Today's Rent-Seeking in Public Utility Regulation

Abstract

A current regulatory issue in the United States centers on the business model of utilities, which includes asking to what extent utilities should broaden their activities to satisfy society-wide political demands. There seems to be an inherent discordance between treating utilities as both a for-profit business and a purveyor of public goods. This tension complicates efforts to achieve a political equilibrium (i.e., a consensus) and retain the traditional objective of utility regulation to assure “just and reasonable” prices and reliable service for households, businesses, and other users of utility services. Added objectives in recent years, as I argue below, clash with those traditional objectives.