Idealism and Realism: An Institutionalist View of Corporate Power in the Regulated Utilities

• Published in: Journal of economic issues Vol. 19; no. 2; pp. 311 - 331
• Main Author: Schwartz, David S.
• Format: Journal Article
• Language: English
• Published: Lincoln Routledge 01.06.1985; Dept. of Economics, California State University; Association for Evolutionary Economics
• Subjects: Customer services; Economic theory; Electric utilities; Environmentalists; Gas utilities; Idealism; National Energy Act 1978-US; Natural gas industry; Prices; Public interest; Public utilities; Rate setting; Rates; Realism; Regulation; Regulatory reform; United States
• ISSN: 0021-3624; 1946-326X
• DOI: 10.1080/00213624.1985.11504373

Despite the broad authority invested in public utility regulators to permit effective economic regulation, regulators have come under intense attack since the early 1970s. The present study is concerned with the criticism of regulation and with the failure of government intervention. It is shown that the ''cost-of-service'' rate-base regulation is not a neutral ratemaking process. It is the implementation of these ratemaking procedures that is, to a large extent, responsible for escalating electricity and gas prices. The departure from traditional regulatory policies is reflected in the decision by many public utility commissions to use such procedures as: 1. automatic flow-through of fuel costs in fuel adjustment clauses, 2. a projected test year, 3. an allowance for an inflation factor, and 4. the allowance of construction work in progress. The natural gas industry is characterized by significant concentration over new gas supplies. Interlocking relationships are evident among producers, major interstate pipeline firms, and banks. There is a need to redefine and broaden the parameters of economic regulation.