Essays in regulatory economics: Testing the economic theory of regulation: Evidence from PURPA, and regulatory lag: A time to failure analysis

In the first essay, I examine three competing theories of regulatory behavior: the public interest theory, the producer protection theory, and a hybrid theory based on the two theories listed above. The test is conducted using data from state regulatory commission decisions on the Public Utility Regulatory Policies Act of 1978 (PURPA). Each of the three theories of regulatory behavior predicts a different pattern of responses by the state regulatory commissions to the PURPA legislation. First, regulatory commission behavior is analyzed based on the three competing theories and testable hypothesis are developed. Second, the state regulatory commission responses to the PURPA legislation is analyzed. Finally, in investigating the commission decisions we find that the producer protection theory and the public interest theory of regulation do not describe commission decisions accurately. The hybrid theory, which claims that agencies consider both the welfare of the public and their political future does seem to correctly describe the results of state commission decisions on the PURPA legislation.;Regulatory lag is the time period between when a regulated utility first files a rate case and the time when the commission renders a decision in the case. The regulator is viewed as solving the problem of maximizing welfare of producers and consumers subject to a constraint that the utility be allowed to earn their authorized rate of return. To analyze the length of regulatory lag a technique called survival analysis, or time to failure analysis is used. This method uses maximum likelihood techniques to estimate failure times using non-normal distributions such as Weibull and exponential distributions.;I conclude that the period of regulatory lag is systematically influenced by economic parameters and conclude that commissions do use regulatory lag as a policy tool.;In the second essay I investigate the factors which influence the period of regulatory lag in a rate proceeding and question whether regulatory lag is used as a policy tool by regulatory agencies.