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Guaranteed return regulation: a case study of regulation of water in California

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  • Michael Crew
  • Rami Kahlon

Abstract

Price cap regulation (PCR) arose out of dissatisfaction with rate-of-return regulation (ROR). In energy and water there has been a move away from PCR into an extended form of ROR, referred to as guaranteed return regulation (GRR). It is employed to implement policies that legislators are unwilling to apply by transparent methods, namely taxation, but willing to apply opaquely through the regulatory process. GRR does not promote efficiency and, as the California experience shows, the guarantees it provides are limited. Its success in California has been mixed and it should be considered to be a work in progress and open to improvements, some of which are outlined. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Michael Crew & Rami Kahlon, 2014. "Guaranteed return regulation: a case study of regulation of water in California," Journal of Regulatory Economics, Springer, vol. 46(1), pages 112-121, August.
    • Handle: RePEc:kap:regeco:v:46:y:2014:i:1:p:112-121
    DOI: 10.1007/s11149-014-9249-8
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    References listed on IDEAS

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    1. Peter Broer & Gijsbert Zwart, 2013. "Optimal regulation of lumpy investments," Journal of Regulatory Economics, Springer, vol. 44(2), pages 177-196, October.
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    6. David Sappington & Dennis Weisman, 2010. "Price cap regulation: what have we learned from 25 years of experience in the telecommunications industry?," Journal of Regulatory Economics, Springer, vol. 38(3), pages 227-257, December.
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    Cited by:

    1. Roger Buckland & Julian Williams & Janice Beecher, 2015. "Risk and regulation in water utilities: a cross-country comparison of evidence from the CAPM," Journal of Regulatory Economics, Springer, vol. 47(2), pages 117-145, April.
    2. David E. M. Sappington & Dennis L. Weisman, 2016. "The disparate adoption of price cap regulation in the U.S. telecommunications and electricity sectors," Journal of Regulatory Economics, Springer, vol. 49(2), pages 250-264, April.

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