Rate-of-return regulation and efficiency: the economics of the natural gas pipeline and distribution industry
This study is an examination of how rate-of-return regulation with wellhead price controls might affect the operating efficiency of gas utilities. It thus differs from much of the previous literature on rate-of-return regulation, which has focused on how regulation might cause an improper mixture of capital and other inputs - the Averch-Johnson effect. The author argues that firm managers have some ability to pursue objectives of their own, which differ from simple profit-maximization. The managers may be thought of as maximizing a utility function of profit and the institutional costs arising from their pursuit of these other objectives, subject to a budget constraint. The author also argues that regulators have a second little-noted instrument of control: their power to deny approval for new capital investments. Finally, the author, shows how wellhead price controls, whether on all or only some supply sources, could lead to increases in institutional costs.
- OSTI ID:
- 6287023
- Country of Publication:
- United States
- Language:
- English
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Rate-of-return regulation and efficiency: the economics of the natural gas pipeline and distribution industry
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Related Subjects
030600 -- Natural Gas-- Economic
Industrial
& Business Aspects
031000* -- Natural Gas-- Legislation & Regulations
032000 -- Natural Gas-- Transport
Handling
& Storage
29 ENERGY PLANNING, POLICY, AND ECONOMY
294003 -- Energy Planning & Policy-- Natural Gas
EFFICIENCY
ENERGY SOURCES
ENERGY SYSTEMS
FLUIDS
FOSSIL FUELS
FUEL GAS
FUELS
GAS FUELS
GAS UTILITIES
GASES
NATURAL GAS
NATURAL GAS DISTRIBUTION SYSTEMS
PIPELINES
PRICES
PUBLIC UTILITIES
REGULATIONS