Regulation, the OPEC Oil Supply Shock, and Wealth Effects for Electric Utilities

Seth Norton

Economic Inquiry, 1988, vol. 26, issue 2, 223-38

Abstract: A popular view among specialists in electric utility economics is that the regulatory process exace rbated the negative effects of the OPEC's oil price increases during the 1970s. In contrast, S. Peltzman's theory of regulation suggests t hat regulators should "buffer" a firm from cost increases. This paper examines these contending propositions by examining the stock retu rns for a sample of electric utilities during the OPEC oil shock of O ctober 1973. The data are more consistent with a buffering effect tha n a regulatory lag. Copyright 1988 by Oxford University Press.

Date: 1988
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