The Effect of a Fuel Adjustment Clause on a Regulated Firm's Selection of Inputs

Frank Scott

The Energy Journal, 1985, vol. 6, issue 2, 117-126

Abstract: When input prices are changing rapidly, the delays inherent in rate-of-return regulation can result in rate decisions that are outdated before they can be implemented. Many regulatory commissions have adopted fuel adjustment clauses to remedy this problem. Fuel clauses adjust output price for changes in fuel costs so that the utility's profit remains relatively unaffected. Fuel adjustment clauses are now used in almost all the 50 states and the District of Columbia; a survey by the National Association of Regulatory Utility Commissioners (NARUC) (1978, p. 6) revealed that only 7 states did not permit fuel clauses.

Keywords: Rate of return regulation; fuel adjustment clause; Input selection; Utilities (search for similar items in EconPapers)
Date: 1985
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Journal Article: The Effect of a Fuel Adjustment Clause on a Regulated Firm's Selection of Inputs (1985)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:6:y:1985:i:2:p:117-126

DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No2-9

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