The impact of agency costs on regulator compensation and the size of electric utility commissions

The current study examines the impact of the selection of electric utilitie s regulators on their compensation and the size of the regulatory commissio ns they lead. Much like the CEOs of regulated enterprises, managers of poli tically supported enterprises and bureaucracies might be expected to pursue increases in the size of administration budgets, the number of support sta ff 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 re gulatory regimes, utilities commissioners are the agents of politicians ins tead of the population at large. In elected regimes, regulators are the age nts of the population at large. Statistical models presented in this paper point toward greater levels of expense preference behavior (or expected uti lity maximization) by commissions(ers) within appointed regulatory regimes, as public choice models and models of the firm would suggest.