The bird in hand: stipulated settlements and electricity regulation in Florida

Stephen Littlechild

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: In the last two decades many major regulatory issues in Florida have been resolved by means of stipulated settlements between the utilities and interested parties, notably the Office of Public Counsel, instead of by the traditional method of hearings and litigation before the Public Services Commission. This paper investigates the extent, nature and effects of these stipulations in the electricity sector there. They have now largely superceded the litigated process. Their purpose is not to save costs, which are orders of magnitude less than the revenues at stake. Stipulations have brought reductions in electricity revenues worth over $3 billion, mainly during the last decade. These reductions are greater than would have otherwise occurred: about three quarters might never have occurred at all. In some cases a change in the method of rate reduction favoured industrial consumers but other customers are nonetheless likely to have benefited despite this. Some benefits were outside the scope of the commission to confer. Other benefits reflected a more flexible accounting policy. Most importantly, there has been a shift from conventional rate of return regulation, and from earnings sharing schemes with profits caps, to prices fixed for specified periods of time with revenue-sharing incentive arrangements. Stipulations have transformed the regulatory landscape in the Florida electricity sector, and their use seems worth considering elsewhere.

Keywords: stipulations; settlements; consumer advocate; regulation. (search for similar items in EconPapers)
JEL-codes: L51 L94 L95 L97 (search for similar items in EconPapers)
Pages: 29
Date: 2007-02
New Economics Papers: this item is included in nep-ene and nep-reg
Note: Ec
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Citations: View citations in EconPapers (4)

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