Evidence From Electric Utilities in Texas
People can use a sample of annual observations from ten privately owned electric utilities in the state of Texas covering the years 1965 to 1985 to construct an empirical test the impact of rate-of-return regulation on technical change. In describing the period between the 1930s and 1975, Jack Hopper notes that 'many utility services remained unregulated: cities had no power to control rates in rural areas; industrial electric and gas rates within cities became private contractual matters in the absence of municipal regulation'. This chapter defines the translog cost function and resulting share equations which are to be estimated; the construction of the variables. It presents the results from the empirical estimation. The first hypothesis (HI) concerns the general effectiveness of rate of return regulation on the firm. The second hypothesis (H2) concerns the presence of technological change. The third hypothesis (H3) tests the directional effect of regulation on the rate of technological change.