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The Impact of Agency Costs on Regulator Compensation and the Size of Electric Utility Commissions

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  • Franklin G. Mixon Jr.

Abstract

The current study examines the impact of the selection of electric utilities regulators on their compensation and the size of the regulatory commissions they lead. Much like the CEOs of regulated enterprises, managers of politically supported enterprises and bureaucracies might be expected to pursue increases in the size of administration budgets, the number of support staff and compensation packages (i.e., engage in expense preference behavior). In the case of public utility commissions, the principal-agent model used to describe private firms applies. However, within politically-appointed regulatory regimes, utilities commissioners are the agents of politicians instead of the population at large. In elected regimes, regulators are the agents of the population at large. Statistical models presented in this paper point toward greater levels of expense preference behavior (or expected utility maximization) by commissions (ers) within appointed regulatory regimes, as public choice models and models of the firm would suggest.

Suggested Citation

  • Franklin G. Mixon Jr., 2001. "The Impact of Agency Costs on Regulator Compensation and the Size of Electric Utility Commissions," The Energy Journal, , vol. 22(2), pages 17-34, April.
    • Handle: RePEc:sae:enejou:v:22:y:2001:i:2:p:17-34
    DOI: 10.5547/ISSN0195-6574-EJ-Vol22-No2-2
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    References listed on IDEAS

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    1. Mixon Jr., Franklin G. & Upadhyaya, Kamal P., 1999. "The impact of economic regulation on attempts to curb expense preference behavior: a micro-data analysis of CEO compensation schemes for electric utilities," Energy Economics, Elsevier, vol. 21(2), pages 185-194, April.
    2. Baldwin, Robert & Cave, Martin & Lodge, Martin, 2011. "Understanding Regulation: Theory, Strategy, and Practice," OUP Catalogue, Oxford University Press, edition 2, number 9780199576098.
    3. repec:aen:journl:1982v03-02-a07 is not listed on IDEAS
    4. Rexford Santerre, 1989. "Representative versus direct democracy: Are there any expenditure differences?," Public Choice, Springer, vol. 60(2), pages 145-154, February.
    5. Jarrell, Gregg A, 1978. "The Demand for State Regulation of the Electric Utility Industry," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 269-295, October.
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