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Capture or contract? The early years of electric utility regulation

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  • Thomas Lyon
  • Nathan Wilson

Abstract

Jarrell (J Law Econ 21:269–295, 1978 ) found that electricity prices fell more slowly in states that adopted state regulation before 1917, suggesting that regulators were “captured” by the interests of the regulated electric utilities. An alternative explanation is that state regulation more credibly protected specialized utility assets from regulatory opportunism than did the municipal franchise contracting that preceded it. We test this alternative hypothesis using a panel of data from the U.S. Electrical Censuses of 1902–1937. We find that the shift from municipal franchise contracting to state regulation was associated with a substantial decrease in investment propensity, an outcome supporting the capture hypothesis. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Thomas Lyon & Nathan Wilson, 2012. "Capture or contract? The early years of electric utility regulation," Journal of Regulatory Economics, Springer, vol. 42(3), pages 225-241, December.
    • Handle: RePEc:kap:regeco:v:42:y:2012:i:3:p:225-241
    DOI: 10.1007/s11149-012-9200-9
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    References listed on IDEAS

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    1. Continuing debate over the economic origins of electric utility regulation
      by Michael Giberson in Knowledge Problem on 2013-09-24 09:49:37

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    More about this item

    Keywords

    Regulatory capture; Transaction cost economics; Electric utilities; K2; L5; L9; N4; N7;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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