Effects of Regulation on Utility Financing: Theory and Evidence

42 Pages Posted: 22 Aug 2007 Last revised: 21 Sep 2008

See all articles by Robert A. Taggart

Robert A. Taggart

Boston College - Carroll School of Management; National Bureau of Economic Research (NBER)

Date Written: March 1982


This paper examines the financing decisions of regulated public utilities. It is argued that the regulatory process affects utility financing choices both by conditioning the environment in which these choices are made and by creating opportunities for firms to influence the regulated price through strategic financing behavior. The nature of this regulatory effect continually changes, however, as economic conditions change and as regulators, firms and consumers adapt to one another's decisions. The direction of the impact on utility financing, therefore, may differ both over time and across regulatory jurisdictions. This theory of regulatory influence is tested by examining several episodes in the financing experience of U.S. electric utilities from 1912 to 1979. Evidence of a regulatory effect on utility financing is found particularly for the early years of state commission regulation. Examples of an adaptive response pattern on the part of regulators, firms and consumers are also cited.

Suggested Citation

Taggart, Robert A., Effects of Regulation on Utility Financing: Theory and Evidence (March 1982). NBER Working Paper No. w0866. Available at SSRN: https://ssrn.com/abstract=351396

Robert A. Taggart (Contact Author)

Boston College - Carroll School of Management ( email )

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Dept. of Finance
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617-552-4113 (Phone)

National Bureau of Economic Research (NBER)

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