Initial state regulation of investor-owned utilities

This paper examines state initiation of public service (or utility) commiss ion regulation of investor-owned utilities (IOUs) using an economic theory of regulation. The decision to regulate IOUs is assumed to have depended on the strength of competing interest groups, e.g. consumers and producers, a nd on institutional factors, e.g. whether commissioners were appointed or e lected. Regulators, which then had jurisdiction over IOU rates, are assumed to have been optimizing agents. The potential benefits of regulation, in t urn, translated into pressure to initiate regulation. To test this, a hazar d model is applied to state-level data. On the demand side of the regulatio n market, the distribution of federal power and population density were unr elated, while a set of time dummies was positively related to the probabili ty that a state initiated regulation. On the supply side, the fraction of t he population that was urban and whether the governor was Republican or not were positively and negatively related to this probability. (C) 2001 Elsev ier Science B.V. All rights reserved.