Public utility valuation and risk under incentive regulation

Lewellen, Wilbur G.; Mauer, David C.

doi:10.1007/bf01065954

Cited by 8 publications

(2 citation statements)

References 23 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…21 Brennan and Schwartz (1982a) and Lewellen and Mauer (1993) use the continuous time framework of contingent claims valuation to analyze the impact of endogenous hearing dates on a regulated firm's value and cost of capital.…”

Section: Different Components Of Costmentioning

confidence: 99%

Regulating Infrastructure: The Impact on Risk and Investment

Guthrie

2005

SSRN Journal

127

View full text Add to dashboard Cite

Section: Different Components Of Costmentioning

confidence: 99%

Regulating Infrastructure: The Impact on Risk and Investment

Guthrie

2005

SSRN Journal

127

View full text Add to dashboard Cite

“…following the announcement in August 1994 of new price caps, which were to come into effect in April of the following year. Partly in response to this share price performance, the electricity industry regulator revised the terms of the price caps in March 1995 (Faure-Grimaud, 2002 Brennan and Schwartz (1982a) and Lewellen and Mauer (1993)…”

Section: Different Components Of Costmentioning

confidence: 99%

Regulating Infrastructure: The Impact on Risk and Investment

Guthrie

2006

Journal of Economic Literature

244

View full text Add to dashboard Cite

The last thirty years have witnessed a fundamental change in the regulation of infrastructure industries. Whereas firms were subject to rate of return regulation and protected from entry in the past, they now face various forms of incentive regulation, competition is actively promoted by many regulators, and both regulators and the firms they regulate must often confront rapid technological progress. This paper surveys the literature on the investment implications of different regulatory schemes, highlighting the relevance of modern investment theory, which puts risk and intertemporal issues, such as the irreversibility of much infrastructure investment, center stage. It discusses the impact on regulated monopolists? investment behavior of key regulatory characteristics, namely the price flexibility allowed by the regulator, the length of the regulatory cycle, and the costs the regulator will allow the firm to recover at future regulatory hearings. It also considers the impact of competition, especially the situation where a vertically integrated firm has its operation of a bottleneck asset regulated, on investment by regulated firms and their competitors.

show abstract

Risk and regulation in water utilities: a cross-country comparison of evidence from the CAPM

2014

View full text Add to dashboard Cite

The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. AbstractThis paper addresses a core issue for the regulated utility: what are the risks taken by investors in organizations that supply a product whose supply is regulated? Prior research on returns of regulated water supply and distribution companies in the United Kingdom concluded that regulation interacts significantly with equity returns and that the systematic risk and hence required returns of water utilities equity were low and decreasing over time (Buckland and Fraser, 2001). The current research analyses the returns on securities issued by regulated water companies in the differently-regulated economies of the UK and the USA, using data from 1980 to 2010. Mirroring the results from the 1990s, the evidence suggests that UK regulators have chronically overestimated the systematic risks borne by investors in water utilities, resulting in lax pressure on permitted returns and higher prices than are needed to provoke efficient supply. The analysis also confirms that there are striking differences between the regulatory risks and patterns of returns for private sector water utilities in the USA and the UK.

show abstract

Public utility valuation and risk under incentive regulation

Cited by 8 publications

References 23 publications

Regulating Infrastructure: The Impact on Risk and Investment

Regulating Infrastructure: The Impact on Risk and Investment

Regulating Infrastructure: The Impact on Risk and Investment

Risk and regulation in water utilities: a cross-country comparison of evidence from the CAPM

Contact Info

Product

Resources

About