Talk:Rate-of-return regulation

Lacks inline citations
Greetings Wikipedians! This article contains a list of references but lacks inline citations to permit verification of specific statements. Cordially, BuzzWeiser196 (talk) 20:50, 15 May 2021 (UTC)


 * It's been nearly 3 years since I posted the above. Since nobody else has stepped forward, I've begun an effort to add more citations where possible. That effort will continue. Cordially, BuzzWeiser196 (talk) 13:58, 9 March 2024 (UTC)

Major concerns with these statements
In the Disadvantages section, the current text says: "...rate-of-return regulation does not provide strong incentives for regulated firms to operate efficiently....Firms regulated in this manner may engage in disproportionate capital accumulation, which in turn will heighten the price level allotted by the government regulator, raising the firm's short-term profits. Unnecessary capital expenditures and operating expenses would increase the firm's revenue requirement." In my experience that is not necessarily true in the electric utility industry in the United States. Regulators are responsible for scrutinizing a utility's capital expenditures and operating expenses, and disallowing those it deems imprudent or unnecessary. Disallowed costs are not included in revenue requirements and are not recovered from the customer. So prices paid by customers are not impacted if regulators are doing their job.

I have the same concern with this sentence in the lead: "Under rate-of-return regulation, regulated monopolies have no incentive to minimize their capital purchases, since prices are set equal to their costs of production." Public utilities do have an incentive to control spending, because of the regulatory oversight and power to disallow expenditures I describe above.

There are no citations provided to support either statement. Let's see some. If none surface, I'm going to soften those statements considerably to make them accurate. Cordially, BuzzWeiser196 (talk) 14:40, 16 May 2021 (UTC)
 * It's been nearly 3 years since I posted the above. Since nobody else has stepped forward, I'll proceed to address these issues myself. Cordially, BuzzWeiser196 (talk) 14:01, 9 March 2024 (UTC)

In the case of a local monopoly, is it a constraint on competition?
In the case of a local monopoly, is it a constraint on competition? 58.97.224.47 (talk) 14:08, 12 July 2022 (UTC)