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A study of the negotiated-settlement practice in regulation: Some evidence from Florida

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  • Chakravorty, Shourjo

Abstract

Negotiated settlements have become a frequently used alternative to contested proceedings when setting prices charged by public utilities under the US rate-of-return regulatory model. The behavior of the representatives of consumer advocates and the firms during settlement negotiations determine customer prices. This paper examines this behavior by using data from the Florida Public Service Commission to estimate the payoff functions of both parties. The estimation suggests that the advocate and the firm weight the present rate change more than the consumer's future average price and the firm's future operating revenue in their settlement decisions. It also indicates that the time saved by settlements is not a primary reason for their popularity.

Suggested Citation

  • Chakravorty, Shourjo, 2015. "A study of the negotiated-settlement practice in regulation: Some evidence from Florida," Utilities Policy, Elsevier, vol. 32(C), pages 12-18.
    • Handle: RePEc:eee:juipol:v:32:y:2015:i:c:p:12-18
    DOI: 10.1016/j.jup.2014.12.002
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    References listed on IDEAS

    as
    1. Zhongmin Wang, 2004. "Settling Utility Rate Cases: An Alternative Ratemaking Procedure," Journal of Regulatory Economics, Springer, vol. 26(2), pages 141-163, September.
    2. Bordignon, Stephen & Littlechild, Stephen, 2012. "The Hunter Valley access undertaking: Elements of a negotiated settlement," Transport Policy, Elsevier, vol. 24(C), pages 179-187.
    3. Stephen Littlechild, 2009. "Stipulated settlements, the consumer advocate and utility regulation in Florida," Journal of Regulatory Economics, Springer, vol. 35(1), pages 96-109, February.
    4. Doucet, Joseph & Littlechild, Stephen, 2009. "Negotiated settlements and the National Energy Board in Canada," Energy Policy, Elsevier, vol. 37(11), pages 4633-4644, November.
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    7. Doucet, J. & Littlechild, S., 2006. "Negotiated Settlements: The development of economic and legal thinking," Cambridge Working Papers in Economics 0622, Faculty of Economics, University of Cambridge.
    8. Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
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    10. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
    11. Littlechild, Stephen, 2009. "The bird in hand: Stipulated settlements in the Florida electricity sector," Utilities Policy, Elsevier, vol. 17(3-4), pages 276-287, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Negotiated settlement; Rate-of-return regulation; Stipulation;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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