chapter  1
20 Pages

Rate-of-Return Regulation

The scope of government involvement in, and regulation of, the economy is exceedingly diverse and difficult to characterize succinctly. The regulation of public utilities, however, is considerably easier to describe. On the federal level, there are four regulatory commissions with jurisdiction over the interstate activities of public utilities: the Federal Communications Commission (FCC), the Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission (NRC), and the Security and Exchange Commission (SEC). The FCC was created by the Communications Act of 1934, and is responsible for the regulation of interstate telephone and telegraph service, and radio and television broadcasting. State regulatory commissions, while collectively much more powerful with respect to the regulation of most public utilities, are, nevertheless, harder to characterize. In the case of the natural gas industry, for example, federal involvement began with the Natural Gas Act of 1938 which established regulatory control of the industry with the Federal Power Commission (FPC).