Price Level Regulation for Diversified Public Utilities: An Assesment
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Topics in Regulatory Economics and Policy Series
Michael A. Crew, Editor Graduate School of Management Rutgers University Newark, New Jersey, U.S.A. Previously published books in the series: Rowley, C., Tollison, R., and Tullock, G.: Political Economy of Rent·Seeking Frantz, R.: X-Efficiency Crew, M.: Deregulation and Diversification of Utilities Shogren, J.F.: The Political Economy of Government Regulation
PRICE LEVEL REGULATION FOR DIVERSIFIED PUBLIC UTILITIES: AN ASSESSMENT
Jordan Jay Hillman Northwestern University School of Law Ronald R. Braeutigam Northwestern University
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Kluwer Academic Publishers Boston/Dordrecht/London
Distributors for North America: Kluwer Academic Publishers 101 Philip Drive Assinippi Park Norwell, Massachusetts 02061 USA Distributors for all other countries: Kluwer Academic Publishers Group Distribution Centre Post Office Box 322 3300 AH Dordrecht, THE NETHERLANDS
Library of Congress Cataloging-in-Publication Data Hillman, Jordan Jay. Price level regulation for diversified public utilities: an assessment I Jordan Jay Hillman, Ronald R. Braeutigam. p. cm. - (Topics in regulatory economics and policy series: 5)
Bibliography: p. Includes index. ISBN-13: 978-1-4612-8900-5
e-ISBN-13: 978-1-4613-1629-9
001: 10.1007/978-1-4613-1629-9 1. Public utilities-Rates-Law and legislation-United States. 2. Public utilities-United States-Rates. I. Braeutigam, Ronald. II. Title. III. Series: Topics in regulatory economics and policy; 5. KF2103.H55 1989 343.7309'1-dc20 [347.30391] 89-34144 CIP Copyright © 1989 by Kluwer Academic Publishers Softcover reprint of the hardcover 1st edition 1989 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, Kluwer Academic Publishers, 101 Philip Drive, Assinippi Park, Norwell, Massachusetts 02061.
Contents
Foreword and Acknowledgements Introduction and Statement of Purpose
1 The Inefficacy of Profit Level Regulation for
ix 1
the Natural Monopoly Markets of Diversified Firms
5
A. AN ECONOMIC OVERVIEW
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1. Economic Rationale for Regulation 2. Economic Goals of Natural Monopoly Regulation 3. Incentives Under Rate of Return Regulation
B. A LEGAL OVERVIEW
1. A View from the MFJ: A Selective Approach to Intermarket Subsidies 2. A View from the FCC: Cost Allocation and Transfer Pricing 3. A View from the States: Transfer Pricing 4. The Uses and Abuses of "Stand Alone" Costs 5. Regulating the Structure of Diversified Utilities Under Profit Level Regulation 6. Summary: Profit Level Regulation and Diversification
5 7 9 13 13 15 16 19 25 35
v
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Price Level Regulation for Diversified Public Utilities
2 The Welfare Ingredients of Price Level Regulation: Incentives and Decisional Options
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A. THE FIRM'S INCENTIVES AND THEIR WELFARE IMPLICATIONS
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B. MAJOR DECISIONAL ISSUES IN A PRICE LEVEL REGIME
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1. Defining the Market Scope of a Price Level Regime
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