regulatory economics. In the tradition of public-choice thought, the commissioners' utility function is modeled to determine the political as well as economic-efficiency variables influencing the commissioners' decision. The rate-making process is modeled as a system for four distinct interest groups - commission members, commission staff, producers (regulated utilities), and consumers (ratepayers) - competing for the wealth transfers emanating from the rate-making process. An ordinary least-squares regression analysis was performed for each of the 4 interest groups. Statistically significant political and economic influences are exerted by the consumer group in determining the budget appropriated to the regulatory commission. The producer group and the commission itself are also influential in determining commission budget. Likewise, the commission staff's influence on the commission decision is assumed to be a function of the size of the commission staff.

• Research Organization: George Mason Univ., Fairfax, VA (USA)
• OSTI ID: 6158554
• 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
DECISION MAKING
ELECTRIC UTILITIES
INCOME DISTRIBUTION
INSTITUTIONAL FACTORS
INTEREST GROUPS
LEAST SQUARE FIT
MATHEMATICS
MAXIMUM-LIKELIHOOD FIT
NUMERICAL SOLUTION
POLITICAL ASPECTS
PUBLIC UTILITIES
RATE STRUCTURE
REGRESSION ANALYSIS
STATISTICS