, Volume 13, Issue 3, pp 207-226

The Regulation of the United Kingdom Electricity Industry: An Event Study of Price-Capping Measures

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access

Abstract

The privatization of United Kingdom utilities after 1979 established a regulatory regime based around price capping rather than return capping. This innovation was intended to provide a predictable framework that encouraged efficiency. An event methodology was used to examine stock market reaction to the main regulatory announcements affecting 12 Regional Electric Companies from flotation to 1995. The results indicate that the regulatory announcements were only a minor contributor to the persistent abnormal returns observed. The low connection between regulatory events, efficiency changes and abnormal returns at company level lead to a conclusion that the initial structural and control frameworks dominated the regulatory framework.