Earned Rates of Return, Allowed Rates of Return and the Cost of Capital in a Historical Setting
In Chapter 1 some key Supreme Court decisions regarding public utility rates were related to the underlying condition of prices. The dispute in Smyth v. Ames involved regulated prices that seemed to remain higher than was warranted during a deflationary period while the disputes in Southwestern Bell, Bluefield,and Georgia involved prices that seemed to remain too low in an inflationary period. The unmistakable impression one gets from these observations is that the outcome of regulatory decision making depends on the historical epoch in which the decision is made.
KeywordsEquity Capital Random Coefficient Capitalization Rate Valuation Parameter Deficiency Index
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