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Regulatory Finance

Financial Foundations of Rate of Return Regulation

  • Book
  • © 1991

Overview

Authors:
  1. Howard E. Thompson

    1. University of Wisconsin-Madison, USA

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Part of the book series: Topics in Regulatory Economics and Policy (TREP, volume 9)

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Table of contents (15 chapters)

  1. Front Matter

    Pages i-xii
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  2. The Institutional Setting for Rate of Return Determination

    1. Front Matter

      Pages 1-1
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    2. Rate of Return in Rate Cases: The Institutional Setting

      • Howard E. Thompson
      Pages 3-9

    3. Earned Rates of Return, Allowed Rates of Return and the Cost of Capital in a Historical Setting

      • Howard E. Thompson
      Pages 11-23

  3. Theory of Rate of Return Determination

    1. Front Matter

      Pages 25-25
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    2. Traditional Models: DCF and Comparable Earnings

      • Howard E. Thompson
      Pages 27-41

    3. Traditional Models: CAPM and Risk Analysis

      • Howard E. Thompson
      Pages 43-55

    4. Recent Models: Arbitrage Pricing Theory

      • Howard E. Thompson
      Pages 57-68

    5. Recent Models: Valuation of Contingent Claims and Regulation

      • Howard E. Thompson
      Pages 69-88

    6. Issues in the Theory of Rate of Return

      • Howard E. Thompson
      Pages 89-95

  4. Methodologies for Rate of Return Determination

    1. Front Matter

      Pages 97-97
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    2. Methodology of Comparable Earnings and DCF

      • Howard E. Thompson
      Pages 99-119

    3. The Methodology for Risk Analysis

      • Howard E. Thompson
      Pages 121-140

    4. Methodology of Arbitrage Pricing Theory

      • Howard E. Thompson
      Pages 141-159

    5. Issues in Methodology for Determining the Rate of Return

      • Howard E. Thompson
      Pages 161-174

  5. Judgment and Rate of Return Determination

    1. Front Matter

      Pages 175-175
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    2. The Past and the Present: Adapting to Change

      • Howard E. Thompson
      Pages 177-189

    3. Factors Not Incorporated into the Models

      • Howard E. Thompson
      Pages 191-206

    4. The Reliability of Rate of Return Judgment

      • Howard E. Thompson
      Pages 207-212

    5. Beyond Rate of Return Regulation

      • Howard E. Thompson
      Pages 213-222
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Keywords

About this book

This monograph is concerned with the determination of the allowed rate ofreturn in rate cases which, in part, determines the rates ofcharge to customers of public utilities. Rate of return determination has been a central topic in utility regulation for a century. Recent changes in the traditionally regulated markets - electricity, gas, and telephone - have shoved discussion of rate of return determination into the background, replacing it by technology changes, competition, downsizing, deregulation, and reg'ulatory incentive systems. These new issues have made the regula­ tory sector, which had the reputation of being stodgy and uninteresting, an exciting field ofstudy. But rate ofreturn is not dead. It will playa key role in whatever the new structure ofthe regulated sector. Separating generation from transmis­ sion and distribution will not eliminate the need for rate of return analysis in the electric utility industry. Rather, it may well increase the number of companies for which the rate of return needs to be determined. It will playa fundamental role in the new regulatory environment. Incentive systems in the regulated sector may be the wave of the future but they will use the required rate ofreturn as a benchmark. Rate case will persist. Most rate cases include opposing testimony as to the "fair" rate of return or even the cost ofcapital for a public utility whose rates are at issue.

Authors and Affiliations

  • University of Wisconsin-Madison, USA

    Howard E. Thompson

Bibliographic Information

  • Book Title: Regulatory Finance

  • Book Subtitle: Financial Foundations of Rate of Return Regulation

  • Authors: Howard E. Thompson

  • Series Title: Topics in Regulatory Economics and Policy

  • DOI: https://doi.org/10.1007/978-1-4615-3948-3

  • Publisher: Springer New York, NY

  • eBook Packages: Springer Book Archive

  • Copyright Information: Springer Science+Business Media New York 1991

  • Hardcover ISBN: 978-0-7923-9143-2Published: 31 March 1991

  • Softcover ISBN: 978-1-4613-6762-8Published: 11 October 2012

  • eBook ISBN: 978-1-4615-3948-3Published: 06 December 2012

  • Series ISSN: 2730-7468

  • Series E-ISSN: 2730-7476

  • Edition Number: 1

  • Number of Pages: XII, 243

  • Topics: Industrial Organization, Finance, general

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