Commissioner selection and deregulation of US gas utilities

Abstract

This study attempts to evaluate the role of reelection motives of state public service commissioners in deregulation of the US gas distribution market over the past twenty years. The reelection motives may affect commissioners' choice regarding when and which regulatory regime - retail restructuring, price cap or sliding-scale regulation - to adopt to deregulate particular utilities from the status quo of rate-of-return regulation. The system of selection of commissioners, timing of elections, and composition of commissions are evaluated as political factors. Frequency of elections is found to be associated positively with the risk of any deregulation, albeit with different time delay. In election years, the risk of price caps rises immediately, while that of restructuring rises in subsequent years. Elections favor price caps, while appointments by state legislature favor restructuring. Democratic-leaning commissions avoid restructuring in favor of price caps.