ABSTRACT

This chapter argues that the legal profession has contributed in no small way to the problems experienced in the regulation of public utilities. "Regulatory lag" is, of course, a common term. The phenomenon is the period of time between the experience of particular cost changes by a regulated firm and the time that its rates can reflect those new costs. The goal should be to bring maximum information to bear on relevant rate-making issues as quickly and clearly as possible. Exact data on the nature and extent of delay in rate making are extremely difficult to obtain. Other objections center on the practicality of developing uniform systems of accounts with sufficient sophistication to be able to deal with all forms of rate-making decisions. In the economics profession's jargon, the task must be to find that elusive moment when the marginal cost of more delay exceeds the marginal benefit from arriving at a more accurate determination of the relevant issues.