rate of return regulation

rate of return regulation

the control of a firm's or industry's level of profitability by the stipulation of maximum-permitted RATES OF RETURN ON CAPITAL EMPLOYED or investment. Such regulation is undertaken by government agencies to prevent the charging of ‘excessive’ prices by private sector monopolies and public utilities. See COMPETITION POLICY.
References in periodicals archive ?
It is well-known that rate of return regulation provides poor incentives for companies to operate efficiently and that alternative forms of regulation, such as price cap regulation, provide better results.
Under his leadership the FCC also rewrote how the agency would regulate telecommunications prices, effectively bringing to an end decades of rate of return regulation and instituting price capping, which had been pioneered in the U.K.
This had led to proposals to decouple allowed revenue from sales quantity, which would tend to favour revenue cap or rate of return regulation. (3)
Myers has published important research papers on many topics, including adjusted present value, rate of return regulation, pricing and capital allocation in insurance, and information issues in capital structure decisions.
A rate regulation regime gives all customers full access to network facilities (common carrier) at regulated rates--generally, rate base rate of return regulation. An access regime is one in which all competitors are given full access to incumbents' networks, with little or no retail rate regulation, thereby allowing competition (over incumbents' networks) to discipline the market.
Rate of return regulation would have a straight horizontal line in this figure.
Siegel, 1986, "Rate of Return Regulation with Price Flexibility", Journal of Business, 59:537-553
"Rate of Return Regulation and Rate Base Valuation," Regional Science and Urban Economics, 28, September, 1998, pp.
Investor owned utilities have been governed by rate of return regulation and have lower rates than the municipal systems.
In this study, an analysis of different pricing methods have been undertaken, i.e., marginal cost pricing, average cost pricing, Ramsey pricing rule, rate of return regulation and price caps.
Macauley found that regulations of the FCC, which differ from rate of return regulation, altered the rate at which technical change occurred.(1) Nelson (1984) examined the impact of regulation on technical change in the electric utility industry, an industry subject to rate of return regulation.
Rate of return regulation is used by commissions and, thus, the "fairness" of returns has often been the emphasis of regulation (Crew and Kleindorfer, 1979).