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Incentive Effects of Rate-of-Return Regulation: The Case of Hong Kong Electric Utilities

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  • Peles, Yoram C
  • Whittred, Greg

Abstract

A comparison of Hong Kong and United States rate-of-return regulation indicates differences in the definition of the rate base and in the proportion of it permitted a fair rate of return. These differences imply that Hong Kong electric utilities utilize proportionately more fixed (less current) assets, and that these assets are financed proportionately more by equity (less by debt), than their United States counterparts. Our results support both these predictions, providing further evidence that since rate-of-return regulation is implemented by reference to "reported" results, comparatively minor differences in regulatory frameworks can have quite dramatic consequences for utilities' asset structure and financing mix. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Peles, Yoram C & Whittred, Greg, 1996. "Incentive Effects of Rate-of-Return Regulation: The Case of Hong Kong Electric Utilities," Journal of Regulatory Economics, Springer, vol. 10(1), pages 99-112, July.
    • Handle: RePEc:kap:regeco:v:10:y:1996:i:1:p:99-112
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    Cited by:

    1. Ovtchinnikov, Alexei V., 2013. "Merger waves following industry deregulation," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 51-76.
    2. Changqi Wu & Leonard K. Cheng, 2000. "Hong Kong's Business Regulation in Transition," NBER Chapters, in: Deregulation and Interdependence in the Asia-Pacific Region, pages 157-194, National Bureau of Economic Research, Inc.
    3. Woo, C.K. & Cheng, Y.S. & Law, A. & Zarnikau, J. & Ho, S.T. & Leung, H.Y., 2015. "Consumer support for a public utilities commission in Hong Kong," Energy Policy, Elsevier, vol. 76(C), pages 87-97.

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