The Role of Costing as a Ratemaking Tool in an Environment of Dynamic Change

THE INSTITUTIONALIST APPROACH TO PUBLIC UTILITIES REGULATION, Edythe Miller and Warren J. Samuels, eds., pp. 250-275, East Lansing: Michigan State University Press, 2002

30 Pages Posted: 9 Feb 2010

See all articles by Mark A Jamison

Mark A Jamison

University of Florida - Warrington College of Business Administration, Public Utility Research Center

Date Written: 2002

Abstract

In this paper I describe how regulators have addressed these trade-offs and what they mean for the future of costing, assuming that ratemaking has a long-term role in telecommunications regulation. I explain how information rents and credibility concerns were important factors leading regulators to adopt rate-of-return regulation in the early part of the 20th century. Further concerns over legitimacy and information rents caused regulators to develop increasingly detailed techniques for rate-of-return regulation and eventually for jurisdictional and service costing. Jurisdictional costing is the process known as Separations. Separations’ purpose is to determine how much of a telephone company’s costs will be recovered through prices for interstate services, the services that the Federal Communications Commission (FCC) regulates. State regulators, called Public Utility Commissions or PUCs, regulate intrastate prices and are responsible for whatever costs are left over (Bolter et al., 1984). Service costing is the process of measuring costs for particular services or categories of services. Regulators first became interested in service costing in the 1960s when certain telecommunications markets became competitive and regulators were called upon to protect against cross subsidization.

Suggested Citation

Jamison, Mark A., The Role of Costing as a Ratemaking Tool in an Environment of Dynamic Change (2002). THE INSTITUTIONALIST APPROACH TO PUBLIC UTILITIES REGULATION, Edythe Miller and Warren J. Samuels, eds., pp. 250-275, East Lansing: Michigan State University Press, 2002, Available at SSRN: https://ssrn.com/abstract=1549686

Mark A. Jamison (Contact Author)

University of Florida - Warrington College of Business Administration, Public Utility Research Center ( email )

PO Box 117142
Gainesville, FL 32611
United States
352-392-6148 (Phone)
352-392-7796 (Fax)

HOME PAGE: http://warrington.ufl.edu/purc/facultyinfo.asp?WEBID=1217

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