Dynamic Relational Contracts Within a Regulatory Environment: An Examination of State Utility Regulators and Their Constituents

Abstract

This study examines state regulatory agencies in the context of the dynamic relationships they hold with consumers, the electric utilities they regulate, and politicians at the state level. Two questions addressing regulatory efficacy are examined.

First, how do power differentials within these relationships affect regulatory decisions? Has the electric utility industry been successful in "capturing" regulators as some have suggested, or do other constituents have the power to influence regulators toward their interests?

Secondly, what efforts are made to balance opposing interests? Specifically, do regulators work towards balancing the demands of opposing constituents, and if so, what strategies are adopted?

These questions are examined within the context of state regulatory decisions from 1973-1987. Results indicate complex regulatory relationships surrounding electric utility regulation, and give evidence that state regulators work toward a balancing of constituent interests.