Regulatory environment and its impact on the market value of investor-owned electric utilities.

摘要

While other regulated industries have one by one been exposed to competitive reform, electric power, for over eighty years, has remained a great monopoly. For all those years, the vertically integrated suppliers of electricity in the United States have been assigned exclusive territorial (consumer) franchises and have been closely regulated. This environment is in the process change because the electric power industry is currently undergoing some dramatic adjustments. Since 1992, a number of states have initiated regulatory reform and are moving to allow retail customers to choose their energy supplier. There has also been a considerable federal government role in encouraging competition in the generation and transmission of electricity.; The objective of this research is to investigate the reaction of investors to the prevailing regulatory environment in the electric utility industry by analyzing the market-to-book value for investor-owned electric utilities in the United States as a gauge of investor concern or support for change.; In this study, the variable of interest is the market valuation of utilities, as it captures investor confidence to changes in the regulatory environment. Initially a classic regression model is analyzed on the full sample (of the 96 investor-owned utilities for the years 1992 through 1996), providing a total number of 480 (96 firms over 5 years) observations.; Later fixed- and random-effects models are analyzed for the same full-sample model specified in the previous analysis. Also, the analysis is carried forward to examine the impact of the size of the utility and its degree of reliability on nuclear power generation on market values.; In the period of this study, 1992–1996, the financial security markets downgraded utilities that were still operating in a regulated environment or had a substantial percentage of their power generation from nuclear power plants.; It was also found that the financial market was sensitive to the size of the electric utility. The negative impact of the regulatory environment declined with the increase in the size of the utility, indicating favorable treatment for larger utilities by financial markets.; Similarly, for the electric utility industry as a whole, financial markets reacted negatively to nuclear power generation.