Note on "Gold Plating" or "Rate Base Padding"

Edward E. Zajac

Bell Journal of Economics, 1972, vol. 3, issue 1, 311-315

Abstract: This note analyzes the ancient "gold plating" or "rate base padding" issue. It is shown that padding is profitable for the regulated firm only if it pursues certain expansion paths, and only if it has exhausted all positive-income-producing investment opportunities and must resort to negative-income-producing investments to bring down its rate of return to that allowed.

Date: 1972
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