Price Caps, Rate-of-Return Regulation, and the Cost of Capital

This Note compares the effects of price cap and rate-of-return regulation on the risk borne by regulated utilities. It present evidence that price cap regulation subjects firms to greater risks and therefore raises their cost of capital. This resul...

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Bibliographic Details
Main Authors:	Alexander, Ian, Irwin, Timothy
Format:	Viewpoint
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	AFFILIATED ORGANIZATIONS CAPITAL COSTS CONSUMERS COST OF CAPITAL COST SAVINGS COSTS OF CAPITAL DECISIONMAKING EMPIRICAL EVIDENCE EQUITY HOLDINGS INFLATION INVESTMENT CAPITAL PORTFOLIO PRICE CAP PRICE CAP REGULATION PRICE CAPS PRICE OF WATER PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY REGULATORY AGENCIES UTILITIES CAPITAL COSTS RATE OF RETURN REGULATIONS PRICE POLICY PRICE CONTROLS
Online Access:	http://documents.worldbank.org/curated/en/1997/09/694600/price-caps-rate-of-return-regulation-cost-capital http://hdl.handle.net/10986/11575

id	okr-10986-11575
recordtype	oai_dc
spelling	okr-10986-115752021-06-14T11:03:02Z Price Caps, Rate-of-Return Regulation, and the Cost of Capital Alexander, Ian Irwin, Timothy AFFILIATED ORGANIZATIONS CAPITAL COSTS CONSUMERS COST OF CAPITAL COST SAVINGS COSTS OF CAPITAL DECISIONMAKING EMPIRICAL EVIDENCE EQUITY HOLDINGS INFLATION INVESTMENT CAPITAL PORTFOLIO PRICE CAP PRICE CAP REGULATION PRICE CAPS PRICE OF WATER PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY REGULATORY AGENCIES UTILITIES CAPITAL COSTS RATE OF RETURN REGULATIONS PRICE POLICY PRICE CONTROLS This Note compares the effects of price cap and rate-of-return regulation on the risk borne by regulated utilities. It present evidence that price cap regulation subjects firms to greater risks and therefore raises their cost of capital. This result has one clear implication: firms regulated by price caps must be permitted to earn higher returns. If they are not, they will be unable to attract new investment capital and the quality of their service will decline. 2012-08-13T15:26:16Z 2012-08-13T15:26:16Z 1997-09 http://documents.worldbank.org/curated/en/1997/09/694600/price-caps-rate-of-return-regulation-cost-capital http://hdl.handle.net/10986/11575 English Viewpoint: Public Policy for the Private Sector; Note No. 87 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Viewpoint Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	AFFILIATED ORGANIZATIONS CAPITAL COSTS CONSUMERS COST OF CAPITAL COST SAVINGS COSTS OF CAPITAL DECISIONMAKING EMPIRICAL EVIDENCE EQUITY HOLDINGS INFLATION INVESTMENT CAPITAL PORTFOLIO PRICE CAP PRICE CAP REGULATION PRICE CAPS PRICE OF WATER PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY REGULATORY AGENCIES UTILITIES CAPITAL COSTS RATE OF RETURN REGULATIONS PRICE POLICY PRICE CONTROLS
spellingShingle	AFFILIATED ORGANIZATIONS CAPITAL COSTS CONSUMERS COST OF CAPITAL COST SAVINGS COSTS OF CAPITAL DECISIONMAKING EMPIRICAL EVIDENCE EQUITY HOLDINGS INFLATION INVESTMENT CAPITAL PORTFOLIO PRICE CAP PRICE CAP REGULATION PRICE CAPS PRICE OF WATER PRIVATE SECTOR DEVELOPMENT PRODUCTIVITY REGULATORY AGENCIES UTILITIES CAPITAL COSTS RATE OF RETURN REGULATIONS PRICE POLICY PRICE CONTROLS Alexander, Ian Irwin, Timothy Price Caps, Rate-of-Return Regulation, and the Cost of Capital
relation	Viewpoint: Public Policy for the Private Sector; Note No. 87
description	This Note compares the effects of price cap and rate-of-return regulation on the risk borne by regulated utilities. It present evidence that price cap regulation subjects firms to greater risks and therefore raises their cost of capital. This result has one clear implication: firms regulated by price caps must be permitted to earn higher returns. If they are not, they will be unable to attract new investment capital and the quality of their service will decline.
format	Publications & Research :: Viewpoint
author	Alexander, Ian Irwin, Timothy
author_facet	Alexander, Ian Irwin, Timothy
author_sort	Alexander, Ian
title	Price Caps, Rate-of-Return Regulation, and the Cost of Capital
title_short	Price Caps, Rate-of-Return Regulation, and the Cost of Capital
title_full	Price Caps, Rate-of-Return Regulation, and the Cost of Capital
title_fullStr	Price Caps, Rate-of-Return Regulation, and the Cost of Capital
title_full_unstemmed	Price Caps, Rate-of-Return Regulation, and the Cost of Capital
title_sort	price caps, rate-of-return regulation, and the cost of capital
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/1997/09/694600/price-caps-rate-of-return-regulation-cost-capital http://hdl.handle.net/10986/11575
_version_	1764417230297104384

Price Caps, Rate-of-Return Regulation, and the Cost of Capital

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