Liberalization and Regulation of Telecoms, Electricity, and Gas in the United States

The United States has a long tradition of commission style regulation of privately owned utilities. This fact has both advantages and disadvantages. On the plus side producers, political bodies, regulatory agencies, courts, consumers, and other players are fully adapted to the idea and practice of independent regulation. Furthermore there is a ready pool of talented professionals to analyze issues and develop solutions as new issues emerge. But these advantages can also be disadvantages during times of change. Complex, well developed systems are often slow to recognize new realities and are costly to change because regulatory policies create interest groups that benefit from the status quo. In some instances new technologies and policies cannot be introduced incrementally, but rather strand investment and challenge investor’s willingness to provide funds. In this chapter we examine the development and evolution of utility regulation in the United States, focusing on energy and telecommunications. We begin with the development of these industries, taking as given the traditions, institutions, and legal frameworks created through the regulation of transportation and other industries, even though these laid critical foundations for utility regulation. We begin by describing the economic and political context for regulation. We then examine regulation for each sector. We conclude with a brief review of emerging issues