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Settling Utility Rate Cases: An Alternative Ratemaking Procedure

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  • Zhongmin Wang

Abstract

The U.S. Federal Energy Regulatory Commission (FERC) has long relied on settlement procedures to resolve its cases, and since the mid-1980s many state regulatory commissions have also adopted this utility ratemaking procedure. This paper examines the settlement practice at FERC to show that the flexibility of the settlement process could lead to settlement outcomes that Pareto dominate the litigation outcome. Negotiated settlements improve welfare because the players can make tradeoffs across the issues during the settlement negotiations. Rate moratorium, for example, arises endogenously as a settlement provision in about half of the major interstate natural gas pipeline rate cases.

Suggested Citation

  • Zhongmin Wang, 2004. "Settling Utility Rate Cases: An Alternative Ratemaking Procedure," Journal of Regulatory Economics, Springer, vol. 26(2), pages 141-163, September.
    • Handle: RePEc:kap:regeco:v:26:y:2004:i:2:p:141-163
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    Citations

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    Cited by:

    1. Littlechild, Stephen C., 2012. "Australian airport regulation: Exploring the frontier," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 50-62.
    2. Stephen Littlechild, 2016. "Contrasting Developments in UK Energy Regulation: Retail Policy and Consumer Engagement," Economic Affairs, Wiley Blackwell, vol. 36(2), pages 118-132, June.
    3. Stephen Littlechild, 2006. "Stipulations, the consumer advocate and utility regulation in Florida+," Working Papers EPRG 0615, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    4. Bordignon, Stephen & Littlechild, Stephen, 2012. "The Hunter Valley access undertaking: Elements of a negotiated settlement," Transport Policy, Elsevier, vol. 24(C), pages 179-187.
    5. Littlechild, Stephen, 2012. "The process of negotiating settlements at FERC," Energy Policy, Elsevier, vol. 50(C), pages 174-191.
    6. Joseph Doucet & Stephen Littlechild, 2006. "Negotiated Settlements: The development of economic and legal thinking," Working Papers EPRG 0604, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    7. Andrzej T. Szablewski, 2018. "Kolejny etap ewolucji koncepcji i praktyki regulacji ekonomicznej," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 49-72.
    8. Chakravorty, Shourjo, 2015. "A study of the negotiated-settlement practice in regulation: Some evidence from Florida," Utilities Policy, Elsevier, vol. 32(C), pages 12-18.
    9. Stephen Littlechild, 2008. "Some Alternative Approaches To Utility Regulation," Economic Affairs, Wiley Blackwell, vol. 28(3), pages 32-37, September.
    10. Stephen Littlechild, 2009. "Stipulated settlements, the consumer advocate and utility regulation in Florida," Journal of Regulatory Economics, Springer, vol. 35(1), pages 96-109, February.
    11. Doucet, Joseph & Littlechild, Stephen, 2009. "Negotiated settlements and the National Energy Board in Canada," Energy Policy, Elsevier, vol. 37(11), pages 4633-4644, November.
    12. Doucet, Joseph & Littlechild, Stephen, 2006. "Negotiated settlements: The development of legal and economic thinking," Utilities Policy, Elsevier, vol. 14(4), pages 266-277, December.
    13. Davies, Ryan J. & Hevert, Kathleen T., 2020. "Stay-out adjustments and multi-year regulatory rate plans," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 105-114.
    14. Littlechild, S., 2007. "The bird in hand: stipulated settlements and electricity regulation in Florida," Cambridge Working Papers in Economics 0713, Faculty of Economics, University of Cambridge.
    15. Robert Hahn & Robert Metcalfe & Florian Rundhammer, 2020. "Promoting customer engagement: A new trend in utility regulation," Regulation & Governance, John Wiley & Sons, vol. 14(1), pages 121-149, January.
    16. Littlechild, Stephen, 2018. "Economic regulation of privatised airports: Some lessons from UK experience," Transportation Research Part A: Policy and Practice, Elsevier, vol. 114(PA), pages 100-114.
    17. Littlechild, Stephen, 2009. "The bird in hand: Stipulated settlements in the Florida electricity sector," Utilities Policy, Elsevier, vol. 17(3-4), pages 276-287, September.

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