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The Market for Capital and the Origins of State Regulation of Electric Utilities in the United States

Published online by Cambridge University Press:  23 January 2003

William J. Hausman  and
John L. Neufeld
William J. Hausman
Affiliation:
Department of Economics, Box 8795, College of William & Mary, Williamsburg, VA 23187. E-mail: wjhaus@wm.edu.
John L. Neufeld
Affiliation:
Department of Economics, University of North Carolina at Greensboro, Greensboro, NC 27412. E-mail: john_neufeld@uncg.edu.
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Abstract

We provide evidence that the problem of raising capital in the early days of the U.S. electric-utility industry motivated industry leaders to embrace state rate-of-return regulation in return for a secure territorial monopoly. Utility executives anticipated that this would lead to a reduction in borrowing costs. Using firm-level bond data for 1910–1919, we estimate a model and find that state regulation led to lower borrowing costs but that the magnitude of the reduction was small. We also find evidence that output of electric utilities in states with regulation was higher than output in states without regulation.

Type
Articles
Information
The Journal of Economic History , Volume 62 , Issue 4 , December 2002 , pp. 1050 - 1073
Copyright
Copyright © The Economic History Association 2002

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