rate-of-return regulation

Also found in: Wikipedia.

rate-of-return regulation

the stipulation by the government of maximum permitted levels of PROFIT accruing to a MONOPOLY supplier. Profit regulation is commonly used in the USA and the UK to control the pricing policies of (privately owned) PUBLIC UTILITIES.

Mentioned in ?

References in periodicals archive ?

Much like traditional rate-of-return regulation, this rule creates incentives for insurers to spend more on medical care rather than to reduce premiums.

Health Insurance

Rate-of-return regulation has worked in the past, and-will work into the future.

Rate of return: it's not rocket science

(1) Before the divestiture of AT&T in 1984, for example, all 50 states employed rate-of-return regulation to regulate intrastate telecommunication operations.

Price-cap regulation and the incentive to cooperate in research

Utilities traditionally are regulated by rate-of-return regulation, under which they pass all of their costs dollar-for-dollar to consumers.

Local natural gas prices under utility deregulation

As already briefly mentioned, firms subject to rate-of-return regulation (also called "cost-of-service" regulation) have distorted incentives when it comes to deploying efficient, low-cost production technology.

Inter-modal competition and telecommunications policy in the United States

Rate-of-return regulation is the formal mechanism by which ACP is typically enforced.

Natural monopoly regulation in the presence of cost misreporting

But Senate Bill 622 eased legislative rules and released Qwest from a rate-of-return regulation that put an earnings cap on the company.

Waiting for a reliable connection. (Around the State)

[12] By contrast, the electricity industry is still governed primarily by cost-based regulation (such as rate-of-return regulation), perhaps because this industry supplies a homogeneous product; therefore cost information is easier to obtain and costs are easier to allocate than in telecommunications and railways, which provide several joint services (such as local, long-distance, mobile communications or freight and passenger transportation).

IV. REGULATORY REFORM IN NETWORK INDUSTRIES: PAST EXPERIENCE AND CURRENT ISSUES

Under the rate-of-return regulation, telecommunication prices are set to reflect the embedded or historical costs of providing services to each set of customers.

Price regulation in telecommunications sector and its implications

For much of this time, economists have lamented the shortcomings of rate-of-return regulation, pointing especially to its weak incentives for cost reduction and innovation.

Designing Incentive Regulation for the Telecommunications Industry

"Price-Cap versus Rate-of-Return Regulation in a Stochastic Cost Model." Rand Journal of Economics 23: Winter 1992.

Regulatory economics: survey of reading materials in universities in Canada and the United States

It abandoned older style, cost-plus rate-of-return regulation in favor of "price cap" regulation, which focused on prices and created incentives for telephone companies to innovate and become more efficient.

Cap-sized: how the promise of the price cap voyage to competition was lost in a sea of good intentions