Regulatory Valuation of Public Utilities: A Case Study of the 20th Century

published by Business History (2014), vol 56, pp 936-955

42 Pages Posted: 24 Jan 2013 Last revised: 19 Dec 2014

See all articles by Paul A. Grout

Paul A. Grout

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO)

Andrew Jenkins

University of London - Institute of Education

Anna (Ania) Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management

Date Written: June 1, 2013

Abstract

This paper analyses the regulatory attitudes to asset valuation in the 20th century. It focuses in particular on the U.S. experience from Smith v Ames 169 U.S. 466 (1898) to Federal Power Commission v Hope Natural Gas 320 U.S. 591 (1944) and on the experience in the U.K. in last two decades of the century. It is shown that movements in capital goods prices in the U.S. had a significant impact on regulatory decisions, e.g., regulators were more likely to choose original cost as the regulatory valuation when replacement cost was high. In the U.K. regulatory agencies moved through valuations increasingly less favourable to the companies from a traditional historic cost model to an ‘original cost’ model based on flotation value. Far from displaying regulatory capture, the evidence is consistent with robust regulation against ‘monopoly’ incumbents.

Keywords: Public utilities, regulation, asset valuation, privatisation

JEL Classification: H00, K2, N8

Suggested Citation

Grout, Paul A. and Jenkins, Andrew and Zalewska, Anna, Regulatory Valuation of Public Utilities: A Case Study of the 20th Century (June 1, 2013). published by Business History (2014), vol 56, pp 936-955 . Available at SSRN: https://ssrn.com/abstract=2205955 or http://dx.doi.org/10.2139/ssrn.2205955

Paul A. Grout (Contact Author)

University of Bristol - Leverhulme Centre for Market and Public Organisation (CMPO) ( email )

Mary Paley Building
12 Priory Road Department of Economics
Bristol BS8 1TN
United Kingdom

Andrew Jenkins

University of London - Institute of Education ( email )

London
United Kingdom

Anna Zalewska

University of Bath - Centre for Governance, Regulation and Industrial Strategy; School of Management ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom
+44 0 1225 384354 (Phone)
+44 0 1226 384354 (Fax)

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