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The Effects of Regulatory Policies on the Cost of Debt for Electric Utilities: An Empirical Investigation

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  • Prager, Robin A

Abstract

This article develops a model of debt-cost determination for regulated electric utilities, based on an application of finance theory. Estimation of the model allows the hypothesis that regulatory policy directly influences the cost of debt to be tested and also enables the specific effects attributable to individual regulatory policy variables to be examined. Regulatory decisions are found to have statistically and economically significant effects on the cost of debt for electric utilities, and the most important effects are associated with the treatment of construction work in progress for ratemaking purposes, the extent of regulatory delay, and whether or not interim rate relief is provided. Copyright 1989 by the University of Chicago.

Suggested Citation

  • Prager, Robin A, 1989. "The Effects of Regulatory Policies on the Cost of Debt for Electric Utilities: An Empirical Investigation," The Journal of Business, University of Chicago Press, vol. 62(1), pages 33-53, January.
  • Handle: RePEc:ucp:jnlbus:v:62:y:1989:i:1:p:33-53
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    Cited by:

    1. James E. Prieger, 2005. "Endogenous Regulatory Delay and the Timing of Product Innovation," Working Papers 54, University of California, Davis, Department of Economics.
    2. Kahn, Edward & Stoft, Steven & Belden, Timothy, 1995. "Impact of power purchases from non-utilities on the utility cost of capital," Utilities Policy, Elsevier, vol. 5(1), pages 3-11, January.
    3. James Prieger, 2008. "Product innovation, signaling, and endogenous regulatory delay," Journal of Regulatory Economics, Springer, vol. 34(2), pages 95-118, October.
    4. James E. Prieger, 2003. "The Timing of Product Innovation and Regulatory Delay," Working Papers 19, University of California, Davis, Department of Economics.
    5. Prieger, James E., 2007. "Regulatory delay and the timing of product innovation," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 219-236, April.
    6. Guthrie, Graeme, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Working Paper Series 3851, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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