Fair rate of return

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Fair rate of return

The rate of return that state governments allow a public utility to earn on its investments and expenditures. Utilities then use these profits to pay investors and provide service upgrades to their customers.

Fair Rate of Return

The profit that a government allows an industry to make if it deems that industry to be necessary for public function. A state may impose a fair rate of return on industries, such as utilities, to keep services affordable for consumers. Critics of this practice contend that this is economically inefficient and ultimately harms consumers, though this is a matter of considerable dispute.
References in periodicals archive ?
Because the owners admitted they could still earn a reasonable return after historic designation of the terminal, however, the Supreme Court did not discuss the methodology of determining fair rates of return. Other courts have recently applied rate-of-return concepts to measure damages for temporary takings,(60) but not to determine when a regulation goes too far in land use takings cases.
Harrington, eds., 1987, Fair Rates of Return in Property-Liability Insurance (Dordrecht: Kluwer Nijhoff Publishing).
Biger and Kahane (1978), Fairley (1979), and Hill (1979) proposed CAPM type models to determine fair rates of return for the property-liability insurance industry.